The state has selected its first eight recipients of the Michigan Innovation Fund, a $60 million investment in the state’s venture capital funds and startup ecosystem.
Of the $60 million, $48 million went to five existing evergreen funds and $4.8 million was used to establish emerging evergreen funds, including one based at Grand Valley State University. The remaining $7.2 million will be used for entrepreneurial support programs and a pitch competition.
The disbursement of the Michigan Innovation Fund marks a milestone in the program’s multi-year journey, from conception nearly three years ago to beginning to invest in Michigan-based startups.
The Michigan Innovation Fund is the largest funding proposal for the state’s entrepreneurship ecosystem since the passage of the 21st Century Jobs Fund in 2005, Jennifer Hayes, senior vice president for operations and policy at Invest Detroit, previously told Crain’s.
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It’s also Michigan’s first contribution to evergreen structured investment funds. An evergreen fund is an investment fund with no fixed end date, meaning investors can enter or exit the fund at various points throughout its life, and allows the fund manager to reinvest proceeds from successful exits into new opportunities.
“We remain grateful and committed to creating the environment for a higher probability of success for all involved in this process — from our governor to the state legislature, the entrepreneurs and startups who continue to bet on Michigan and our team at the MEDC, and partners from academia and elsewhere throughout Michigan’s increasingly vibrant entrepreneurial ecosystem,” Quentin Messer Jr., CEO of the Michigan Economic Development Corp., said in a statement.
ID Ventures, the investment arm of Invest Detroit, as well as Ann Arbor Spark, the University of Michigan Accelerate Blue Fund and the Michigan State University Research Foundation each received $10.6 million from the fund. Western Michigan University Biosciences Research & Commercialization Center caps off the disbursement of existing evergreen funds with a $5.3 million investment.
“The creation of, and funding from, the Michigan Innovation Fund is an essential element of an economic growth strategy that invites the best, most creative minds to not only learn and grow in Michigan, but to stay here and scale while minimizing costs and maximizing efficiency” said Steve Haakenson, executive director of WMU’s Biosciences Research & Commercialization Center. “These funds will go a long way toward filling a gap for the support of entrepreneurs throughout the state to initiate their big ideas and inventions in a place that’s no stranger to transformative concepts.”
InvestUP, which supports the state’s outdoor recreation VC fund Michigan Outdoor Investment Fund, Traverse City-based 20Fathoms and Grand Valley Research Corp. will each receive $1.6 million to establish emerging evergreen funds.
“As key partners in West Michigan’s tech growth strategy, GVSU is well-positioned to focus on Michigan startups that are engaged in high-tech industries,” GVSU President Philomena Mantella said. “The evergreen fund will function as a key financial engine for our Blue Dot Lab, which will serve as a central node for innovation commercialization, and founder support and student engagement, allowing us to scale investment reach and advance Michigan’s innovation economy.”
Grand Valley Research Corp. is a subsidiary that GVSU formed to manage licenses and intellectual property.
Most investments in Michigan-based startups are by private VC investors, not government-backed funds, Crain’s previously reported. Those government-backed funds are how Michigan’s competitors, such as Ohio, have been able to pull ahead of the state in ecosystem growth and return on investment.
The disbursement of the funds comes after a Business Leaders for Michigan report found that Michigan’s innovation economy ranks 32nd in growth funding compared to other states, as well as 36th in seed funding, 23rd in early-stage funding and 35th in late-stage funding.
The Michigan Innovation Fund draws funding from the Venture Michigan Fund, a venture capital fund investment program that was formed under the Michigan Early Stage Venture Investment Act of 2003. Investment proceeds are slated to be returned to the state in 2030, but Whitmer proposed to return $100 million early, with $60 million going to the Michigan Innovation Fund and $40 million to the general fund.
As part of the new Michigan Innovation Fund, the state will receive 10% of any return on investment that exceeds $8 million within 15 years after the initial investment. No less than 85% of the return on investment will be reinvested into the evergreen structured fund.
Whitmer signed the package to establish the Michigan Innovation Fund in January, and the Michigan Strategic Fund board finalized the implementation of the funds with a vote in April.
According to the Michigan Innovation Fund website, $3 million of the remaining $7.2 million will be invested in universities or nonprofits that will support high-quality entrepreneurial programming with a statewide focus.
“Every day at Michigan Rise, we meet founders who are working with passion and purpose to solve problems and make a difference,” said Jeff Wesley, the executive director of the MSU Research Foundation & Michigan Rise. “The Michigan Innovation Fund is more than just funding; it’s a powerful way to uplift Michigan’s entrepreneurs and help turn their ideas into impact. We are proud to play a role in helping founders take those first steps, and we are committed to making sure innovation has the support it needs to thrive across our state.”
The remaining $4.2 million is available to Michigan-based nonprofit organizations that provide qualified startup support services, through programs such as startup acceleration tracks, entrepreneurship and innovation convenings and more. Those interested can apply on the Michigan Innovation Fund website.
Crain’s Grand Rapids Business reporter Mark Sanchez contributed to this report.
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