Michigan Seeing More Home-Grown Second-Stage Companies

Shannon Beeman
May 7, 2012

Michigan has seen several successful homegrown harvests in recent years, such as those of HealthMedia Solutions and HandyLab, Inc. Michigan Growth Capital Symposium (MGCS) Founder David J. Brophy, Director and Professor of Finance at the University of Michigan Ross School of Business, said the state is increasingly seeing emerging growth companies enter the second stage. “The banks have been very difficult with respect to available credit,” he said. “So what we’re now seeing is that some of our venture funds are beginning to look at these later stage companies as very good candidates for equity capital.”

Brophy notes that in past years the Michigan market was dependent on out-of-state sources, and syndicate investing was unusual. Now, however, more venture funds are working together, and the amount of capital available for investment is increasing. “One of the issues has always been that we would seed the companies here in Michigan, and then the big boys from California or New York would swoop in and do the B round. Then the company moves,” said Brophy. “The best defense against that is to have a vibrant local venture capital market capable of sending up –  participating in, if not totally providing – that subsequent round of funding. We’re more and more capable of seeing a deal further down the road than we used to be able to – maybe a second or third round of funding. And that is a real key strength in the marketplace.”

This year’s MGCS will reflect this industry growth and evolution. “One of the things we’re going to do at this year’s Symposium is have a panel that addresses these developments, and look to some of those kinds of companies as we’re seeking candidates for presentation,” Brophy said.