Let's Make A Deal
ANN ARBOR — The 2006 Michigan Growth Capital Symposium will introduce financiers from all over the country to “the best of the Midwest” in new businesses and emerging technologies at a two-day venture capital conference in Ypsilanti that kicks off tomorrow.
Some 500 people are expected to attend the symposium during its Tuesday through Wednesday run at the Eagle Crest Conference Center. The Michigan Growth Capital Symposium is a University of Michigan-based venture fair that has been held annually since 1979. Its purpose is to bring together entrepreneurs, venture capitalists, angel investors and institutional investors in the hopes of spurring venture investment and entrepreneurial success in Michigan.
The symposium will showcase up-and-coming Midwest companies representing the information technology, life sciences and alternatives energy industries. Besides showcasing “the best deals in the Midwest,” the conferences will feature keynote speakers, panel discussions, and what event organizers call “unparalleled” business networking opportunities for both entrepreneurs and financiers.
“We specifically target venture folks from both coasts,” said Tim Faley, managing director of U-M’s Samuel Zell & Robert H. Lurie Institute, which runs the symposium. The university’s Stephen M. Ross School of Business and its Center for Venture Capital and Private Equity Finance is part of the institute.
This year, 45 companies will present their business plans to an audience of investors and venture capitalists. Faley said companies will present by industry group and in three distinct investor tracks: companies seeking initial investment, or “angel” financing; companies seeking institutional financing for first or second stage development, or venture capital; and companies seeking expansion stage financing, or growth capital.
The 45 companies were selected out of pool of more than 100 that applied for the opportunity to present at the symposium. The Zell & Lurie Institute solicits potential applicants through venture firms, the U-M Tech Transfer office and known angel investors.
“It’s a tough process,” Faley said. “We have a lot of judges. We involve the students from the Wolverine Venture Fund and some other groups. We have a lot of serial entrepreneurs and venture capitalists that help us out. Each company that applies is typically specialized by industry, so we judge them by their commercialization potential and all the things that venture folks are looking for.”
The Wolverine Venture Fund is a $3.5 million venture capital fund in which MBA students co-invest with venture firms. It operates out of the U-M Business School.
The yearly venture capital symposium, or course, is designed to stimulate new deals. David Brophy, Ph.D., founder of the Michigan Growth Capital Symposium and director of the Center for Venture Capital and Private Equity Finance, said that during the past 24 years companies that have presented at the symposium, in the aggregate, have raised more than $800 million.
“This is an event where deals happen and the coastal divide is bridged by bringing investors from across the country together with Midwestern entrepreneurs seeking funding.”
According to event organizers, seven Michigan-based companies were estimated to have received a combined $18 million in funding as a result of connections made at the 2004 conference.
“It’s always tricky to find out whether a deal was a direct result of the conference,” Faley acknowledged. “We do know that companies that present there eventually get money. Did they meet their venture folks because they presented at the symposium? It’s about relationships. Investments are relationships, and they all have to start somewhere. We think some of them start here. Whether they close a deal at the symposium or six months later is hard to sort out.”
The average investment per deal is all over the board, he said. On the angel investment track, the typical deal is under $1 million; at the first and second development stage, or the A/B round investment track, the typical deals are $5 million to $10 million; and on the growth capital track, the companies are typically looking for investments in excess of $20 million to $30 million.
It’s difficult to judge “success” by the size of the deal, Faley said.
“Sometimes, if we make that initial contact with an entrepreneur that otherwise wouldn’t have met an angel group and they can get $300,000, that’s a huge success, because that puts them on their way. We don’t look at them as any less viable than those that got $20 million in a later round.”
Faley said what angels and venture capitalists have said they like about the symposium is the fact that they can come to one place and meet a lot of Midwest companies simultaneously, rather than having to travel all over the Midwest.
This year, for the first time ever, the symposium is being held in Ypsilanti rather than on the U-M campus, because the business school — the normal venue for the event — is in the process of being torn down and rebuilt, Faley said.