Blog: Larry Eiler

I see many more reasons to be encouraged that Michigan is on the right path for fostering entrepreneurship and economic growth.

For instance, today we have a better funding environment with the 21st Century Jobs Fund. Launched in 2005 by the MEDC, Michigan’s 10-year $2 billion 21st Century Jobs Fund has created a fertile climate for entrepreneurship and begin the transformation and diversification of Michigan’s economy.

The initiative has also:

• Made direct investments in high growth technology companies;
• Made indirect investments in additional high growth companies through venture capital firms, banks,and economic development programs; and
• Built upon the existing business support infrastructure to help Michigan companies develop business plans, enter new markets, submit successful research proposals, raise capital, and conduct other critical activities involved in growing their businesses.

The 21st Century Jobs Fund plays an important role in building what just about any entrepreneur will tell you Michigan needs: a stronger financing environment with support available at different stages of a company’s
development.

The initiative addresses this by creating multiple programs, each with a different sweet spot:

The Michigan Emerging Technologies Fund (managed by the MI-SBTDC) provides commercialization funding to companies at their earliest stage when they receive federal R&D grants. Thirty companies have been funded with the first $2.4 million of this program, leveraging $17.7 million in additional capital and creating and retaining 230 jobs.

The Michigan PreSeed Capital Fund (managed by Ann Arbor SPARK in partnership with the Smart Zones) enables companies to achieve or accelerate early sales and/or meet milestones necessary to raise larger, institutional rounds of financing. Forty-three companies were funded with the first $9 million deployed by this program, leveraging more than $34 million and creating nearly 500 jobs.

The 21st Century Investment Fund (as well as a few other similar state initiatives) strengthens Michigan’s venture capital environment and has helped grow the state’s venture investment community to 16 venture capital firms with $1.1 billion under management. The 21st Century Investment Fund invested in 11 venture capital firms, who in turn invested $33.9 million in 13 companies, leveraging almost $260 million third party capital, creating more than 780 jobs.

Our greatest assets

It's important, however, to remember that Michigan has always had unique and powerful assets, the most prominent of which are our research universities and natural resources

Chuck Newman, chairman of Ann Arbor-based ReCellular, one of the world’s largest recyclers of cell phones and accessories, is not alone when he credits Michigan’s strong research institutions with providing the state with a fresh supply of new talent for emerging companies and start-ups.

Michigan State University, Wayne State and U-M give Michigan a leg up on other states for top talent as it diversifies into such emerging technologies as alternative energy, battery development, advanced manufacturing of medical devices, and wind turbines.

Newman and others also point to the state’s natural resources and large supply of fresh water as one of its competitive assets.

Lean and green

Probably the most encouraging and promising developments in Michigan is the growing corporate commitment to sustainability and innovation.

One need not look any farther away than Downriver Detroit for a prime example of Michigan’s globalleadership in sustainability. Trenton Forging is a leading producer of custom impression die forgings for a wide variety of industries that include automotive, mining, defense and agriculture. The company has earned the distinction of being one of the first companies worldwide to be certified QS9000, and the first closed impression die forging company in the world certified QS9000/ISO9002.

Under the leadership of President David Moxlow, the company has turned its rooftop into a viable greenhouse…even growing poinsettias for the holidays.

"I have been interested in ‘vertical’ farming for a few years and even did some research into growing algae in a controlled environment for use as a biofuel," Moxlow says.

"In doing the research and trying to figure out what I could do with 26 million BTU's of wasted energy a day, I decided that we could take advantage of a flat roof on one of our manufacturing buildings and go up. This is as close as I could get to vertical farming and I wanted to create a model for industry and prove that we could grow vegetables in Michigan during the low-light months of October through January," he explains.

"We were successful with the help of energy efficient LED grow panels. Heating the greenhouse using waste heat (from the forging plant) is what makes the project affordable," Trenton Forging's top executive said.

We've come a long way, we have a long way to go

Michigan has had a collective inferiority complex, developed over many years. Obviously, the state still faces daunting challenges like cutting $1.2 billion from a $9 billion budget. We still lead in too many negative economic metrics like unemployment and home foreclosures. And too many entrepreneurs still consider their situation dismal and feel they can’t get the support they need, especially financially.

But increasingly, one also hears Michigan entrepreneurs say how amazed they are by the vast amount of resources available in the state. Compare this situation to 10 years ago when there was virtually no investment community.

There is no doubt that Michigan’s economic development efforts are working. As we learned in the past decade, there’s no easy fix, no cure-all panacea for Michigan. We need to build on the past decade, set realistic, achievable expectations, measure what’s done and rebuild the superiority complex we once had.

Here are just a few of the key elements of Michigan’s infrastructure that helped play a role in turning our state around:

Small Business and Technology Development Centers

Last year, 13 economic development specialists from six states - including California - visited Michigan to
view our state’s infrastructure organization firsthand. Their summary view, expressed by Clinton Tymes, director of the Delaware Small Business Technology Development Center was that Michigan’s Small Business and Technology Development Center (SBTDC) is among the finest in the nation.

“When we identified a need for a program to assist technology-based firms we looked throughout the
nation for the best," Tymes said. "And where was our first stop? Michigan. We were thrilled to have the chance to visit, explore what you have to offer and confirm that all the great things we had heard are an understatement.”

“You are very fortunate to not only have such a strong, innovative and effective program in your SBTDC but the overall infrastructure Michigan has to support entrepreneurship and innovation, as well as the excellent collaboration that exists among these resources is simply extraordinary,” Tymes added.

SBTDC provides ‘feet on the street’ to help emerging companies in all aspects,” explains Carol Lopucki, state director of SBTDC for the past 10 years. “We help business people do the things they have to do to build their businesses.”

MEDC Smart Zones

MSBTDC technology consultant Phil Tepley, in a July newsletter, credited the effort made by the Michigan Economic Development Corp. and its Smart Zone Network that focuses on early stage Michigan companies with growth potential.

Launched in 2000 by the MEDC, Tepley pointed out that Michigan’s 15 Smart Zones are specifically designed to cluster the activities and assets of universities, industry, research institutions and local communities to accelerate the commercialization of technologies and foster new ventures and job creation.

“The MI-SBTDC Tech Team, a national best practice, is fully funded by the MEDC as well as our new Manufacturing Assistance Team that was launched to help small Michigan manufacturers manage their finances and access capital in support of their diversification efforts. Michigan has a very strong support infrastructure for small growing businesses, much due to the efforts of the MEDC,” Tepley noted.

In addition, “the Smart Zone program facilitated tax capture from local development finance authorities, who along with state and county governments and the private sector, fund business incubators, business accelerators, networking and educational events, and financing programs,” he said.

What else are we doing right? Stop back tomorrow and I'll let you know.

Back in 2001, I wrote that Michigan had almost no real capacity to develop technology companies. I compared Michigan and California’s Silicon Valley on several important factors in developing a healthy entrepreneurial infrastructure. The name of my article was "Comparing Start-up Information Technology Companies: Michigan Vs. Silicon Valley."

In that comparison, based on my experience working in both states, Michigan fell far behind. It had virtually no investment community, and no groups like SPARK, Automation Alley, Tech Town and Southwest Michigan First to nurture fledgling ideas and get entrepreneurs started on the road to commercial success.

Now, 10 years later, Michigan stands in a dramatically different position.

>Ten years ago, Michigan did not have the infrastructure to foster entrepreneurs.
Today we do. SPARK, the Small Business Technology & Development Center, the Small Business Association of Michigan, Automation Alley, Tech Town, The Right Place, MEDC Smart Zones and other similar efforts are helping to seed the ground with innovative start-ups.

>Ten years ago, Michigan had virtually no investment community.
Today we do. The Venture Michigan Fund, Michigan Venture Capital Association, six angel investor groups, and several prominent VC firms have regional representatives.  “This is light years ahead of 10 years ago,” says Tom Kinnear, president and chairman of the Venture Michigan Fund, a $200 million fund for VCs.

>Ten years ago, we had no well-organized technology transfer offices at our colleges and universities.

  Today we do. The University of Michigan, Wayne State University, Michigan State University and other public and private universities across the state are aggressively developing their technology transfer programs and helping to launch the state's next generation of business..

>Ten years ago, entrepreneurship was not widely heralded in our state.

  Today we have numerous successful entrepreneurs and a large pool of up-and-coming candidates.

>Ten years ago, Michigan had a thriving automobile manufacturing economy.

  Today, it has been reconstituted, is substantially smaller, and showing signs of promise for the future, albeit in a much less dominant way in our state.

>Ten years ago, Michigan had more than 13 million residents.

  Today, we have less than 11 million, and we have lost nearly 850,000 jobs since 2000.

All of the above changes happened with great effort. They took nearly a decade to produce. And the good news is that many of those efforts appear to be paying off. Michigan may have hit bottom but it is now poised to bounce back. The state is in position to begin adding jobs, according to the most recent forecast by U-M economists George Fulton, Joan Crary and Donald Grimes.

In November, those U-M economists predicted Michigan will gain jobs for the first time in 10 years. They say Michigan will gain 24,500 jobs in 2011 and another 63,000 jobs in 2012 as the state economic gains economic traction. To get a perspective on what this means, Michigan suffered job losses of 17,000 in 2010, and an unprecedented 230,000 jobs lost in 2009.

No one would claim that the first set of numbers balances out the second. But as an indicator of where we are headed, there is much to be encouraged by.

Tomorrow I will reflect on the key elements in Michigan's dramatic turnaround.