Arboretum Ventures’ Petersen on VC in MI, What the Future Holds

11/14/12Follow @XconomyDET

The Michigan Venture Capital Association (MVCA) held its annual awards dinner last week, where it honored the VCs and deals of the year, so we thought it would be a good time to catch up with Arboretum Ventures‘ Tim Petersen, who also serves as the MVCA’s board chair.

Petersen says the most interesting thing about VC in Michigan is how it’s growing even as national trends show the number of VC firms are shrinking. “Michigan has grown,” he explains. “It hasn’t grown off the charts, but we’ve grown. There is 50 percent more capital under management than there was four or five years ago, and that’s pretty startling when you put it into the context of the national figures.”

He considers Northern California, specifically Silicon Valley, to be the “Mt. Everest” of venture capital, but says Michigan is steadily gaining esteem in the eyes of national investors. “Ten years ago, we were at sea level. Now we’re up a couple of thousand feet. There’s still a lot of work to be done, but we’re headed in a positive direction.”

Petersen says a major factor in Michigan’s growing success in the VC realm is the increase in the quality of homegrown companies over the past 10 years. He points out that Arboretum Ventures’ best-performing companies have all been Michigan-based: HealthMedia, HandyLab, and Accuri Cytometers. “Those were three very successful exits that were a crucial piece of fundraising success,” he says.

He’s optimistic about the future of VC in Michigan thanks in part to serial entrepreneurs like Accuri’s Jeff Williams and Xconomist Jen Baird deciding to stay in Michigan to launch their next startups. “The CFO of Accuri was recruited from Austin, TX, to Ann Arbor,” Petersen adds. “After Accuri sold, he moved over to Delphinus. That’s starting to happen more and more, and not just with CEOs but people one level down. That’s something that only happens in a few areas of the country.”

Petersen says Michigan’s other strengths are a talented base of engineers nurtured by big companies and a cost of living that pales in comparison to cities like Boston and San Francisco. But perhaps what’s most unique, he says, is the relentless local work ethic. “We find a way to get it done, and companies in other geographies don’t quite do that.”

One of biggest challenges Petersen sees is the state suffering “in some twisted way” under the weight of the success of local behemoths like Ford and General Motors. “It’s taken a little while, but seeing the difficulties of those companies has made us … Next Page »

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://twitter.com/akibalogh Aki Balogh

    As a Michigander, former VC Associate and entrepreneur, I completely agree with the essence of this article. Michigan is an undervalued place for startups, especially considering all of the high-quality talent available there.

    However, it’s impossible to talk about startups in Michigan without mentioning Dug Song (co-founder and CEO of Duo Security, founding architect of Arbor Networks). He’s worked tirelessly to found organizations such as Tech Brewery and a2geeks in Ann Arbor. Tech Brewery alone has sent several startups to Y Combinator.

    When thinking about entrepreneurship in Michigan, Dug Song should not be overlooked!

    • http://www.xconomy.com/detroit Sarah Schmid

      We completely agree, which is why Dug is one of our Detroit Xconomists, as well as a speaker at our upcoming mobile event!