BLM plan boosting innovation

October 3, 2009
| By Pete Daly |
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Business Leaders for Michigan — the new, statewide organization formerly called Detroit Renaissance — has an ambitious plan for turning around Michigan’s depressed economy, including an accelerated means of linking entrepreneurs and innovative companies with potential customers.

At least one innovator already has benefited from the Michigan Turnaround Plan.

BLM, a private, nonprofit executive leadership organization, has spelled out five steps that it believes will turn around the Michigan economy and again place the state among those that lead the nation in business.

The first three steps of the Michigan Turnaround Plan, according to BLM President/CEO Doug Rothwell, are focused on state government policies, especially those related to fiscal affairs and taxation. The last two steps are economic development strategies, with particular emphasis on support of innovation and entrepreneurship.

“We think the state’s economic development strategies should focus on (innovation and entrepreneurship) as opposed to programs (state agencies) run where they’re making investments in individual companies,” said Rothwell.

BLM is using its affiliate, Renaissance Venture Capital Fund, as the medium for linking entrepreneurs/innovators with BLM members who could be potential customers.  BLM’s 66 board members are the chairpersons, chief executives or top executives of Michigan’s largest corporations and universities.

The RVCF is a $40 million fund that invests in other venture capital funds around the state, according to Rothwell.

“We are going use Business Leaders for Michigan to expand the size of that fund, because we now have more companies that could potentially invest in it,” said Rothwell. The entrepreneurs and innovators who get financing from those venture capital funds around the state will then be connected with BLM members that could be potential users of the new product or service, said Rothwell.

Rothwell said the intent is to put “entrepreneurs in Michigan who have great ideas, great products and services” in a position to “get them beta tested with established Michigan companies. That way they can grow faster, and we can get a better rate of return on our investment.”

He said one or two member companies are already involved in trying out the new products or services. One is new software from an IT company that is being tried by a BLM member company. Rothwell said he was not at liberty to identify the entrepreneurs/innovators or the companies testing the products, due to SEC regulations. He did indicate, however, that the BLM member is not a manufacturing company.

Rothwell said all the companies that are members of BLM “have agreed to be participating in this, where it’s appropriate.”

It is not a mentoring service, he said, but “more of a match-making service, where we match a product or service an entrepreneur has with a need that one of our companies may have.

“These are (business) deals,” he said. “This is not a social welfare program. These are deals.”

Renaissance Venture Capital Fund, the brainchild of what was then Detroit Renaissance, was founded last December with investments solely from a number of businesses in Michigan, according to RVCF CEO/Fund Manager Christopher L. Rizik.

So far RVCF has invested $12 million in three other venture capital funds: TGap Ventures LLC in Kalamazoo, and two Ann Arbor VCs, Arboretum Ventures and RPM Ventures. RVCF will invest another $5 million or so in a fourth VC fund in Michigan, but that has not been formally announced yet.

So far, the funds it has invested provide financing for early-stage companies involved with medical devices, software, specialty manufacturing, Internet, telecommunications, health care and other high growth fields.

“We are a 100 percent private fund, and we’re the largest fund of our kind that is privately funded in the country,” said Rizik.

He said RVCF has been contacted by interested groups from other parts of the country “trying to replicate what we’ve done, because people haven’t been able to do it without the government having to fund it.”

BLM board members from West Michigan include Mark Murray of Meijer Inc.; William Parfet of MPI Research in Mattawan; Jeff Fettig of Whirlpool; Michael Jandernoa, a director of Perrigo Co. and general partner at Bridge Street Capital Fund; Doug DeVos of Amway; Richard Haworth of Haworth Inc.; John Kennedy of Autocam; Hank Meijer of Meijer Inc.; and Jim Hackett of Steelcase Inc.

The Michigan Turnaround Plan put forward by the BLM has several main themes, including:

**Changing the way the state manages finances, and reducing its spending. It would reduce state employee compensation to the U.S. average of state workers or the average of state private sector workers, reduce the size of the state work force, and increase state employee insurance premium contributions.

**Structural reforms would result in shared services for local governments and school districts; reduced sentences so that there are fewer prisoners to be housed in state prisons; elimination of duplicate state programs; binding arbitration for police and firefighters; and reduced state contributions to teacher retirement benefits.

**Reducing the MBT, providing a more predictable and stable tax environment for businesses; ensuring tax changes don’t make the state’s structural deficit worse; and a tax on consumer services.

**Eliminate the personal property tax; require fiscal notes that identify compliance costs of new regulations; create a regulatory report card; ban state regulations that exceed federal standards; require regulations to demonstrate cost/benefit analysis and basis in science; and benchmark state costs.

**Investments in improvement of K-12 performance by consolidating administration of state school districts, retain demanding graduation standards, and allow an unlimited number of charter schools.

**Reduce the number of state colleges and universities, with the remaining institutions given enough funding to achieve “Top Ten” status nationally.

“The Turnaround Plan, we think, is going to take several years to execute. It can’t all be done at once,” said Rothwell.

“I’d say we are making some progress in Lansing, if they balance the budget without taxes. That’s a step in the right direction.”

He added there is serious talk now about budget reform, which could take place this fall. “And then, we believe that the state needs tax reform, which would reduce the cost on business. And we think that can be done this fall, as well.

“I give great credit to the CEOs of the state for stepping up to do this,” said Rothwell. “These are (people) that basically pay money to be part of an organization, to put out a pretty bold plan which is going to get some people riled up. But the reality is, this state needs leadership desperately.

“You may not agree with everything in the plan, but personally, I think they deserve great credit for doing this,” said Rothwell.

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