MGCS Highlights MI’s Strengths, Challenges, Need for More Capital
The 34th annual Michigan Growth Capital Symposium (MGCS) continues today in Ypsilanti, attracting venture capitalists and hot startups from around the region for a two-day conference where companies have a chance to pitch their ideas and network with potential investors.
The keynote speech yesterday was delivered by Brad Keywell, a former metro Detroiter and University of Michigan alum who went on to start Groupon. He lives in Chicago these days, but he’s still connected to the Great Lakes State, and it’s fair to say he’s rooting for us in Detroit.
He pointed to Quicken Loans founder Dan Gilbert’s achievements in building a tech hub downtown, but more than that, he praised Gilbert for helping to make Detroit a place where tech entrepreneurship is valued and nurtured. But now that we have this fledgling ecosystem, where do we take it from here?
In Keywell’s opinion, it may start with innovating Michigan’s core industries, like automotive, and bringing the spirit of entrepreneurship back to huge corporations that are typically thought of as bloated, many-headed beasts. With the dawn of connected cars and autonomous vehicles, Michigan has a concrete opportunity to lead the development of the technologies required to bring connected cars fully online.
“It’s extraordinarily exciting,” he said. “Look at the state of Michigan and the iconic industry-leading companies there. Who is partnering with them to unlock the unique entrepreneurial opportunities?”
Ultimately, Keywell said, Michigan isn’t at a competitive disadvantage when compared to other cities in the region, like Chicago. In fact, with the amount of corporate capital available here, plus the number of highly skilled engineers being churned out of Michigan universities, we probably have one up on many other places. However, he stressed that members of the entrepreneurial community have to be relentless in their desire to connect with one another, and they must also embrace failure the way Silicon Valley does.
In advance of the symposium, I talked with David Brophy, the director of the University of Michigan’s Center for Venture Capital and Private Equity and the founder of the MCGS, about some of the findings in the Michigan Venture Capital Association’s 2015 report.
“We continue to see growth and development, but is it fast enough and big enough, and where does it put us among states that aren’t California?” he said. “It’s moving in a positive direction, just not as fast. We need more capital.”
Indeed. According to the MVCA report, Michigan’s venture firms estimate that their in-state portfolio companies will need more than $1.3 billion for subsequent funding rounds in the near future.
As Brophy sees it, the issues at hand are the quality of the companies in Michigan and their ability to get to market and gain momentum. Though he said Michigan is doing better than most states in the region, he described it as “sort of an also-ran” when compared to Illinois, the strongest state for VC in the Midwest, let alone startup hubs like Boston, Seattle, and San Francisco.
“Overall, I’m very positive,” Brophy emphasized. “There’s been a great sea change in the attitude of the population in Michigan. It’s gone from somewhat dependent on our major industry [automotive] to people being unable to rely on it as the main source of employment. As a result, more people are becoming self-reliant and starting companies. That’s a healthy sign that augers well for the future.”
Brophy feels that one of Michigan’s greatest untapped resources is the tacit manufacturing knowledge in the state. Automakers, he said, are willing to look at technology and talent developed locally in part because the logistics are easier. “They absolutely want to increase collaboration with emerging tech companies in Michigan. The auto industry is in its new suit, so to speak—it’s now a tech-based industry instead of the mechanical engineering industry of the past,” he said.
The bottom line, Brophy said, is that the symposium has always been about bringing Michigan technology forward and giving investors a chance to understand it. The other half of that equation, he said, is that Michigan companies must be mindful of the technologies the market is asking for, regardless of sector.
“Say you have a kid who likes the Detroit Tigers,” he said. “You can buy him the gear, but he still has to learn to throw. In Michigan, we have universities, scientists, and technologists that are second-to-none. All we need now is a pinch of salt in the stew to get talented people to focus on big markets and act as if they’re in Silicon Valley.”