Mahendra Ramsinghani is our guest blogger this week. Ramsinghani is part of Plymouth Venture Partners in Ann Arbor. Check back here weekdays for more.
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Post No. 4
Welcome to Michigan, now start a company…
I recently read a bumper sticker which commanded, “Welcome to America….now speak English.” Whoever came up with idea was probably tired of bad accents. I am glad the Immigration and Naturalization Service does not have such signs at the entry points of the country. But if we extend the idea to attracting entrepreneurs to Michigan, what would the tag line be?
I have noticed a very interesting trend where entrepreneurs who have built successful companies on the coasts are returning back to Michigan to repeat the economic successes.
Take for example, Doug Neal who spent several years on the West coast, built a successful venture backed company, survived various ups and downs and eventually had a nice exit. Now, Doug has moved to Brighton and is using his expertise to help build start-ups in Michigan. His family ties brought him back to Michigan.
Bob Poloskey and Tom Bollum built a successful company in California which raised over $30mm of venture capital. The company was sold within four years and Bob and Tom brought back their expertise (and wealth, thank you very much) to Michigan, where they became a part of Osiris Innovations. Osiris is based in Auburn Hills & is focused on sales of cutting edge supplier management software. With marquee customers like Office Depot, TRW and Detroit Medical Centers, Bob & Tom are well on their way to replicate the success, this time in Michigan.
Sreeram Veeragandham was the founding member of Juniper Networks, now a public company with $10 billion market capitalization. Sreeram was a part of the team that helped develop and re-tool the initial product line that led Juniper to eventually grow and compete with the likes of CISCO. Sreeram came to Michigan to get his MBA at the University of Michigan and decided to stay. He worked tirelessly to build Accuri Cytometers, an Ann Arbor based University of Michigan spin-off that is selling research instruments. Sreeram also invested capital and helped raise initial rounds of funding for Accuri. Sreeram now spends time with Plymouth Ventures to help build Michigan companies.
So how can the State of Michigan attract more of the ilk… entrepreneurs are unique beasts who are highly independent. Charlie Rothstein, founder of Beringea, one of the successful venture funds in Michigan shared a brilliant idea: “Destination Michigan” where any entrepreneur in any part of the country who can raise the first million of venture capital would get a matching investment from state programs. A simple elegant idea which can attract entrepreneurs, start-ups and investments to Michigan – all without any tax incentives. You can spot a good idea whose time has not yet come… hopefully we will see this get launched sometime soon. Till then, some bumper stickers maybe?
Mahendra Ramsinghani is with Plymouth Venture Partners, an “all immigrant” venture firm with an Australian (Ian Bund) and two Indians (Mahendra & Sreeram) working hard to build Michigan’s economy. Thank God, at least two of the three speak English well.
Post No. 3
Supporting small businesses in creative ways
Listening to yesterday's “State of the State 2007” address you couldn't help but agree that when Governor Granholm speaks, she spreads a lot of enthusiasm, cheer and positive energy. Rumor has it she was once an aspiring actress. Her talents at the podium are obvious.
In her address, Governor Granholm highlights several initiatives that could help small business in Michigan. Unfortunately, nothing in her speech came close to what I will term as the “Orabone model”.
Some time back, my friend and maverick entrepreneur Bill Orabone proposed an interesting idea worthy of pursuit. Bill suggested that the state adopt a simple policy of putting its money where the mouth is, i.e. setting aside no more than 2% of its buying budget to purchase products and services from Michigan-based small businesses.
Granted, Bill has a selfish interest in pushing his own products to the state, but if his company’s products can save Michigan tangible resources (say, by extending the life of the state’s roads), why not give it a close look? I know that Bill struggled mightily to get the attention of the right audience at MDOT in Lansing.
Sircon, a venture backed small company based in Okemos, Michigan offers software products for effective management of the insurance industry. States like South Dakota, Indiana, Nevada, Wisconsin and Wyoming have all bought their products. I did not see Michigan on their list. If insurance regulators from 15 other states can see the value of Sircon’s products, why not Michigan?
Or take the example of Xoran Technologies, a University of Michigan spin-off focused on selling mini CAT scan machines. The company can sell their products everywhere, but not in Michigan.
According to an obscure rule, the state’s 'Certificate of Need' requirement stipulates that users of CT scanners must demonstrate they will use the equipment for at least 7,500 scans a year. Per Xoran, most doctors don’t use the device for more than 300 scans a year. Good luck, Xoran!
The Ann Arbor Business Review carried a detailed article on the subject & funnily enough, six months prior to this story, the Governor announced the expansion of Xoran in Michigan via tax cuts. I am not sure the tax cuts would help Xoran as much as common sense (in other words, a Certificate of Need).
There are plenty of small businesses that would thrive in Michigan if only the state would set an example by creating a “buying program”. Venture Capital and financial programs are good but customer relationships are even better. Giving small businesses a meaningful opportunity to make their case --as opposed to tax breaks-- would stimulate the economy.
It would also send a powerful message to companies considering a move to Michigan.The state might even attract these companies without giving away tax breaks. Or maybe, I'm just naïve…
As a naive immigrant, Mahendra cannot vote for either Red or Blue but strongly believes that government can play a positive role in stimulating the economy. If you have ideas that can top the “Orabone model”, please email them to Mahendra at firstname.lastname@example.org
In Mr. Ramsinghani's 2/2/2007 blog he indicates that
"Or take the example of Xoran Technologies, a University of Michiganspin-off focused on selling mini CAT scan machines. The company can selltheir products everywhere, but not in Michigan. According to an obscure rule, the state's 'Certificate of Need' requirement stipulates that users of CT scanners must demonstrate they will use the equipment for at least 7,500 scans a year. Per Xoran, most doctors don't use the device for more than 300 scans a year. Good luck, Xoran!"
This is completely inaccurate. Last summer Michigan's Certificate of Need Program changed its standards regarding the Dental CT being marketed by Xoran. Working with Xoran, the standard was changed to meet a minimumvolume of 200 procedures annually. Xoran can and does sell Dental CT machines in Michigan. On the other hand, full body CT machines continue tooperate as they have for years under the higher standard.
Michigan's CON program is continuing to review its overall requirements for CT during 2007 with the goal of reflecting the state of the science while balancing cost, quality and access. Good for Michigan businesses struggling to hold downunnecessary escalations in health care insurance costs. Good for Xoran - a responsive and timely CON modification to allow its business to expand inMichigan. Good for patients - appropriate access to important newtechnology.
Mr. Ramsinghani should not feel bad, several businessnewsletters got the story wrong as well. For information on Michigan's CON program please contact: Brenda Rogers Certificate of Need Program.
Post No. 2
Achieving success through social capital
According to an experiment conducted by University of Virginia, now known as the Oracle of Bacon at Virginia, actor Kevin Bacon is at the "Center of the Universe."
Kevin has worked with various actors and is connected to pretty much, the entire acting universe with the shortest links or "degrees of separation." Similarly, Sand Hill Road in California is considered to be the center of the venture capital universe.
The brightest minds of capital work closely with entrepreneurs & technology to create intrinsic value, build anchor companies leading to strong financial returns. To build Michigan’s venture capital infrastructure, Venture Michigan Fund, a Fund of Funds with approximately $100 million was launched by the State of Michigan in late 2006.
Last week, fund manager Credit Suisse picked its first three venture funds in which substantial amount of capital, ranging from $5 million to $15 million, would be invested. These funds have a mandate to invest in Michigan companies, which may foster collaboration and trust within the financing industry.
In a well researched white paper, Steve Bird, of Focus Ventures analyzed returns from more than 8,000 venture financings from 1980-2003. Steve argues that “fortunes are built on bonds of trust and reinforced by repeated success”. If you analyze the investments made by Michigan venture capitalists over the past five years, you’ll notice an interesting trend: very few companies have raised capital from two or more Michigan venture capitalists. While most venture capitalists offices are within a short driving (or walking) distance, investments did not reflect "bonds of trust." How do you build bonds of trust and camaraderie in a highly competitive business where each one is independent, opinionated and trying to "get more"? My friend, Marc Weiser, founder of Ann Arbor-based RPM Ventures, points out that venture capitalists in Colorado meet regularly at pubs or bowling alleys to just enjoy the downtime & catch up. Maybe, I am being naïve but I believe that Venture Michigan Fund, by virtue of its in-state mandate, may foster collaboration amongst the financing industry. That should be a reason for cheer. In my opinion, Michigan need not aspire to become another Silicon Valley but rather aspire to replicate the foundation of trust and partnerships that build Sand Hill Road. Economic success and growth is a natural by-product in a nourishing environment.
Read Ramsinghani's previous posts below and chekc back weekdays for updates. Send comments to email@example.com.
Post No. 1
Let A Thousand Entrepreneurs Bloom!
When Jim Carrey arrived in Hollywood Hills in 1987, like every other aspiring actor: lot of dreams and energy, no track record. The story goes: he wrote a check to himself for $10 million and dated it "Thanksgiving 1995." In the memo line he added "For Services Rendered."
Carrey worked for years before he made any money – and in moments, weak or strong, he would pull out the check to remind himself of what he could create and the value of his ‘services’.
As Pfizer employees struggle with career choices (in the coming months?), a few may explore the entrepreneurial route and to them I suggest, write a check to yourself with the memo line: "For forming a great life sciences company." After all, some of the best life sciences entrepreneurs in Michigan have graduated from Pfizer (or Parke-Davis/ Pharmacia / Upjohn).
Take for example, the Newton-Mayleban team who were responsible for forming Esperion Therapeutics - a great company creating a lot of wealth in Ann Arbor. Roger Newton and Tim Mayleban formed and led this start-up to its initial public offering in August 2000 followed by a $1.3 billion acquisition by Pfizer in December 2003.
Post acquisition, Roger Newton has invested his time, wisdom and cash, nurturing several entrepreneurs and venture funds in the region, creating a ripple effect in the economy. Likewise, Mayleban is building yet more start-ups, allowing his cranium to indulge in a never-ending entrepreneurial high.
Or take the example of QuatRx, an Ann Arbor based drug development company. The company is led by a team of ex-Parke-Davis executives, who started it when Pfizer swallowed their former employer. As a testimonial to the strength of the management team and its technology, QuatRx has raised more than $67 million in venture capital since 2000 and is currently an IPO candidate.
Several Pfizer / Esperion executives have recently formed Cerenis, a company focused on developing small molecule HDL products for cardio-vascular treatment. Most of the management team members are ex-Esperion or Pfizer. Cerenis raised $53.5 million in venture capital in November 2006.
Another example that comes to mind is Felix de la Iglesia, who has a 34-year career in pharmaceutical development. Felix co-founded Cambridge Biotechnology Ltd. in 2001, which was then sold to a larger pharma company in 2004. In 2003 he co-founded QRxPharma Pty Ltd., a biopharmaceutical start-up company that raised venture capital in August 2004. In Nov 2006, Felix organized the Michigan Technology and Research Institute, a service laboratory and a research-consulting consortium, which is led by two key Pfizer executives, Michael Bleavins and Elizabeth Garofalo.
All of these companies could spawn the 'anchor company' effect in Ann Arbor.
Needless to say, it will take time for start-ups to create a meaningful impact. There is always the chance of high mortality and a lot of drop-offs. But Jim Carrey never looked at the obstacles. By 1994 Ace Ventura, Mask and Dumb & Dumber had grossed $550 million. Carrey was commanding $20 million a movie… a year ahead of his prediction. When Carrey’s dad passed away in 1994, the star no longer needed the check & slipped it in his Dad’s coat pocket as he was lowered into his grave.
I know it is hard to draw inspiration from a goofball such as Jim Carrey but, heck, when was the last time you wrote a $10 million check to yourself? Try it. You have nothing to loose and you might like the feeling enough to do something about it.
Mahendra is looking to invest in the next 'Pfizer' entrepreneur. If you spot one, please email him at: firstname.lastname@example.org
Photograph of Mahendra Ramsinghani Copyright Peter Schottenfels