Michigan Opportunities Attract Texas VC Firm

Shannon Beeman
April 20, 2011

It took a lot for Houston, Texas-based DFJ Mercury to divert some of its focus from developing investments in the Southwest region of the country to the Midwest. But the attraction was undeniable, according to Managing Director Blair Garrou. “We found over time that the Midwest, and particularly Michigan and Illinois, had a lot of similar attributes that we found in Texas, Colorado and the Southwest states,” he said. “A high degree of economic development activity around entrepreneurism, very solid for-profit and non-profit incubators, strong angel investment groups.”

The seed and startup VC firm launched in 2005 with a focus on innovative IT and science-based startup opportunities. By 2007, team members began travelling to Michigan to see if the state was a good fit for the firm’s business model. Garrou said Michigan offered a wealth of potential. “When we were in Michigan early on, we reached out to universities, to the angel groups; we started collaborating in various business plan competitions, and we just found a real robust environment with a lot of great startups,” he said. “Early on our pipeline of deals was probably about 10 percent in Michigan versus the other regions, and now probably about 25 percent of our opportunities that we’re seeing are emanating out of Michigan institutions and our network that we’ve begun to develop.”

Today, DFJ Mercury leverages Michigan resources, including the University of Michigan and Wayne State University, Tech Town and Ann Arbor SPARK, and business competitions such as the Great Lakes Entrepreneur’s Quest and Accelerate Michigan. One of its portfolio companies, Kabongo, leveraged software development resources in Michigan. Another, Ambiq Micro, continues to work the University of Michigan on technology development. Ann Arbor-based Swift Biosicences, another investment, benefitted from partnerships by DFJ Mercury and local angel investors to bring its technology to market. “Being active in Michigan not only helps us find great investment opportunities, but it’s also afforded our non-Michigan portfolio companies access to great Michigan resources,” said Garrou. “We find the ability to cross-pollinate in and out of Michigan very beneficial to our overall portfolio strategy.”

Another asset that DFJ Mercury values is its ongoing relationship with the Michigan Growth Capital Symposium. “We’ve been involved with the Michigan Growth Capital Symposium for about four years,” said Garrou. “We think the MGCS just does a great job of bringing a lot of venture capital and angel investment groups to be a showcase for the commercialization going on.”