Just as plants need water and sunlight to survive, new businesses need investment capital to grow and thrive. Needed capital can come from a wide range of sources, including: the entrepreneur(s) themselves, friends and family, angel investors, SBA loans, etc. Regardless of the source, virtually all early-stage firms need funding to pay for legal, strategic planning, marketing, technology, and product development assistance, to name but a few critical functions.
Here lies the dilemma for entrepreneurs in the state of Michigan… While there is a tremendous amount of talent and innovative thought leadership in the state, Michigan entrepreneurs often struggle to access early stage capital to commercialize their business ideas. The causes of this "Capital Gap" are many, including, but not limited to:
-- The lack of regional or national banks headquartered in the state (a real surprise for a state the size of Michigan)
-- A general risk aversion among Michigan investors regarding early-stage or alternative investment opportunities
-- A comparatively low level of angel, venture capital, and private equity industry presence (also an unfortunate byproduct of general investment-related risk aversion in the state)
The resulting sub-optimal level of investment capital for early-stage businesses represents a real risk for the state, as it limits the ability of innovative entrepreneurs to realize their business visions and create jobs over time. There are, however, a number of both private and governmental groups who are actively working to address these gaps. Groups like Detroit Venture Partners are playing a prominent role in increasing the visibility and market potential of Michigan-based start-ups. Government groups like the Michigan Economic Development Corporation
(MEDC) and the 15 SmartZone organizations across the state also represent one of the most progressive public-sector eco-systems for entrepreneurial enablement in the country. Accelerate Michigan
is another program that promotes entrepreneurial innovation in the state and is doing a great job of getting promising early stage businesses funded to open shop.
While progress is clearly being made, the needs and importance of this issue are significant. Small businesses are the most important engine for economic and employment growth over time, and they are truly the key to our future economic prospects. As a result, Michiganders with the resources to contribute to investing in early stage firms should seriously consider doing so. Not only do such investments often yield very attractive risk-adjusted returns, particularly if allocated and diversified by knowledgeable managers, but they also have the potential to play an important role in the state's economic future. For people interested in this issue, I'd recommend that you look into the Michigan Angel Fund
, Great Lakes Angels
, and the Grand Angels
. Alternatively, any of the state's SmartZones
would be happy to forward you to groups that can bring you up to speed on opportunities to play a role in this important area.