Blog: Mahendra Ramsinghani

Mahendra Ramsinghani, our guest blogger this week asks: "By attracting a few entrepreneurs, a lot of economic challenges could be addressed. But could a bumper sticker attract the right entrepreneurs?" Read his final post to learn the answer.

Ramsinghani is with Plymouth Venture Partners in Ann Arbor. Check back here weekdays for more posts.

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.