Recent bad news about Michigan's venture capital environment isn't as bad as it appears if you look at it in the proper context.
The first quarter was one of the state's worst in recent years when it comes to venture capital investment. But Kelly Williams, managing director of Credit Suisse's Customized Fund Investment Group, points out that venture capital statistics can be misleading from a quarterly view point, and even from a number of dollars invested perspective.
For instance, the recent $36 million venture capital investment into Ann Arbor-based Lycera happened three days after the first quarter ended. Had it been a week earlier, the first quarter would have been hailed as one of the best ever for Michigan. Williams suggests looking at such numbers on an annual basis to get a better view of where Michigan stands.
Not to mention, consideration should be given to the number of companies invested in, rather than just the dollar amount. Investing in start-ups is much cheaper today compared to a year or two ago because of the economic downfall.
"The same number of companies were funded this year as were last year," Williams says. "The dollar amount is different."
She also pointed out that there has been significant progress in developing Michigan's venture capital community and that doesn't show up in investment statistics. The number of venture capital managers in the state has doubled, and their track record is growing. That will give bigger venture capital firms in California and Massachusetts more reason to invest in Michigan.
"When they know there are really quality, smart sophisticated investors in the state, they don't need to pull the companies out to the coasts," Williams says.
She adds that there is still some dry powder in the Michigan 21st Century Jobs Fund, including $33 million in the Venture Michigan Fund and $35 million in the 21st Century Fund. She expects another round of venture capital investments from these state funds to be announced within the next 4-6 weeks.
Source: Kelly Williams, managing director of Credit Suisse's Customized Fund Investment Group
Writer: Jon Zemke
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