Opportunity and Capital for Entrepreneurs
Michigan lost some 8000,000 jobs between 2000 and 2009, but the state is bouncing back-big-time. Unemployment was down to 7.8 percent in January of this year from a high of 14.2 percent in August 2009, and the Michigan Economic Development Corp. (MEDC) is aggressively pursuing businesses and investors, attracting and training talent, and supporting entrepreneurs in an effort to create more new jobs.
“We are seeing companies move from the West Coast because it’s cheaper to build a company here,” says Paula Sorrell, Managing Director, Entrepreneurial Services for MEDC. “If they’re headquartered in Michigan, or even if a majority of their employees are based here, we offer a lot of support to help get them through the early setup, ‘valley of death’ stage.”
Sorrell’s point is backed up by the fact that, as of March, Michigan ranked first among all 50 states in loans dispensed as part of the State Small Business Credit Initiative.
Since raising money is key to early-state business survival, the MEDC works to increase the availability of capital at this and every state of a company’s development. It connects businesses with sources of funding, including federal grants, venture capital and banks. And it encourages venture capital companies to invest in Michigan businesses through a range of incentives, including the availability of loans backed by tax certificates, to allow investors to reduce possible losses.
“When we started to attract venture capital in 2006, Michigan had seven venture capital firms. Now we have 30,” Sorrell says. “Of those, 22 are homegrown funds and the rest are from outside.”
As a result, Michigan ranked 15th for venture capital activity among U.S. states in 2012, up from a rank of 25th in 2011. Sorrel says the MEDC also makes $250 million available annually in incentives and assistance to qualifying small and medium-sized businesses.
“The amount of venture capital available in Michigan may be smaller than on the West or East Coasts, bust for our infrastructure requirements, we have sufficient resources to target the venture dollars to the deal flow we have going,” Sorrell says.
Besides helping to increase the venture capital dollar pool, the MEDC supports companies by sourcing and training candidates for jobs, and by running programs that increase their chances of getting funding.
“We’ve established many ways venture capitalists can engage with companies,” Sorrell says. “For instance, we sponsor competitions with venture companies serving as judges, and programs through which the venture community can coach new companies. All efforts are focused to give the venture community an opportunity to engage and see potential deals.”
The MEDC also intervenes directly to drive new business. For example, it reaches out to local universities to determine if the intellectual property and research owned by the schools can be fast-tracked into commercial production.
“We see what they have, and have oversight committees, made up industry professionals, venture capitalists and strategic partners, that can move their ideas forward,” she says. “Initially, we’ve focused on the low-hanging fruit, and when we find projects with commercial potential, we fund the schools to bring on someone with industry experience to work with them.”
The MEDC measures success by the number of jobs and the business it helps create, and by the amount of funding new businesses bring to the state.
The ultimate goal is to create more and better jobs – typically tech jobs that pay about $80k per annum, which Sorrell notes is almost double what a typical economic development organization looks for.
“Our mission is to create good jobs and access to capital for companies, and to facilitate business growth,” she says. “Very rarely do companies realize all the support that’s available to them until they get here and are introduced to the opportunities.”