Why Michigan?Opportunities for Investment and

Entrepreneurship

Martin DoberSr. VP, Entrepreneurship & Innovation

Michigan Economic Development Corporation

New Leadership, New Direction

• “We will not dwell on the past or the depth of our problems. The focus will be on agreed-on action, implementation, measuring results and continuous improvement…It is time to solve problems.”

Governor Rick Snyder, State of the State, January 19, 2011

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MissionThe mission of the MEDC is:

To market Michigan and provide the tools and environment to drive job creation and investment.

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VisionThe vision of the MEDC is:

To reinvent the Michigan economy by:• growing and attracting business• keeping talented residents here, and • revitalizing our urban centers.

As a result, Michigan will be a top ten state in:• employment• GDP growth• per capita income, and • young adult population growth.

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100+ Supporting Activities

StrategyThe MEDC’s jobs strategy consists of seven initiatives aligned to drive job growth.

Strategic Initiatives

Entrepre-neurship

Access to Capital

Business Growth

Vibrant Communities

Talent Image Seamless Delivery

1 32 4 5 6 7

MEDC Operations

Unemployment rate in the lowest 10 statesGDP growth in the top 10 states

Real personal income per capita in top 10 statesPopulation increase of people 25-34

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Objectives and Key Activities

Entrepre-neurship

1 Promote a culture of entrepreneurship and the development of high-growth, technology ventures by:

• Facilitating the commercialization of technology• Ensuring the availability of key entrepreneurial support• Strengthening the state’s entrepreneurial infrastructure

For Venture Capitalists, Michigan presents the opportunity for extraordinary investment returns

Attractive Pre-Money Valuations Exist

Michigan 70% lower than coastal marketsMidwest 43% lower than coastal markets

Refers to first-round, early-stage investments, 2002-2009Source: VentureXpert

Average pre-money valuation by company location

Midwest Market includes: IL, IN, MI, MN, MO, OH, WI Top Venture Markets include: California, New York, and Boston

All Industries High Tech

$3.8M$3.2M

$7.3M $7.5M

$12.7M $13.2M

Michigan MidwestTop Venture Markets

Top Venture Markets Midwest Michigan

VC Dollars Invested per Company ($M) $ 15.5 $ 8.9 $ 8.8

Average Exit Value $ 138.9 $ 116.7 $118

Average Exit Value / Average VC Invested 9.0X 13.1X 13.4X

Target Market Premium 46.1% 49.7%

Source: VentureXpert data from 1/1/2006 – 12/31/2010Top Venture Markets: California, Massachusetts, New YorkMidwest: Illinois, Indiana, Michigan, Ohio, WisconsinSeed, Early, Growth, Late Stage

Better Premiums per VC Dollars Invested

On average, Michigan and Midwest venture capital investments yield a premium over investments in the top venture markets.

At the heart of these extraordinary venture capital return opportunities are Michigan’s:

Exceptionally high rate of innovation

World-class innovative talent

Growing rate of venture capital activity

Michigan Ranks High in Innovation

Vehicle R&D Spending:

#1

NIH Grants:#11

(70% to University of Michigan)

Government Research Funding:

#9

Patents Issued:#8

University R&D:University of Michigan

#1

Number of Engineering

Degrees:#3

Industrial R&D Spending:

#4

Overall R&D Spending:

#5

University Cluster URC (UM, MSU, WSU):

#5 in R&D#3 in Patents

#5 in Start-ups

Michigan Has the Superior Opportunity to Convert Research Funding into Startup Companies

Funded Research Dollars

Source: 2008 AUTM survey data

Successful University spinouts turned into great venture opportunities

Michigan universities have, on average, created one start-up company for every $78 million of funded research expenditures. The national average is one in $84 million.

$1.6 Billion509

321135

Research Expenditures

Invention Disclosures

Patent ApplicationsFiled

Licenses/ Options Executed

Non-Michigan Venture Firms Investing in Michigan

2008 2009 20100

20

40

60

80

100

5870 78

Non-MI Venture Firms

Michigan VC's contribu-tion to VC financings in

Michigan34%

Non-Michigan Contri-bution to VC financings

66%

2010 Michigan Venture Capital Financing Sources

Since 2008, 20 additional non-Michigan venture capital funds have

invested in Michigan’s start-up companies.

Although ~90% of Michigan’s venture capital-backed companies were

originated by local venture firms, 66% of the capital raised came from

non-Michigan venture firms.

2001 2010 % Growth

# Venture Firms 7 24 243%

Investment Professionals 18 58 222%

Capital Under Management $520M $2.6B 400%

National VC Investment Ranking 25 18 39%

Michigan Portfolio Companies ~23 ~70 204%

The Growth of Professional Venture Capital in Michigan

- Data represents all venture capital firms headquartered in Michigan or with a presence in Michigan.

Venture Capital Support

• 21st Century Investment and Venture Michigan Funds - $200 Million to VC, mezzanine, and private equity funds

• Invest Michigan - $300 Million pension fund investments• Michigan Venture Capital Association (MVCA) programs:

– Venture Fellows– CEO Placement– Entrepreneur-in-Residence– Angel Network Development

• New Venture Capital Programs in Development:– Venture Matching Fund– Venture Development Fund

Michigan has a long history of entrepreneurship, and is investing in programs to continue that tradition

Expanded Toolkit for Companies

• Replacing complex tax incentive-based way of doing economic development with a restructured, tactical toolkit– $100 million annually for business attraction and economic

gardening– $25 million annually for film, video game production– $25 million annually for innovation and entrepreneurship

programs– $80 million for State Small Business Credit Initiative (SSBCI)– $3 billion+ Pure Michigan Business Connect program

Early Stage Company Support

• Business Commercialization Assistance– Small Business Technology Development Center (SBTDC): Strategic business

assistance provided at no cost by professional technology business consultants– Biotech Business Consultants (BBC): Training and hands-on review for

companies seeking federal SBIR or STTR grants– Michigan Manufacturing Technology Center (MMTC): Connects manufacturers

to companies needing manufacturing components– Michigan’s Universities: Research, Engineering and Technology Transfer

offices, talent connections, corporate connections– Michigan’s 15 SmartZones: Technology business accelerators and incubators

that provide the entrepreneurial and commercialization support services to start-up ventures.

Michigan SmartZones

1 MTEC SmartZone2 Sault Ste. Marie3 Michigan Alternative and Renewable Energy Center4 West Michigan Science and Technology Initiative5 CMU Research Corporation 5a Mount Pleasant SmartZone Satellite6 Lansing Regional SmartZone7 Southwest Michigan Innovation Center8 Battle Creek Unlimited9 Jackson Technology Park10 Ann Arbor SPARK11 Pinnacle Aeropark12 TechTown13 OU INCubator14 Macomb INCubator15 Automation Alley

Michigan is home to 15 SmartZones , each anchored by an academic institution and supported by the local communities.

Expanded Infrastructure for Entrepreneurs

$32 Million in new, statewide Entrepreneurial

Programs

Pre-Seed and Angel Capital (SPARK, BRCC, MVCA)

Business Plan Competitions (AMIC,

GLEQ)

Business Accelerator Fund (SBTDC)

Grant Writing Assistance (BBC)

Entrepreneur-in-Residence (MVCA)

CEO Placement (MVCA)

Specialized Training (Inforum, DCCC)

University Tech Acceleration

Early Stage Company Financial Support

• Business Plan Competitions– Great Lakes Entrepreneur’s Quest: Top prize is $100,000, in addition to

mentoring assistance– Accelerate Michigan Innovation Competition: Top prize is $500,000

• Funding Assistance– Michigan Universities Commercialization Initiative: Up to $100,000 match

grant– Pre-Seed Fund: Up to $250,000 convertible note– Pre-Seed Micro-Loan: Up to $50,000 at 12% interest– Emerging Technologies Fund: Up to $25,000 match grant on SBIR/STTR Phase

I, Up to $125,000 match grant on Phase II– Business Accelerator Fund: Up to $50,000 for consulting, research, or

manufacturing assistance– Venture Matching Program (Proposed): Up to $500,000 equity investment

Recent Headlines

• Michigan ranks 2nd in study of states’ economic health– Michigan’s economic health ranks No. 2 in the nation, according to Bloomberg. The

Bloomberg analysis considered important indicators such as personal income, tax revenue, employment and housing prices.

• Michigan no. 1 in nation for small business loans– Michigan’s banks and credit unions led the country in providing government-backed

small-business loans, according to new data from the U.S. Small Business Administration

• Michigan No. 1 for tech job growth– Michigan leads the nation in tech job growth, according to the latest 2010 TechAmerica

report.

• Michigan No. 1 for job creation potential– Newsweek and its affiliate web site The Daily Beast named Michigan as No. 1 on the list

for booming states for business.

• Michigan home to ‘most beautiful place in America.’– ABC News’ Good Morning America has named Michigan’s Sleeping Bear Dunes the Most

Beautiful Place in America.

Why Michigan?

Questions

martin@michigan.org