Ann Arbor VCs stand to gain from $120M Venture Michigan Fund II

Wednesday, January 19, 2011 | Source: Concentrate

Thanks to the launch of the Venture Michigan Fund II, venture capital firms in Michigan have $120 million in new funding available to them and Ann Arbor-based firms are well positioned for a shot at that money.

The new fund will be run by Credit Suisse and serves as the sequel to the $96 million Venture Michigan Fund launched in 2006. The Venture Michigan Fund II will act as a fund of funds, investing its capital in local VC firms. Those firms will use the money to invest in seed and early stage Michigan-based start-ups in the advanced manufacturing, health-care, life sciences, IT, alternative energy, homeland security and defense sectors.

Ann Arbor-based VC firms and start-ups received the lion's share of the first Venture Michigan Fund. Nine of the 11 VC firms to receive commitments from the first fund were either based in Ann Arbor or have offices there. Twelve of the 15 start-ups that have received VC investments are also based in Ann Arbor.

"Most of the firms based in Michigan are based in Ann Arbor," says Bob Payne, who runs Credit Suisse's Michigan-based investment funds. "A lot of that comes from the University of Michigan Office of Tech Transfer."

State tax vouchers are providing the capital for the Venture Michigan Funds, the first of which is fully committed to 11 venture fund vehicles, with about one-third of that money invested in 15 Michigan-based companies. That money supported the creation of 200 new jobs and has leveraged $186 million from other investors.

The idea behind the Venture Michigan Fund is to grow the state's fledgling VC industry. Many of those firms (both new and established) are in based in Ann Arbor. A Thomson Reuters study shows that there were 26 VC investments in Michigan in 2006, representing $117.3 million. Those numbers went up to 44 deals worth $231.1 million last year, the year the U.S. officially emerged from a recession.

Source: Bob Payne, manager of the Michigan Venture Fund II
Writer: Jon Zemke

Read more about Metro Detroit's growing entrepreneurial ecosystem at SEMichiganStartup.com.