New TechTown Venture Fund looks to raise $10M-plus
BYLINE: Tom Henderson
Officials of a new Detroit-based venture-capital fund say they will start fundraising in June and hope to raise a minimum of $10 million in the next six months, eventually targeting a maximum of between $20 million and $30 million.
The TechTown Venture Fund will be a partnership with Wayne State University. It will focus on early-stage WSU spin-offs and on tenant companies of the TechTown business incubator and technology park near campus, but it will also invest in other companies.
Wayne State likely will have some financial stake in the fund, but details have yet to be worked out or approved by the school's board of governors.
``This is about making money. It's not just about doing something for Wayne State or for the city of Detroit,'' said Joseph Alam, who will run the fund.
Alam is chairman of Mid-States Capital L.L.C., an investment-banking firm he founded in 1995. He recently moved his company from Grosse Pointe Farms into temporary offices on the fifth floor at TechTown while a 2,000-square foot office is built on the ground floor.
``We see a lot of high-value technology here and no local funds taking advantage of it,'' Alam said. ``We've got individuals with good technology at Wayne State flying out to California to talk to venture capitals there. Greg Auner just got back from California. They told him if he moves out there, they'll give him funding. We have to compete with that.''
Auner, the director of the Smart Sensors and Integrated Microsystems program in WSU's engineering school, has 26 patents issued or pending and a startup company located in TechTown, Visca L.L.C. (See ``Dollars and sensors,'' Crain's Detroit Business, Feb. 5.)
Alam said he has already identified potential investments and has begun fundraising privately for what may end up being an early portfolio company of the fund, Climate Technologies L.L.C. of Plymouth, which he said likely will move into TechTown.
Members of the fund's advisor board include Jim Croce, CEO of NextEnergy, the alternative-energy nonprofit directly across Burroughs Street from TechTown; Randal Charlton, interim director of TechTown, chairman of MichBio and former CEO and co-founder of Asterand plc, TechTown's largest tenant; Terry Cross, executive in residence-entrepreneurship at WSU; Fred Reinhart, assistant vice president for research at WSU's technology transfer office; and Paul Tobias, former CEO at Birmingham-based Munder Capital Management and co-founder of Bloomfield Hills-based Mackinac Partners L.L.C., a financial-advisory services firm and merchant bank.
``We want to make university technology an engine of economic growth,'' Charlton said.
Alam said he has meetings arranged with large area banks. He will be meeting with government pension-fund managers and will apply for funding from the state, which has the $95 million Venture Michigan Fund and the $109 million 21st Century Investment Fund. Alam already has commitments from Ann Arbor Spark, a nonprofit business development organization, to co-invest in deals.
``Any additional venture capital dollars arriving in the state of Michigan is welcome and needed,'' Spark CEO Michael Finney said. ``This fund will fill a gap. We would certainly look to co-invest in their companies.''
In January, Spark began accepting grant applications of between $50,000 and $250,000, as part of a $6.6 million, two-year Michigan Pre-Seed Capital Fund program funded by the state's 21st Century Jobs Fund. The grants must be matched by other investments.
While Spark administers the pre-seed fund, it is targeted for firms statewide, with applicants being vetted by one of the state's 11 Smart Zones. TechTown is one of them.
``There are two or three companies from TechTown currently in our pipeline,'' Finney said.
Last week, Spark announced it was merging with the Ann Arbor IT Zone, another support organization for young and start-up businesses, effective July 1.
``I think it's a great idea that they are focusing on Wayne State. There's a great amount of technology there. We know there's gold there to be mined,'' said Mary Campbell, president of the Michigan Venture Capital Association and co-founder and general partner in EDF Ventures of Ann Arbor, the state's oldest venture-capital firm.
``Wayne State has very talented people in their tech-transfer office, so that piece of the puzzle is already solved,'' Campbell said. ``All universities are seeking ways to fund their technology. The first $150,000 or $250,000 can be the hardest to come by and the most meaningful going forward.
``Randal, having started a company himself, can assess what's needed to move a company forward. They couldn't have found a better person to be involved.''
``We're really excited,'' Charlton said. ``To have a fund located in this building will inevitably be a magnet. It will help us not only attract companies from the region but help us attract companies from outside the region.
``We're very supportive of this concept. It's a very potent combination to be able to offer people business services, space and money to run a company. That will get the park filled,'' Reinhart said. ``We need a fund in TechTown, and we (WSU) will be involved in an appropriate way yet to be decided on.''
Alam said this will be the first but not the only fund he plans on raising.
``There will be other funds. We'll be perpetually raising money,'' he said. ``We expect to have great returns. There are big winners here.''
Tom Henderson: (313) 446-0337, thenderson@crain.com