OK, so we've got the capital ...; Now the state works to lure, keep managerial talent
BYLINE: Bill Shea
Michigan's native venture-capital funds are growing both in number and dollars, but the state now needs to bolster its cadre of managerial talent that can run new and growing companies.
``Talent, that's the single biggest challenge. That's what we desperately need,'' said Michael Finney, chairman and CEO of regional economic-development group Ann Arbor Spark, which has ongoing initiatives to train managers.
Efforts are under way to cultivate executive talent to help retain startups and attract companies to the state. But Finney and others behind those efforts say it will likely take some time before they pay off.
In the meantime, companies are deciding whether to seek money and leadership somewhere else.
The example often held up by economic-development executives to illustrate the need for both native money and talent is IntraLase Corp. The company was co-founded by scientists from the University of Michigan's Kellogg Eye Center in 1997 and received venture-capital funding from in-state firms. A year later, however, IntraLase moved to Irvine, Calif., where a pool of skilled workers and management talent was immediately available for the company's laser eye-surgery equipment business.
The lack of entrepreneurial management talent in the state contributed to the move, said Mary Campbell, head of the Michigan Venture Capital Association and founder and general partner of EDF Ventures, which invested in IntraLase. ``We couldn't have retained (IntraLase) with just money,'' she said.
Mobius Microsystems Inc., a maker of tiny clocking devices for the silicon-chip industry, is another example. Mobius left Detroit earlier this year for Sunnyvale, Calif., after receiving $10 million in 2005 from three Silicon Valley venture-capital firms.
There are no hard numbers on how many companies have left Michigan to follow venture-capital money elsewhere, said David Brophy, an associate professor at the Stephen M. Ross School of Business at the University of Michigan and director of the school's Center for Venture Capital and Private Equity Finance.
``They leave in the middle of the night, figuratively speaking,'' he said. But there's anecdotal evidence that fewer companies are leaving, he said.
And groups like Ann Arbor Spark are attempting to ensure that the state's track record continues to improve.
Spark's two-day ``entrepreneur boot camps'' focus on business-plan preparation and connecting companies with investors. The idea is to better prepare entrepreneurs who have an idea or product, but need help running their business and finding money, Finney said.
Dan Gilbert, chairman and founder of Livonia-based Quicken Loans/Rock Financial Inc., put up $10 million of his own money to start Bizdom U., a two-year entrepreneurial institute that he hopes will generate Detroit's next generation of entrepreneurs. The program, which began in January, is taught on Wayne State University's campus. Graduates of the program are eligible to receive initial investment of at least $25,000 from Bizdom to start their businesses in the city, and they can receive an investment of up to $500,000 for meeting agreed-upon goals.
Some companies also see opportunity in staying in the state.
Michigan has pools of highly skilled scientists and technical workers, especially in the biotech field, said Gary Glick, CEO of Ann Arbor-based biotech startup Lycera Corp.
Lycera is taking advantage of the local talent. It is researching drugs to treat autoimmune diseases and cancer, based on work Glick had done at the University of Michigan.
Lycera has received venture-capital money from Michigan and out-of-state funds. Glick declined to provide details about the amounts of funding, but did say the non-Michigan funds want him to move to one of the coasts. What's keeping him here, he said, is the talent available in Ann Arbor, especially the highly trained people available in the wake of Pfizer Inc. starting to shutter its operations in the city.
``It's keeping us in Michigan for now,'' he said of the Pfizer talent. ``We'd like to stay in Michigan long-term, but there's a lot of factors.''
Pioneer Surgical Technologies in Marquette received out-of-state venture capital - including $30.5 million in 2006 from a syndicate of four firms, led by Pharos Capital Group L.L.C. - but has remained in Michigan.
The company, which makes spinal and orthopedic implants, instead took advantage of the lack of competition for talent and established internship programs with Northern Michigan University and Michigan Technological University to develop even more.
``We saw that we wouldn't be competing with other high-tech firms,'' said founder, president and CEO Matthew Songer, who added that being in the Upper Peninsula ``hasn't been an impediment to our funding.''
Bill Shea: (313) 446-1626, bshea@crain.com