Survey shows increased investments in Michigan companies
The Michigan Economic Development Corporation (MEDC) recently announced that venture capital (VC) investments increased by 75 percent in 2000 to $232.3 million, mirroring national trends of 80 percent for VC growth.
According to a recent survey, conducted by Ann Arbor-based EDF Ventures L.L.P. and PricewaterhouseCoopers, a total of 36 out-of-state VC firms invested in Michigan compared to 28 in 1999. The number of Michigan venture firms investing in Michigan companies last year remained constant at 13. Three new VC firms initiated operations in Michigan last year. The amount of venture capital under management in Michigan increased 36 percent to $2.5 billion.This is nearly 20 times the growth since 1996.
“This is a great victory for Michigan. This news signifies that our efforts to bring high-tech industries and companies to Michigan are making a difference,” said Doug Rothwell, president and CEO of the MEDC. “It also confirms that the resources are available to foster new businesses seeking to invest in Michigan.”
Michigan is home to the nation’s fastest growing venture capital industry, with more than $2.5 billion available to bankroll growth-oriented companies in the state.Venture capital is a high-risk equity investment by experienced fund managers in companies with explosive growth potential.Investments should yield earnings several times the size of the original equity investment over five to seven years.
“The good news for Michigan is that each year we have more venture capitalists in state and more money under management. This helps in the building of the state’s financial structure,” said Tom Porter, a general partner at EDF.“It’s important because it demonstrates the steady growth in capital funds and professionals in Michigan.”
In addition, the life sciences and health care companies cornered 20.2 percent of total investments.The information technology (IT) sector raised 62.2 percent while 14.8 percent was raised by business services.Seed and first round investments increased from 34 percent to 58 percent.The majority of the investments are in early stage companies.
EDF Ventures, L.L.P. and PricewaterhouseCoopers annually survey companies via mail, e-mail and phone responses to measure the cash-for-equity investments of venture capitalists nationwide.
The Michigan Economic Development Corporation, a partnership between the state and local communities, promotes smart economic growth by developing strategies and providing services to create and retain good jobs and a high quality of life.