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Unfiltered: David J. Brophy On Seeding Startups in Michigan

You think we're not trying? You think Detroit and its surrounding communities are down and out? Not so fast.

Next week, we'll host something called The Michigan Growth Capital Symposium, run by the University of Michigan's Zell Lurie Institute for Entrepreneurial Studies. The event brings investors together from across the country with the “Best of the Midwest” in new business and emerging technologies. MGCS 2010, which is being held May 11-12 at the Marriott Resort in Ypsilanti, will mark the symposium's 29th anniversary fostering growth in Michigan (and the Midwest). A group of 32 companies, representing industries ranging from information technology, life sciences, and alternative energy, will present for an audience of venture capitalists, angel investors and institutional investors.

I'm honored to bring Prof. David J. Brophy, PhD, from Stephen M. Ross School of Business at The University of Michigan, to the blog. My favorite line of the essay before you (emphasis added):

In harmony with local entrepreneurs and a workforce of smart, talented people with tacit knowledge of refined technical manufacturing, the state is capable of serving the world.

The Startup Scene: Investing in Michigan's Future

By David Brophy, Founder of the University of Michigan Ross School of Business Michigan Growth Capital Symposium

Despite struggles with its auto companies and an unemployment rate of nearly 15 percent, Michigan shows signs of an emerging economic spring. Investment activity is steady, and innovative startups are being seeded around the state, positioned to grow into companies that will help fuel the state's recovery.

Even the most optimistic among us – myself included – realize the state will take time to recover and create economic momentum. For decades, we have taken great pride in our manufacturing roots, albeit becoming so beholden to it that its demise led us to the brink of our own destruction. As old industries fall away, new sectors are appearing throughout the state. The same holds for our traditional manufacturing plants, now being transitioned to accommodate new applications.

We are seeing the beginning of both a renaissance and reinvention of this state. The recent successful exits of venture capital-backed companies Health Media and HandyLab provide bright beacons and solid evidence indicating the entrepreneurial viability of the region. And these companies are not exceptions to the rule.

For years we've been building bridges to bring technology to market from our universities. Just this past year, The University of Michigan's research expenditures exceeded – for the first time – the $1 billion annual milestone, part of a total pool of university sponsored R&D of $1.4 billion when combined with Michigan State University and Wayne State University, which together have an estimated economic impact of $14.5 billion. Our local startups are positioned to build these technologies into businesses that in turn attract investors from Michigan-based VCs and those from across the United States to support the growth of these businesses.

We have an opportunity to join the set of areas that serve global markets with locally-produced, knowledge-based goods and services in a wide range of fast-growth, high margin businesses. Michigan's universities draw research-oriented faculty and students from around the world. In harmony with local entrepreneurs and a workforce of smart, talented people with tacit knowledge of refined technical manufacturing, the state is capable of serving the world.

The key is to achieve a critical mass of entrepreneurial opportunity in make the area attractive to young professionals by providing them with the type of lifestyle they may look for elsewhere – like in like Boulder, Colorado, and Austin, Texas, which have worked vigorously to market their lifestyles and tout their assets. Communities like Ann Arbor, Kalamazoo and Royal Oak are establishing similar reputations.

Michigan's management talent pool has traditionally been oriented toward manufacturing, but as small tech-based startups spring up throughout the state, many graduates are staying because they have found a great startup or young company to work with. On the flip side, massive job losses mean there are more people training, honing their skills, examining new careers and willing to take risks. Essentially, the economic crisis is resulting in the sharpening and growth of the available workforce – including attracting people who are being dislocated from other regions.

When we can make the case for our talented workforce – and have success stories to back it up, like Jeffrey Williams, who led HandyLab to acquisition and now is CEO of Accuri Cytometers – we have the power to keep our most promising companies local.

While it's still too early to tell which specific industries, companies and leaders will dominate the new landscape, the wealth of all of them indicate an environment healthy enough to support a diverse eco-system. The coming months and years will be critical to helping them flourish. After what feels like a long period of activity working against us, a lot of factors are starting to move in our favor. The challenge now is continuing that momentum.

***

The event is presented by the Zell Lurie Institute's Center for Venture Capital & Private Equity Finance at the Ross School of Business at the University of Michigan in partnership with the Michigan Venture Capital Association and with support from the Michigan Economic Development Corporation. Check it out here.

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