Flagship Ventures Plans to Open Michigan Office

2/1/12Follow @XconomyDET

Cambridge, MA-based Flagship Ventures, a $900 million fund known for its successes with companies such as Accuri Cytometers and Acceleron Pharma, is planning to open an office in Michigan in the next six months, says Sean O’Donnell, VP at Credit Suisse’s Michigan office.

The move comes after Venture Michigan Fund II (VMF II), a fund-of-fund which is managed by Credit Suisse, made a $15 million investment commitment in Flagship Ventures Fund IV, which invests in early-stage companies. As part of the agreement, Flagship will invest that $15 million in Michigan companies. Flagship has already found success in local companies with Accuri Cytometers, which is based on technology spun out of the University of Michigan.

“Flagship Ventures is a much larger fund than is typically involved in our program,” O’Donnell says. “We hope they’ll exceed that amount.”

The Venture Michigan Fund II was established in February 2011. Like the first Venture Michigan Fund, VMF II exists to primarily invest in early- and seed-stage Michigan companies. VMF II has $120 million in capital to invest in funds that target high-growth and emerging industries. The commitment to Flagship was the fourth investment it has made.

And what can we expect Flagship to invest in? O’Donnell admitted that Michigan continues to feel the effects of a difficult national fundraising environment, though he says there is actually an increased amount of capital available to Michigan companies compared to years past thanks to programs like VMF II. He pointed to the success of homegrown entities like Arboretum Ventures and HandyLab as helping to persuade investors that Michigan is a viable place to invest.

O’Donnell also says that, though Michigan’s life science sector will remain robust, he predicts movement away from therapeutics and devices in favor of anything that saves money. Where he expects to see increased investment is in the IT sector, particularly in software development, mobile apps, and social media, and the reason is simple: Those kinds of companies are cheap to start.

“I feel Michigan is on the right track,” O’Donnell says. “We’re always going to have gaps, but good deals will still be able to find capital.”

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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  • http://www.dailygrommet.com Jules Pieri, CEO Daily Grommet

    OK Flagship deserves “Smart VC Firm of the Year” recognition. It’s brilliant to go to a state where people are born hackers, innovators, and savvy with technology and tools for real world business applications and inventions. Detroit, Flint, Ann Arbor are all bursting with these current and future entrepreneurs whose main obstacles are access to capital and external validation. OK a little more internal belief is needed too, but the external recognition of Flagships move will help a lot.

  • http://www.xconomy.com/author/wroush/ Wade Roush

    Cheers to that Jules! Every time I talk to Bay Area VCs I tell them the same thing.