By Claudia Capos
The future of Michigan’s entrepreneurial economy ─ and the talented University of Michigan students who will help it flourish ─ were spotlighted at the annual Financing Research Commercialization Pitch Competition on Dec. 12 at the Ross School of Business.
This year, 14 highly competitive teams of graduate and undergraduate students in Professor David J. Brophy’s Financing Research Commercialization practicum presented well-researched and compelling fundraising pitches to a judges’ panel of seasoned venture capitalists.
Each student team had worked closely with the founder, CEO and/or management team of a Michigan-based, early-stage startup for the semester to help the company jump-start its business growth and development. Several of the participating startups were spun out of universities ─ including the U-M and Wayne State University ─ to commercialize new technologies and research discoveries.
To prepare for the competition, the student teams were challenged to create and present a comprehensive pitch deck to venture-capital investors detailing the company’s product or service, business model, monetization strategy, timeline and milestones, management team, financing needs and exit strategy. Seasoned mentors coached the students to help them put their textbook theory into practice.
The practicum’s goal, according to Professor Brophy, is to give emerging, fast-growth companies a fresh set of eyes, minds and hands that can help them progress “the next mile” to raise external equity capital. Students, in turn, benefit from their action-based learning experience, which prepares them to become successful leaders of their own entrepreneurial enterprises in the future.
“In an action-learning setting, this unique course succeeds in teaching students and entrepreneurs, as working partners, how to prepare and position high-potential, emerging growth companies to raise their first (Series A) venture capital, a critical milestone in the company’s growth,” Professor Brophy said. “Our objective is to help local market companies directly and to prepare U-M students to be fundable founders and venture investors in their own right.”
Since its inception in 2004, Professor Brophy’s course has provided student-led business-development and capital-raising assistance to 205 early-stage companies, including 50 ventures that have procured their targeted funding. More than 1,100 U-M students have gone through the practicum and become part of the Michigan Ross Center for Venture Capital and Private Equity Finance (CVP) “Next Mile to Funding” venture-capital network.
Walking in an Entrepreneur’s Shoes
By working closely with a startup company for three months, the students had an opportunity to walk in an entrepreneur’s shoes. Sometimes those shoes pinched a little, as the teams navigated a bumpy landscape pocked with unfamiliar technology, internal management shifts, product shortfalls and financial uncertainty.
“Our biggest challenge was scaling the learning curve,” remarked Matt Stelmach, an evening MBA student who worked with next-generation bioinformatics company Advaita. “We had to understand the underlying technology and its value to a highly specific customer,” he explained. “The CEO had to explain the company to us, and, in doing so, he gained additional ability to communicate more effectively with investors.”
Amrit Ahluwalia, MBA ’19, also a member of the Advaita student team, said the pitch competition better prepared him to step into a strategic position at his family’s business, Automotive Quality & Logistics, in Detroit. “This experience shed light on my father’s trials and tribulations, and set me up to understand how to take his business to the next level,” Ahluwalia remarked.
Chris Zhang, CS ’19, who assisted Echo AR, a startup developing an augmented-reality training platform for health caregivers, said he learned to work as part of a business-consulting team. “We had to ask the right questions and delegate tasks,” Zhang explained. “As a computer-science major, it was not like my usual day at the College of Engineering.”
Zhang’s teammate, John Nicoli, LSA ’19, a history major specializing in classical civilizations, said he often had dreamed of becoming an entrepreneur. “Working with Echo AR’s co-founders taught me a lot about entrepreneurship and opened my eyes to this pathway as a possibility for me someday,” Nicoli added.
Stephen Svirbly, a part-time MBA student, whose team was paired up with virtual-reality software startup Gwydion, said his team helped the company founders think about their target market, cost structure and product pricing. “We also developed a comprehensive financial model for the company,” he added. “Our biggest challenge was real company issues that we had to navigate. It made our work extremely exciting and ultimately rewarding.”
For Guangye Cao, a fourth-year economics Ph.D. student, the opportunity to partner with Locally, a consumer-engagement and marketing-intelligence company, opened a new window into entrepreneurship. “My previous experience has been in academia, which is very theoretical, and I had never worked in the private sector,” she explained. “This was my first exposure to the startup scene. I learned a lot about valuation, market estimation and competition. I would like to go into entrepreneurship in the future.”
Startup Founders Reap Benefits
Locally’s co-founder and chief product officer, Mike Vartanian, had high praise for the student team. “They were another set of eyes, and questioned a lot of our assumptions,” he said. “They helped us conduct market research and refine our business plan and investor pitch.”
Carsten Hohnke, the new CEO of Gwydion, said he was impressed by his student team’s presentation. “They did a fantastic job of synthesizing information about the company’s valuation and go-to-market strategy,” Hohnke remarked. “The students had no prior connection to this technological space and got ramped up very quickly.”
Echo AR co-founder Chris Warburton credited his student team for providing “a fantastic, unfiltered academic viewpoint” that helped him gain a new perspective. “The students developed the entire investor presentation, including the pitch deck, business model, business plan and financial forecasts,” he said.
Accelerating Michigan’s Entrepreneurial Economy
“This [event] is the future,” stated Charlie Moret, the chairman and CEO of Invest Michigan, an organization that has invested in 50 Michigan-based early-stage companies in the advanced manufacturing materials, life sciences and information technology industries. “We have to support university-based programs that expose students to real-life entrepreneurial experiences. This is critical for building our future pipeline of entrepreneurial companies.”
Moret, who was judging the competition for the first time, expressed interest, as a potential investor, in startups with proof of concept, viable products and customer validation. He noted that many of Invest Michigan’s portfolio companies offer student internships, which provide valuable hands-on experience for aspiring entrepreneurs.
Jeremy Werner, a Michigan Ross graduate (BBA ’02) who is now a senior associate with Beringea, also served as a judge at the competition. “I think we need more people to recognize entrepreneurship is a valuable career path, and that we have a real entrepreneurial ecosystem here in Michigan,” he said. “If you consider the number of STEM graduates from the U-M versus those in Seattle, Washington, we have the talent here in Michigan, but just not as many startups as the West Coast.”
Werner, whose job at Beringea involves originating new investment opportunities, executing new investments and working with portfolio companies, noted that U-M students bring a new perspective and a “beginner’s mind” to startup companies. “They can help an entrepreneur take a step back and see what he or she has overlooked,” he commented.
Two other VCs who volunteered as judges expressed their support for entrepreneurial-focused events, such as the Financing Research Commercialization Pitch Competition.
“This competition gives students an opportunity to learn how venture capitalists think,” said Maria Thompson, a Michigan Ross alumna (MBA ’88) who is a venture partner for Arsenal Venture Partners and the former president and CEO of the Michigan-based alternative-energy company T/J Technologies.
“Any experience students can gain in the entrepreneurial world is valuable, because it builds their entrepreneurial spirit and teaches them to fail fast and try again,” remarked Janet Wyllie, director of engagement at Grand Angels. “The opportunity to pitch to potential investors further enhances the students’ learning experience.