SSBCI 2.0 Michigan Small Business Venture Capital Program (SBVCP)
SBVCP provides up to $75 million to increase the availability of capital to early-stage, technology-based businesses in the State of Michigan. As approved by the U.S. Department of the Treasury, the program will support funding for qualified for-profit early-stage, technology-based businesses by investing as a limited partner in venture capital funds operating in the State of Michigan.
Overview
The primary purpose of the Limited Partnership is to invest in equity or equity securities of privately held companies. Entities that meet the following SEC definition of a Fund will be considered for investment. These include, but are not limited to:
Represent itself as pursuing a venture capital strategy
80% or more of the Fund’s activity must be direct investments into private companies
Leverage limitations at the portfolio company and fund level
Prohibition on annual redemptions
SBVCP will focus on support of technology based small businesses aligned with the MEDC Strategic Plan. The MEDC’s statewide and regional impact focus industries include Mobility and Automotive Manufacturing, Advanced Manufacturing, Engineering, Design and Development, Life Sciences and Medical Devices, Technology, Professional and Corporate Services, Agribusiness, Tourism and Outdoor Recreation Industry, Logistics, Financial Services, other Manufacturing, or any other innovative technology sectors that drives regional impact. The Fund must be able to show how they will create jobs and commercialize product(s) within one or more of the competitive edge technology sectors where Michigan has a distinct competitive advantage to drive sustained, long-term economic growth as well as tools and sustainment programs in sectors that drive regional impact.
Additional requirements of the SBVCP include but are not limited to the following:
Only funds which do not engage in lobbying activities or provide political contributions can be considered for investment.
Venture firm does not need to be headquartered in Michigan but must have at least one fund managing/general partner (investment decision makers with carry) with full-time Michigan residence.
General partner of the Fund must have financial risk in the Fund of at least 1% (or generally accepted market standards).
SSBCI/MSF investment must be pari passu with all other LP’s and not subject to subordination.
SSBCI/MSF investment must be catalytic to “cause and result in” a minimum 1:1 private financing.
The maximum SBVCP investment will be no more than 49% of a fund’s total investible assets.
SBVCP capital will be used for portfolio companies with their headquarters facilities in Michigan and for which Michigan is its principal place of operation.
The maximum investment to an eligible portfolio company may not exceed $20 million and may not include more than $5 million in Program funding per investment.
Funds that invest into socially and economically disadvantaged individuals (SEDI) owned companies and/or very small businesses (VSBs), as defined by US Treasury, will be provided additional consideration, so long as the Minimum Eligibility Requirements are met.
The Program shall target firms with 500 employees or less and shall not provide support for companies with more than 750 employees.
Venture funds seeking to apply must meet all the following minimum criteria:
Must meet the SEC definition of a Fund.
Must not engage in lobbying activities or provide political contributions.
General partner of the Fund must have financial risk in the Fund of at least 1%.
Must have at least one fund managing/general partner (investment decision makers with carry) with full-time Michigan residence.
Must provide evidence that the SSBCI investment is catalytic to private financing, based on the fund’s age, size, or experience. An example of a situation where the SSBCI investment might not be catalytic is if it occurs after the venture capital fund’s initial close; if this is the case, then the fund's explanation for “cause and result” in the application may address this circumstance.
Must demonstrate that, at a minimum, $1 of SSBCI/MSF investment will cause and result in $1 of new private capital.
The proposed Fund management team must have experience relevant to the strategy as well as a long-term commitment to the mission and operation of the Fund. Of particular importance is the team’s depth and a successful track record making and exiting from investments in entrepreneurial ventures.
Application Process
Applications will be accepted during a three-year open period or until the budget is exhausted. Please submit the following information to be considered:
The Small Business Venture Capital Program intake form (click here to open)
The Small Business Venture Capital Program Application Form, including Appendix A-D (click here to open)
These documents should be downloaded, completed, and emailed back toSBVCP@Michigan.org. Incomplete proposals will not be accepted or reviewed.
Review Process
Applicants will be evaluated using the following criteria:
Level of Experience/Prior Investment Fund Results
Quality of Management
Investment Philosophy and Process
Fundraising Experience
Plan for Achieving the Purposes of the MEDC Strategic Plan Statutes
Proposed Fee Structure.
The evaluation factors are approximately equal in importance. Funds that invest into socially and economically disadvantaged individuals (SEDI) owned companies and/or very small businesses (VSBs), as defined by US Treasury, will be provided additional consideration.
All proposals will be evaluated by program staff and independent peer review expert(s).
Program staff will perform additional due diligence of applicant funds at its discretion prior to making any award, including civil and criminal background checks. Funds shall provide information upon request to the satisfaction of program staff’s due diligence.
Recommendations for awards will be submitted the MSF Board for approval.
If approved by MSF Board, MEDC Staff in consultation with the MEDC counsel negotiates and finalizes all necessary documents for the operation of the Fund.
MSF Fund manager executes final agreements with awarded fund manager(s).
