Homeland Security Resource Fund Set

September 21, 2007
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GRAND RAPIDS — A year in the making, the Michigan Homeland Security Resource Fund is expected to launch at the second annual Michigan Homeland Security Venture & Angel Capital Symposium on Dec. 4.

Not intended solely as an investment vehicle, the fund will provide targeted micro-resources and larger investments to entrepreneurs with early-stage homeland security businesses and launches.

Clark Hill PC — a major sponsor of the fund and of the Michigan Homeland Security Consortium, which created the fund — will complete the fund’s legal formation in the coming month. Negotiations are under way with a Michigan-based investment group to run the fund.

A combination of in-kind contributions and cash, the resource fund is targeting three types of companies as the foundation for homeland security as an economic driver in the state: Michigan-based “garage” entrepreneurs with a novel technology or business plan, out-of-state entrepreneurs willing to relocate to Michigan, and spin-offs from Michigan-based universities and corporations.

“The goal is to do early-stage investments to get companies off the ground,” said Tom Hines, consortium president and CEO of local security technology startup SecureMatrix. “While the governor and many state entities have been supportive of the homeland security industry, the attention from capital has gone in other directions.”

Hines believes this is due to reluctance of Michigan investors to participate in homeland security startups, largely due to the newness of the industry and the state’s down economy. The same investors would be willing to invest in a second-stage or more mature venture, but it is difficult for many entrepreneurs just to reach that point.

“A lot of startups fold before they can even get started,” Hines said. “And sometimes it’s something as simple as a little bit of legal advice, financial advice or help with a business plan. Maybe they need $10,000 for a marketing study as proof to potential investors, or maybe they need a prototype or some testing.”

That assistance will come in the form of small capital investments — generally $10,000 to $30,000, but up to $100,000 or more — and in-kind service donations.

While the fund is currently slated for a $2 million target, the target announced in December could be substantially higher, as the consortium has discovered that it might be more efficient to establish a fund of $5 million to $10 million.

There were 85 attendees at last year’s venture capital symposium, with representatives from venture and angel capital, economic development and the homeland security industry along with elected and appointed government officials. The consortium is expecting to double attendance this year at the one-day event at ClearyUniversity in Howell. The agenda for the event has not been set.     

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