Jim Adox, Chairman of the Michigan Venture Capital Association, and Managing Director of Venture Investors LLC, said phasing out the Venture Michigan Fund – as proposed by the Michigan House Commerce and Trade Committee this week – would have a tremendous negative impact on the state’s efforts to make Michigan more entrepreneur friendly.
“In 2003, and again in 2006, the State of Michigan endorsed and financed venture capital in Michigan with bipartisan support and the formation of the first fund of funds – The Early Stage Venture Investment Corporation,” Adox said. “The financing of the VMF programs was done by the State to fit within the State’s budgetary constraints of 2003-2006. Today, 12 years later, the current bills are modifying the State’s financing of the VMF programs to better fit within today’s budget constraints.”
“It is important to note that the VMF programs themselves have been very successful in helping to catalyze, build, and importantly, diversify the Michigan economy. For example, in 2003 there was $80 Million dollars invested into 18 Michigan companies by venture capital firms. Last year alone, venture capital firms funded 40 startup companies in Michigan with more than $120 million dollars. Of those, 17 were new companies, which create new, high-paying jobs in Michigan. MEDC estimates that the number of these high-tech jobs grows by an average of 1100 jobs per year. Jobs created in venture-backed companies pay 50 percent more than the median salary in Michigan.”
Adox said the MVCA looks “forward to working with the administration and legislators to build a better means for the State to maintain its commitment to entrepreneurism and diversifying Michigan’s economy using venture capital as the catalyst for funding startups.”
Under the legislation proposed, The Michigan Early Stage Venture Investment Corporation would not be able to enter into any new agreement, and current venture funds would expire in 2030 rather than 2054 under bills reported by the House Commerce and Trade Committee on Tuesday.
The corporation was created in 2003. The state was to issue tax vouchers to lending institutions to serve as collateral against the capital provided by lending institutions to the corporation, with the idea that the fund would then invest in Michigan startup companies.