PPA was commissioned by ID Ventures to undertake a landscape scan of best practices in different states around venture capital. The aim was to see what other states were doing to support high growth early stage companies. The report specifically focused on “evergreen funds” (funding that provides capital in intervals and extends the maturity, as compared to all at once) around the country and a series of high-level stakeholder interviews with state and local venture development leaders.
The final report, entitled Michigan Startup Evergreen Fund: Landscape Scan, was released on May 25th. One of the surprising discoveries is that while other states increased their support for early-stage investing around high-growth businesses in recent years, this funding has declined by 40% in Michigan. Because of this, Michigan is losing out on creating jobs, developing talent, and attracting additional investment.
As noted in the report, “For Michigan to increase job creation and spur economic development, the state needs to be creative at generating more opportunity for entrepreneurs. To be more competitive the state of Michigan needs to invest more public funding in its startup ecosystem.”1
PPA’s CEO, Rob Fowler, who conducted the interviews for the report, adds, “During our conversations with venture leaders, several important takeaways were identified. Among the most important was that funding in this area needs to be both large and patient. Also, most of the models explored kept investment decisions independent from politics. Long-term, patient investing requires thoughtful planning and consideration.”
Using PPA’s report as a starting point, ID Ventures, along with the Biosciences Research and Commercialization Center at Western Michigan University, Ann Arbor Spark, and Ann Arbor-based Accelerated Blue Fund are looking to promote the Michigan Startup Evergreen Fund.
Modeled on the work done in Ohio, as noted in the ID Ventures press release, it is hoped that together this “urges state lawmakers to approve a one-time $126 million appropriation for a fund for four nonprofit venture capital firms in the state to invest in tech-focused startup companies.”2 An investment like this could have positive implications now and in the future for Michigan.
“The next step is for proponents of the new fund to work with policymakers to back the idea and find new ways to create economic growth,” says PPA’s Dan Quinn, one of the report’s authors. You can read the report from PPA online here. You can also read a recent article in Crain’s Grand Rapids Business on the report and next steps here.
If you would like to know more about PPA and their research on this and similar topics, you can reach out to Dr. Daniel Quinn at DQuinn@publicpolicy.com
1 Michigan Startup Evergreen Fund: Landscape Scan, Public Policy Associates, May 9, 2023, https://idventures.com/wp-content/uploads/2023/05/PPA-Evergreen-Funding-Scan-Report-May-9-2023.pdf
2 Mark Sanchez, "Venture capital groups ask state for $126M to back startups," Crain's Grand Rapids Business (May 25, 2023), accessed May 31, 2023, https://www.crainsgrandrapids.com/news/banking-finance/venture-capital-groups-ask-state-for-126m-to-back-startups/