Google has signed on as a technology partner with IncubateNYC’s campaign to establish a technology incubator in Harlem, says Marcus Mayo, co-founder of IncubateNYC. The group is competing to be chosen by the New York City Economic Development Corporation to fulfill a request for proposals for a new incubator to be established near 125th Street.

Mayo says it is too early to share specifics of Google’s participation but having the technology giant in IncubateNYC’s corner is a huge step for the campaign. “We have a sit-down with them at the first of the new year to map that out,” Mayo says. Google did not immediately respond to requests for comment.

Mayo says his group intends to forge ahead no matter which plan is picked by Mayor Mike Bloomberg’s administration. “We’re working hard for the RFP and it would be nice to have but given the partnerships we’ve been able to secure we’re going to do it regardless,” Mayo says. “We have to do it.”

With the RFPs due on Dec. 29, Mayo is looking for other ways to rally more support for his group’s efforts. The Abyssinian Development Corp. is already onboard as a partner. “The next thing we want to do is get investors as well as large corporations to be sponsors,” Mayo says. “That’s what we’re focused on right now—finding investors who want to invest in businesses who come to the incubator.”

Mayo says he also wants IncubateNYC to connect with the established players such as TechStars and General Assembly that are nurturing the city’s startups. “Harlem can be the next hub of innovation in New York City,” he says. “We want it to be integrated into the entire New York City technology community.”

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When the Economist‘s piece on Detroit (“The Parable of Detroit: So Cheap, There’s Hope“) landed in my inbox this morning, I dug in, curious. This is the Economist, after all, which typically puts its jaundiced British eye on American subjects and reports without bias or mercy. Ah, yes, I thought—here comes a super legit international media outfit to tell Detroit’s story correctly. And they did, sort of. But there are a few things irritating Detroiters about the way we’re covered by reporters that I’d like to air out.

First: Can we please, please, PLEASE stop holding Slow’s Bar-B-Q up as Detroit’s savior? It’s a restaurant, and if not for its location right next to the highway that carries suburbanites to and from the city, it would probably be like any other restaurant in Detroit, only with a better beer selection. I have absolutely nothing against the Cooley family (though, judging by this mock Twitter page, others in Detroit might) and I appreciate their efforts to improve the Corktown community. But the truth is, what they’re selling to their mostly white clientele is a “Detroit experience” that involves hardly any Detroit. Any given Sunday, Slow’s has a two-hour wait. Drive by: You can see for yourself how the men in Dockers clutch their wives protectively while their teenaged children creep tentatively toward the Michigan Central Station ruins to snap a few photographs. Then they eat, walk across the street to the security-patrolled parking lot, get in their cars, and go home.

I suppose it’s better than nothing, and considering how racial prejudice still haunts every single issue in this region, it may be the best we can hope for at the moment. But reporters should know better. I understand that all of us in the word-juggling business are being asked to do more with less, and that reporters often don’t have the resources to stay in town longer than a few hours. So, in the interest of journalistic integrity, I hearby offer any visiting journalist a spot on my “guest futon” if they want to stay a few days and truly cover the city. I live in a cramped Detroit apartment that I unfortunately share with cockroaches, but at least it’s authentic.

And if it’s authenticity you seek, then please let me show you around. The Economist‘s report seems to play … Next Page »

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“Entrepreneurialism is a virus that must be spread.” So said Samuel Zell 12 years ago as he and Anne Lurie (on behalf of her deceased husband Robert) gave the University of Michigan Ross School of Business $10 million to establish the Zell Lurie Institute for Entrepreneurial Studies.

Since then, the Institute has extended its reach beyond U-M, playing an active role in the management of several statewide initiatives, and supporting regional entrepreneurial organizations that serve as a catalyst for economic development. Just last week, the Princeton Review named U-M as having the fifth best graduate entrepreneurship program in the country.

“What we’ve done in 12 years is codify what entrepreneurs really do,” says Tim Faley, managing director of the Institute and adjunct professor of entrepreneurship. “We have broken it into logical and learnable steps that span from ideation to success and that involve both classes and action-based learning.”

Faley says he collaborated with an unnamed serial entrepreneur in Ann Arbor to vet the steps he had in mind to teach his students. He said at first, his friend scoffed at him, saying entrepreneurialism was all instinct and couldn’t be learned. But as Faley explained his theory, the serial entrepreneur looked down at the notes pertaining to his latest project scattered all over the table and realized Faley’s methodology matched the way he was going about turning his “problem” into a fully realized business.

“We knew we got it right when the steps applied to both the family business entrepreneurial model and the technology entrepreneurial model, and all other entrepreneurial models in between,” Falhey says.

Faley says now is the perfect time for students to delay their entrance into the workforce for a few years while they work on bringing an idea hatched and honed in college to business fruition. To that end, in 2008 the Institute “blew up” the way they did their annual business-plan competition, doing away with the typical format where students form teams, make pitches, and are … Next Page »

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Building owners and managers are often reluctant to adopt new energy efficiency technology because they doubt it will be worth the cost in the long run.

Nolan Browne, managing director of the Cambridge, MA-based (for now) Fraunhofer Center for Sustainable Energy Systems, is on the same page.

“I fundamentally agree with them,” he says. “If we don’t prove it, why would they want to buy it? We need to prove that it will work or last 20 to 30 years and that the occupant in that building is going to be happy and productive. If not, then it’s a problem.”

His organization is in the process of retrofitting an old building in the South Boston waterfront section known as the Innovation District. The facility will serve as the center’s offices and a “living lab” for demonstrating and validating energy efficient building technologies.

“Our goal is to become recognized as premier global leader in sustainable energy field,” says Browne. And it hopes to promote economic development through the technology it commercializes, he says.

The Center for Sustainable Energy Systems (CSE) is connected to the Munich-based Fraunhofer Society, an organization formed in 1949 and funded in part by the Marshall Plan to help spur economic recovery in post World War II through research projects that could benefit industry across the country.

Globally, Fraunhofer centers now perform research in a variety of arenas and have about 18,000 scientists and engineers, and a 1.66 billion euro annual research budget. They’re credited with having a role in the invention of things like MP3s and fat-free sausage, to name a few, says Browne. CSE was first formed in 2008 to collaborate with MIT on research in building technology and solar. It is part of a smattering of U.S.-based research centers known as Fraunhofer USA, an independent American 501c3 nonprofit focused on growing the U.S. economy through technology research and commercialization. The USA centers have different structures and non-profit charters than the German group, Browne says.

CSE—which launched with funding from National Grid and Massachusetts Technology Collaborative’s the Renewable Energy Trust (now part of the Massachusetts Clean Energy Center)—works in a few different ways with industry partners. The CSE can be commissioned by companies who are in need new technology or modifications to their existing products, but don’t have the needed internal R&D capabilities. And CSE scientists can come up with an idea and develop the project in house and bring it to potential industry partners. Some of CSE’s projects are publicly funded, focusing on cleantech areas the government has deemed promising. It has attracted research funding from private donors and foundations.

For its South Boston project—dubbed the Building Technology Showcase—CSE will be installing materials and systems from a host of energy efficiency players (Browne wouldn’t name names) and collecting real-time data on how the products are working. The project is costing more than $20 million, and has the support from groups such as the U.S. Department of Commerce’s economic development agency, the city of Boston, MassCEC, the Massachusetts Department of Energy and Environmental Affairs, the Massachusetts Department of Housing and Economic Development, and Commonwealth Ventures, Browne says.

And it’s not just typical efficiency tools you might think of—like solar panels or energy use monitoring software that the CSE will be

… Next Page »

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If Michigan’s angel investor tax credit died an early death and no one was around to notice, did the program ever exist?

Come December 31, we’ll find out.

The would-be three-year, $27 million program designed to stimulate early stage funding of startups, will end at the end of this year, the victim of Gov. Rick Snyder’s tax reforms and budget wrangling. The program began this past February.

That means investors have less than six months to grab a piece of $9 million in credits.

Last call folks!

You’d think there were would be a stampede towards the proverbial bar. But so far, the numbers have been less than impressive, suggesting potential angels, wealthy individuals who invest anywhere from $25,000 to $200,000 in a startup, are taking their sweet time.

The Michigan Economic Development Corp. (MEDC), which administers the program, has awarded a mere $370,000 to 26 investors in six startups. The agency is also reviewing applications for another 27 investors seeking to fund seven startups.

Applicants who miss the Dec. 31 deadline are out of luck and any unused money disappears in fiscal 2011. “I certainly hope [investors] use all of the $9 million,” says Mike Flanagan, MEDC’s Capital Markets Team Leader.

The lackluster numbers are somewhat puzzling. We know there’s no shortage of startups seeking funds. And there’s not a whole lot of people who will pass on free money.

Like college students who start writing their papers the night before they’re due, Flanagan suspects angel investors will rush forward with applications as the deadline approaches. Due diligence also takes time, he says.

In any case, the program has already accomplished one crucial goal, Flanagan says: the creation of more organized angel groups who will presumably stick around long after the credit expires. Before the program began, there were five angel groups in Michigan; today, there are close to 40.

And the angels, usually inexperienced, unpolished investors, are showing signs of increasing sophistication.

For example, Grand Angels in Grand Rapids, MI and BlueWater Angels in Midland, MI, said Monday they will join forces to fund AzulStar, a Grand Haven, MI-based startup that provides WiMAX broadband Internet and voices services to residential, business, and government customers.

The deal, terms which the angels did not disclose, marks the first time two Michigan angel groups have agreed to co-invest in a startup. Grand Angels has invested over $980,000 alone this year.

One only hopes that other angels will follow Grand Angels’ example by the end of the year.

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William “Bill” Geppert, who retired just five months ago as the head of Cox Communications in San Diego, has stepped in to serve as interim CEO of the San Diego Regional Economic Development Corp. (EDC). Geppert, a Cox senior vice president and general manager, agreed to serve until the end of 2011. He is not a candidate for the permanent position, according to a statement issued late Wednesday by the EDC. The vacancy was created after Barry Broome, the head of the Greater Phoenix Economic Council, changed his mind after publicly accepting the top post at San Diego’s EDC. Geppert is a longtime EDC board member and business leader.

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Less than two days after publicly accepting the top job at the San Diego Regional Economic Development Corp. (EDC), Barry Broome changed his mind, saying Friday afternoon he had decided to remain in Phoenix, AZ, where he heads the Greater Phoenix Economic Council. EDC leaders introduced Broome to reporters Wednesday morning, saying he would take over in San Diego on Aug. 1. In a statement late Friday, the EDC says its “executive search committee will convene to secure a leader committed to San Diego and to the organization’s new regional jobs-development strategy.”

(The strategy has set a goal of growing 220,000 jobs here by 2020 in partnership with industry associations representing San Diego’s core economic strengths in life sciences, cleantech, communications, software, electronics, and defense.)

In a statement released by the San Diego EDC, Broome said, “There was an overwhelming response from the Greater Phoenix community for me to stay, and I felt compelled to honor this tremendous support.” He did not respond to a query from Xconomy today.

Broome’s change of heart came as a complete surprise in San Diego, according to Lauree Sahba, the EDC’s chief operating officer. Asked if the Phoenix council had made a counter-offer with increased compensation to keep Broome, Sahba said in a weekend e-mail, “No, their statements indicate they did not.” Broome called a number of executive board members in Phoenix Thursday night, saying he wanted to remain in Phoenix, according to local news accounts.

Broome told the Phoenix Business Journal “GPEC and the board extended their support to me,” he said. “They said if I wanted to stay, you can stay. Professionally, the opportunity in San Diego is staggering. But at the end of the day, this is where I wanted to be.” The weekly also reported that Broome made the decision without changes to his contract, pay, or benefits in Phoenix.

Debra Reed, chairman of the EDC’s 70-plus member board of directors, said, “We are disappointed with this decision, especially after announcing it publicly. However, San Diego has one of the world’s most diverse economies, and we have had interest in the position from some of the country’s top economic development professionals. We will move forward.”

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Ann Arbor SPARK says it has attracted 13 new companies to the region and helped 29 businesses to expand in the region last year. The business accelerator also said it helped secure $151 million in new investment commitments and create over 1,400 new jobs.

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Simon Boag sounds downright sheepish.

“We’re spoiled,” Boag, the new CEO of the $100 million Stage 2 Innovations Fund, told Xconomy. “We realize that. We’re extremely lucky to be in this position.”

The fund, announced earlier this week, is targeting growth/expansion startups on the brink of commercializing their technology. An anonymous billionaire is putting up the entire $100 million. Former Chrysler CEO Tom LaSorda is a co-founder.

I can’t stress enough what a big deal this is. Over the years, I’ve written about Midwest venture funds that say they are going to raise (insert unrealistic amount right here) dollars only to see the funds fall short of the mark or fizzle all together.

The most infamous example that comes to mind is San Francisco-based investor Steve Burrill’s boast that he would create a $1 billion fund to back a biotech park in rural Minnesota in 12 months. Three years and several empty promises later, the state is still waiting.

$100 million in the bank not only gives you instant credibility but more importantly, the ability to actually….you know, do things.

Instead of constantly wooing investors, the upfront money “affords you the time and luxury to really dig into the projects,” says Boag, a former Chrysler and General Motors executive.

Here’s how the fund works. Stage 2 is looking for companies, especially in auto and medical devices, which already possess patents and ready to commercialize in 18 months.

“These companies need to scale up quickly,” Boag says. “When you come out, you come out on fire, en mass.”

Stage 2 will either take a majority stake in the company or retain exclusive licensing rights to the technology. The fund is looking startups that can eventually generate $100 million to $200 million in net income.

“There remains significant opportunity for a mid- and later-stage venture companies here in Michigan,” says Jeff Bocan, managing director of Beringea, a venture/private equity firm based in Farmington Hills, MI. “That’s what we’re focused on. I think their strategy makes sense. It all comes down to execution.”

The anonymous donor and LaSorda, who runs his own manufacturing consulting firm called the LaSorda Group, will make the final decisions on investments. Boag says each deal amount will vary but he doesn’t think Stage 2 will require outside capital.

“We have enough money that we don’t need other partners,” he says. “But we wouldn’t close the door if there is the right opportunity,” especially if there’s a large deal.

With high gas prices, Stage 2 is especially interested in automotive technology that promotes fuel efficiency, Boag says.

“Consumer behaviors are changing,” he says. “People are driving less miles. Put all of these factors together, that’s a great sweet spot.”

Stage 2 also likes medical devices that help lower skyrocketing healthcare costs. “Small- and medium-sized companies play a big role” in Michigan’s economy, Boag says. “They need to play a bigger role. We know that from the last three years” when the Big Three automakers struggled.

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Wow. Now that’s what I’m talking about.

Automation Alley, a business accelerator based in Troy, MI that helps nurture local startups, today announced the creation of a $100 million fund to back local companies looking to take their fledgling businesses to a higher level.

Chrysler CEO Tom LaSorda co-founded the fund, called Stage 2 Innovations .

“$100 million is a big deal,” Automation Alley executive director Ken Rogers told Xconomy. “This is great news for the state of Michigan. We’re just thrilled.”

What makes the fund even more intriguing is the source of the money: an anonymous billionaire who’s putting up the entire $100 million. Rogers wouldn’t say much but said the donor had previously worked with LaSorda. (I’m gonna got out on a limb and say this donor worked in the automobile industry. Who else could be a billionaire in Michigan?)

It’s encouraging to see Michiganders step up. Contrary to popular perception, the state is home to a large number of wealthy individuals, who mostly made their fortunes in the car business. There’s also Quicken Loans founder Dan Gilbert, who recently formed Detroit Venture Partners to back local tech companies.

But unlike DVP, which is still trying to raise money from other investors besides Gilbert, Stage 2 Innovations has all of its money upfront.

“The $100 million is on the table today,” Rogers says.

The money couldn’t come at a better time. Michigan is not a venture capital powerhouse, though the state has improved in recent years. Last year, local companies attracted $215 million, placing Michigan in the middle of the pack compared to the rest of the country, according to the annual report of the Michigan Venture Capital Association.

About two-thirds of that money went to early stage startups, while only 19 percent went to companies in the growth/expansion stage, the report says. That’s where Stage 2 Innovations comes in.

The idea of the fund, Rogers says, came from conversations he had with LaSorda, whose consulting firm belongs to Automation Alley. Since 2003, the organization has invested $6 million in seed money to 29 companies.

But just when those companies have developed a prototype and are about to land their first contract, the money dries up, Rogers says.

“Bam! They hit the wall,” he says. “They couldn’t find the funding.”

So LaSorda approached the donor, who agreed to back the fund.

Stage 2 Innovations is only interested in companies with products that are ready to generate sales. “They only want companies ready to go,” Rogers says.

The fund will offer the startups either money, management advice, or manufacturing capabilities, or a combination of all three, Rogers says.

“How much better can that get?” he says.

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Ann Arbor SPARK named the following community leaders to its board: Ric DeVore, regional president of PNC;Marty Kahn,CEO of ProQuest; Mike Miller, head of Google’s local office;Conan Smith, Washtenaw County commissioner and executive director of Michigan Suburbs Alliance;Thomas Zurbuchen, director of University of Michigan’s Center for Entrepreneurship, and Dr. Susan Martin, president of Eastern Michigan University.

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Oh angel investment tax credit! We barely knew ye!

Michigan’s new and improved three year, $27 million angel tax credit, signed into law just last fall by then Gov. Jennifer Granholm, will likely not survive contentious budget negotiations, according to sources close to the state legislature.

Last week, the Michigan House passed a budget that will end the credit this year. If the House prevails, investors and startups will only have about six months to receive a share of the $9 million in credits the program allows for Fiscal 2011.

So far, seven startups have applied for the credit and are expecting investments, according to data from the Michigan Economic Development Corp. (MEDC), which administers the program. The agency is currently reviewing 22 more applications. All told, 32 investment groups have already registered with MEDC.

“It’s unfortunate,” says Chris Moultrup, associate director for Blue Water Angels in Midland, MI. “At a time when we need jobs, it’s kind of discouraging. We viewed the tax credit as a great vehicle to get new investors involved in safer, entry level deals, to take a chance and really invest in Michigan’s future. To see it end without giving it a try is quite discouraging.”

Ending the angel credit puts Republican Gov. Rick Snyder in a tough spot. A former venture capitalist, Snyder largely campaigned on his business experience and ties to investors and entrepreneurs. However, Snyder may have unwittingly put himself in this position.

Earlier this year, Snyder unveiled a budget to close a $2 billion shortfall by cutting spending and fundamentally reforming Michigan’s tax system.

Under his proposals, the state would eliminate a hodgepodge of tax credits, including the popular Michigan Film Credit, in favor of a flat corporate tax of six percent.

Snyder’s budget essentially says this: only a favorable, broad-based tax structure will key an economic recovery versus using tax credits to support so-called special interests. He did, however, recommend $50 million in general fund support for “business retention activities.”

However, the House and Senate proposed cutting the budget even further. Of that $50 million from the general fund, the legislature earmarked only $25 million.

If passed into law, the budget would be a bitter blow to angel groups that have long lobbied the state for the credit.

“We put a lot of time and effort into it,” says Jody VanderWel, president of Grand Angels in Holland, MI. “We finally go there and it might not stick.”

In 2010, angel and pre-seed investments in Michigan totaled $4.9 million, down 42 percent from two years ago, according to the annual report of the Michigan Venture Capital Association.

David Weaver, chair of the Great Lakes Angels, says the credit could be salvaged if investors could show results.

The goal of the credit was to encourage new investors to enter the game and perhaps also encourage the formation of new investor groups. Indeed, of the 32 investment groups registered with the state, several appear to be new, including Burns Park Angels, Swift Angels, and Windy Ridge Angels.

“It created a lot of buzz among the angels,” VanderWel of Grand Angels says. “It created the mindset of wanting to invest.”

The program has also attracted outside investors like DJF Mercury in Texas and Patronus Capital in New Jersey.

Moultrup of Blue Water Angels expects to have 70 members by the end of the year, up from 45.

The credit “really did change the dynamics of angel investment,” he says.

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What’s the best way to snap a state out of a post-industrial, Rust Belt funk? Get together about a dozen of your smartest and most successful friends and neighbors and ask them to envision a vibrant high tech economy twenty years into the future.

That’s exactly what Xconomy did last week with Michigan 2031, our first such event in the state to stimulate a discussion on innovation and economic development. The forum drew about 80 people to TechTown in Detroit to network with luminaries like Sakti3 founder Ann Marie Sastry, Esperion Therapeutics CEO Roger Newton, and Beringea co-founder Charlie Rothstein.

The forum ran longer than expected and people didn’t seem to want to leave. Who could blame them? After absorbing the insights of Michigan’s brightest entrepreneurs and investors, you couldn’t help but feel a little juiced. And that feeling is hard to let go.

We asked each of our main panelists about what Michigan needs to build that high tech economy. Below is a quick and dirty summary of their responses.

David Cole, chairman emeritus, Center for Automotive Research- Workforce training and education

Gone are the days when all you needed was a high school education, if even that, to win a high paying job with generous benefits on the automobile assembly line. Today’s knowledge economy requires higher levels of education, even in the auto industry which requires engineers and software designers.

Roger Newton, CEO, Esperion Therapeutics- Communication

Michigan is less of a state than a region of fragmented pockets of innovation and economic development, each with their own to-do list. To build critical mass, these pockets need to come together.

“I don’t think we’re connected enough,” Newton says. “C’mon! We’re all Michiganders for Pete’s sake!”

Newton criticized the Michigan Economic Development Corp, calling the state’s economic development arm “an island in itself” that does not promote lifesciences. He did, however, think MEDC’s decision to open regional offices a positive step.

Ann Marie Sastry, CEO/Founder, Sakti3- Global view

Michigan needs to set its sights (and ambitions) beyond its borders.

“If you’re good at what you do, then people will want to join you,” Sastry says. “Don’t be afraid to look for world class people. You got to make global connections.”

Especially if you’re competing in a global, tech-driven economy.

“There is no separation between high tech and manufacturing,” she says. “It’s one word.”

Charlie Rothstein, co-founder, Beringea- Money, money, money

Beringea, a venture capital/private equity firm, doesn’t have much competition in Michigan. And that’s not a good thing.

“It’s embarrassing that Beringea is the largest source of capital” in the state, Rothstein says.

Beringea has a difficult time convincing even local large investors, including endowments and pension funds, to finance Michigan companies.

Success is the best way to break that reluctance.

“It’s up to all of us to [achieve] success to convince the institutional market that Michigan (companies) can (generate) returns,” he says.

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You know you want to go.

So obey those instincts and come out to Xconomy’s Michigan 2031 forum Thursday evening at TechTown in downtown Detroit.

Since I’ve arrived in the area three months ago, I’ve seen firsthand the tremendous amount of innovation and initiative circulating in Michigan. What’s now needed is context, a thoughtful discussion that can bring meaning and foresight to the people, companies, and trends driving Michigan’s high tech economy.

To that end, Xconomy has assembled an all star cast of investors and entrepreneurs to envision Michigan twenty years from now. Will the state be a national leader in cleantech, as so many predict? Or will Michigan build lifescience or software clusters that rival Silicon Valley in California or Route 128 in Massachusetts?

Our speakers include Beringea co-founder Charlie Rothstein, Arboretum Ventures managing director Jan Garfinkle, Esperion Therapeutics CEO Roger Newton, tech entrepreneur Dug Song and others.

This is a conversation that you don’t want to miss. So grab your tickets and I’ll see you in Detroit Thursday night!

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Forbes recently ranked the best cities for minority entrepreneurs and perhaps not surprisingly, Detroit finished near the bottom of the list.

Despite Detroit’s large African American population, the magazine ranked the Motor City 47th out of 52 metropolitan areas. You can probably blame the usual suspects: lack of venture capital, the loss of population, downsizing of the auto industry, etc. Atlanta, Baltimore, Nashville, Houston, and Miami made the top five.

Here’s what did catch my eye. All of Xconomy’s cities— Seattle (27th), San Francisco (35th), New York (39th), Boston (45th), San Diego (48th)—fared poorly.

What gives? These cities boast dynamic high-tech economies (which is why Xconomy’s there in the first place) and vibrant immigrant communities, who, according to a Kauffman Foundation study, are more likely to start a company.

In the Forbes piece, Jonathan Bowles, president of the New York-based Center for an Urban Future, theorizes that expensive business rents and unaffordable real estate discourage minorities from launching companies in those areas.

Detroit does not have that problem. The city has plenty of cheap land and help for would-be minority entrepreneurs. Kauffman’s Urban Entrepreneur Partnership, for example, is trying to help minority-owned auto suppliers expand into high-tech industries like medical devices and clean energy. BizDom U, a joint project by Kauffman and the New Economy Initiative, mentors and trains minority entrepreneurs and helps find funding for their ideas.

The region, though, is trending in the right direction. From 2002 to 2007, the number of black-owned businesses in the Detroit-Warren-Livonia area jumped 71 percent, far outpacing the national average, according to a recent report by the U.S. Census Bureau. Tax receipts in the area increased 16.9 percent to $3.7 billion.

Most of the businesses focused on repair, maintenance, personal and laundry services, healthcare and social assistance, and administrative support, waste management, and remediation services.

So it seems Detroit’s minority community, at least African Americans, is starting to embrace entrepreneurship. What remains to be seen is whether the region can produce minority-owned high tech startups that attract venture capital and produce high-paying jobs similar to those on the coasts.

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Ann Arbor is getting a fresh infusion of Silicon Valley.

Ann Arbor SPARK, one of four business accelerators in Southeast Michigan, said Tuesday that it named Paul Krutko president and CEO.

Krutko, previously the chief development officer for San Jose, CA., will replace Mike Finney, who’s now CEO of the Michigan Economic Development Corp.

Krutko brings an impressive resume. A graduate of the University of Cincinnati, he led economic development efforts in Cleveland, OH, and Jacksonville, FL, before moving to San Jose, the heart of Silicon Valley.

“Paul has impressive experience in economic development…and a driving passion for innovation economies,” Ann Arbor SPARK chair Dr. Stephen Forrest, also vice president of research at the University of Michigan, said in a statement. “His experience will ensure that SPARK fulfills its promise for building the region’s economy and its national presence.”

What’s interesting about Krutko’s time in San Jose are his efforts to integrate arts and culture with economic development programs. Tech entrepreneurs in Ann Arbor say creating a vibrant social scene is just as crucial to building an innovation ecosystem as is venture capital and technology.

Krutko also authored San Jose’s Green Vision, a plan to promote economic growth by meeting specific goals for environmental sustainability. In 2009, the International Economic Development Council in Washington, DC, named Krutko a Fellow Member, “for achieving unusual stature in the field of economic development and closely related disciplines.”

“Over the last nine years, I’ve worked in the heart of Silicon Valley, one of the most innovative places in the world,” Krutko said in a statement. “The opportunity to come back home to the Midwest and join an organization that’s becoming known across the country for its work in changing Southeast Michigan’s economic destiny, is exciting.”

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Universities and colleges across Michigan may be scrambling to reduce costs as state officials weigh deep budget cuts to higher education. But programs that encourage entrepreneurship and innovation will likely be spared, school officials say.

The programs are well-established and often funded by outside sources and therefore won’t be directly affected by the state funding cuts. However, the poor economy could make it more difficult for centers to raise funds and university-bred startups to survive once they leave campus, officials say.

Bryan Ritchie, the director of Michigan State University’s Entrepreneurship Network, says he doesn’t think the proposed cuts cuts will hurt his organization because 80 to 90 percent of the network’s funding comes from outside MSU. He does worry that a weak economy might discourage donors from writing checks.

“We continue to grow pretty rapidly, it’s just made it a little tougher to get some the resources we need,” Ritchie says. “Even though it’s been a little bit hard, we’ve been able to get them.”

Judy Johncox, associate vice president for research and technology commercialization at Wayne State University, says there’s still strong interest in university innovation from students and faculty and companies looking to commercialize high tech intellectual property.

She remains confident any cuts won’t hurt WSU’s efforts to foster an entrepreneurial spirit on campus. But startups that spin out from Michigan universities might have a tougher time staying afloat, she says.

“The cuts to education I don’t think are the issue, I think the economy itself and financial resources to support those companies once they get started is the issue,” she says.

Tim Faley, managing director of the University of Michigan’s Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies, says such programs are “beyond the tipping point.”

Like MSU’s Entrepreneurship Network, Wayne State’s Blackstone LaunchPad or his own center, most campus innovation programs are endowed, Faley said.

Perhaps most importantly, Faley says, university officials understand that they can show state legislators … Next Page »

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If Michigan was looking for an industry to bolster its future high tech economy beyond automobiles, medical devices would appear to be a good bet.

HandyLabs and Accuri Cytometers, both University of Michigan spinoffs based in Ann Arbor, MI, were recently purchased by Benton, Dickinson & Co.

With nearly $8 billion in revenue last year, Stryker is rapidly becoming a major player in medical devices. The company, based in Kalamazoo, MI, recently spent $1.5 billion to acquire the neurovascular business of Boston Scientific.

Traditional auto supply manufacturers, including Roush Life Sciences and Delphi Medical, are now expanding into medical devices. Two new medical schools are in the works in Michigan while the U-M medical school is ramping up efforts to convert its research into bankable technology.

“All of the pieces seem to be falling into place,” said Tim Peterson, managing director of Arboretum Ventures in Ann Arbor, which funded HandyLabs and Accuri. “The trend line looks really good.”

Ten or 15 years from now, Michigan will view this moment as a turning point, he says.

Whether Peterson’s prediction is a sound one is just one of the important questions that will be debated at Xconomy’s Michigan 2031 forum next month. The April 14 event—which will bring together some of Michigan’s most prominent investors, academics, and entrepreneurs at Detroit’s TechTown—will discuss the shape and makeup of the state’s high tech economy 20 years from now, including the role medical devices will play in that economy.

Michigan has a lot of work to do in the meantime. The state’s medical device community is largely scattered, disorganized, and underfunded, observers say.

“We have no good, strategic plan,” says Stephen Rapundalo, CEO of MichBIO Institute in Ann Arbor. “We don’t even know what we have.”

From 2004 to 2009, Michigan attracted $439.6 million in bioscience-related venture capital, good enough for 18th place in the United States, according to the Battelle Report.

Of that money, medical devices (diagnostic and therapeutic products) captured only 21 percent, or $92 million, with the vast majority going to pharmaceuticals and biotechnology. By contrast, venture investments in Minneosta medical device firms totaled $1.2 billion and Ohio medical device startups grabbed $394.2 million.

Michigan’s medical device sector has actually shrunk over the past several years, the Battelle Report says. In 2008, the state had 500 device-related “organizations,” down 13.1 percent from 2001, compared to 0.4 percent gain for the entire country.

In that time period, the number of Michiganders working in medical devices fell 4.3 percent to 12,339, while employment in the industry across the United States rose 2 percent to 435,509 people.

But some experts think money is not the main problem. Scott Merz, president of MC3, a medical device incubator in Ann Arbor, says the state lacks “anchor” companies that entrepreneurs and investors can build around.

Minnesota, for example, boasts three major medical device makers—Medtronic, Boston Scientific, and St. Jude Medical. Alumni from those companies in turn launch their startups and invest in and advise others.

“There are a lot of [device] companies here,” Merz says. “What we’re missing is the presence of … Next Page »

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Last week, the Kauffman Foundation released details from a six-month study that cataloged the capabilities of the region’s four top economic development groups: Ann Arbor Spark, TechTown in Detroit, Automation Alley in Troy, and Macomb-OU Incubator.

Collectively, the report boasts, the groups “have created more than 1,000 jobs and invested approximately $18 million in hundreds of start-up companies while securing more than $101.2 million in additional capital.”

Sounds good, right? Left unanswered, however, is whether these accelerators are helping to create companies and jobs for the benefit of the whole region or for their own pockets of geographic influence. In other words, can these four disparate groups rise above their own agendas and pool their resources for the good of the regional economy?

“There’s an opportunity for the business accelerators to cooperate and do things that we couldn’t do on our own,” says Automation Alley president Ken Rogers. “We can step outside our parochial interests and work together to secure more funding, more programming.”

The first step, Rogers says, was to form the Business Accelerator Network for Southeast Michigan (BANSEM), an alliance of the four groups forged in June 2010. In addition to commissioning the Kauffman study, BANSEM last year bankrolled Accelerate Michigan, a business plan competition for promising startups. BANSEM is also exploring ways to win funding from the U.S. Commerce Department to form international trade missions that would represent southeast Michigan.

But collaboration, I believe, will be difficult. Economic development is often a zero sum game in which states and countries attempt to swipe each other’s companies and talent. Throw four accelerators, each with its own agenda and constituents, into a relatively compact geographic area and they inevitably start to compete for time, money and attention.

Take Detroit’s TechTown and Ann Arbor Spark. One represents a struggling city with a predominantly African American population trying to rebuild its economy beyond the auto industry and attract capital and young professionals. The other represents a well-to-do, mostly white college town filled with tech startups and well-to-do angel investors.

“I think it is going to be a struggle for the two regions to work together in the name of regional economic development on a broad scale,” says Jeff Bocan, managing director of Beringea, a private equity firm based just outside of Detroit. “I do think there are opportunities for the two areas to collaborate on mutually beneficial projects like high-speed rail or attracting new airlines to Detroit-Wayne County Airport. But in terms of broad-scale development, I feel that the needs of the respective areas are too divergent. The scale and fundamental nature of the challenges faced by Detroit far exceed those of Ann Arbor and makes it very tough to have those regions coordinate their efforts.”

I’ve spoken to several people in Detroit and Ann Arbor and they consistently describe a tension that roughly … Next Page »

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Republican Gov. Rick Snyder’s top economic development official defended a controversial plan to eliminate certain tax credits in favor of a flat corporate tax rate, arguing the state’s economy would better benefit from broad tax reform than tax breaks aimed at specific industries.

The best way to lower the state’s 11 percent unemployment rate is to “position Michigan in the minds of people as a place to do business,” Michigan Economic Development Corp. (MEDC) CEO Mike Finney told Xconomy.

“Business people want [ to operate] in a stable business environment,” Finney says. “They see that as the top priority.”

Snyder’s budget calls for a flat six percent corporate tax rate while eliminating a litany of tax credits meant to spur development in specific industries like medical devices, biotechnology, batteries, and clean energy.

Eliminating tax breaks can be politically dicey, as Snyder discovered when Michigan’s prominent film industry loudly decried the potential loss of the state’s generous film credit. The program allows companies to claim up to 42 percent of expenditures of movies, television shows, digital media, and video games produced in Michigan.

Finney admits the administration was a bit surprised by the blowback from the industry but insists Snyder will not waver on his budget proposals. Under Snyder’s budget proposal, the state can spend up to $25 million a year on film incentives—a perfectly “reasonable” figure, according to Finney. But if the industry wants more, they will have to petition the legislature to raise the cap, he says.

Though Snyder is a former venture capitalist who invested in new startups, he believes that any economic recovery depends on “helping existing businesses grow,” Finney says.

“If we had more of that growth in the state, we would be much more effective,” he says.

Tax credits, on the other hand, often fail to promote long- term economic development, Finney says.

He thinks Michigan boasts several promising high tech industries, including medical devices, IT and software. So instead of blindly doling out tax credits to specific industries, Michigan needs to be smarter about where to invest its limited economic development dollars, Finney says.

“Michigan has a lot of upside potential and we need to take advantage of it,” Finney says. “We want to be opportunistic, look at opportunities and go after them as they make sense to Michigan.”

One of Finney’s top priorities at MEDC is to boost Michigan’s exports. Currently, less than one percent of America’s 30 million companies sell their products overseas, according to International Trade Administration, a unit of the U.S. Commerce Department.

“Imagine what could happen if [Michigan can] double or triple that,” Finney says.

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