Legislature Gives Entrepreneurs $66 Million For Michigan Innovation Fund

1. Why Did the Legislature Give $66 Million for Michigan’s Startups Fund?

The Michigan Innovation Fund aims to provide much-needed capital to emerging businesses.

Ann Arbor SPARK is set to receive approximately $9 million from the Michigan Innovation Fund, enabling it to further fuel entrepreneurial growth and innovation.

Startup companies in Michigan have historically reported that they lack the capital they need to grow and succeed.  As a result, a coalition of entrepreneurial support organizations, including Ann Arbor SPARK, created the Michigan Innovation Fund concept and advocated for the state to support it.

2. Key Investment Funds Benefit from Michigan Innovation Fund:

This new program will fund several existing nonprofit investment funds, including:

• Ann Arbor SPARK,
• The University of Michigan Accelerate Blue Fund,
• Detroit-based ID Ventures,
• The Michigan State University Research Foundation,
• The Biosciences Research and Commercialization Center of Western Michigan University

3. How Will the Michigan Innovation Fund Support Startups?

This new program will allocate funding to existing nonprofit investment funds, drastically increasing investment in Michigan’s startup community. By reinvesting returns from the Venture Michigan Fund (VMF), the program will remain budget-neutral, ensuring long-term sustainability.

Paul Krutko, President and CEO of Ann Arbor SPARK, emphasized the importance of this initiative:

“Michigan had fallen well behind our Midwest neighbors in the last decade in terms of support for startups and we’ve desperately needed the state to act,”

said Paul Krutko, President and CEO of Ann Arbor SPARK.

“This is a big first step in that direction and will get more capital into the hands of our best entrepreneurs to create growth and prosperity for the state.  I applaud this coalition and our legislative champions (Representatives Farhat, Hoskins, and VanWoerkom) in getting this bipartisan initiative across the finish line.”

Additionally, the Michigan Innovation Fund is projected to support over 500 Michigan-based startups and attract an additional $5 billion in investment over time.

4. How Is the Michigan Innovation Fund Being Financed?

The funding for the program will come from the investment returns to the Venture Michigan Fund (VMF) program. It was a prior effort by the state to invest in venture capital funds in the early 2000s.

Over the years, VMF has had significant returns from its underlying investments, which will now be reinvested in a similar manner to support startups.  As a result of this structure, the new program is budget neutral for the state.

5. The Role of Ann Arbor SPARK in Michigan’s Startup Growth:

Ann Arbor SPARK will play an integral part in the program, leveraging its nearly 20-year track record of startup investment. SPARK managed the original MI Pre-Seed Capital Fund starting in 2007 and invested in nearly 200 companies.

Many of these companies have been successful and provided significant investment returns to SPARK.  As a result, SPARK has been able to reinvest those returns over time into new startups from its SPARK Capital fund.

Mike Flanagan, Vice President of Capital Programs at Ann Arbor SPARK, highlighted the long-term benefits:

“We think this is a great model that will enable us to ramp up the pace of investing in Michigan companies from our SPARK Capital fund. And it helps establish an ‘evergreen fund’ that will continue to reinvest returns into the next generation of startups.”

6. How Did the Michigan Innovation Fund Get Approved?

The Michigan Innovation Fund exemplifies a remarkable collaboration among entrepreneurial support organizations. Over nearly two years, the coalition diligently worked to bring this initiative to fruition. In July, the program received approval for inclusion in the state budget.

Following this milestone, in November, the enabling bills successfully passed in the state House. Now, with the Senate’s approval on Friday, the bills are set to move to Governor Whitmer for final approval. As a result, initial investments from the program are expected to begin in 2025.

7. How Will Michigan’s New R&D Tax Credit Benefit Businesses?

In addition to the Michigan Innovation Fund, the state is further strengthening its commitment to innovation by supporting research and development (R&D) efforts through new legislation. Earlier this week, the Michigan House passed the final bills in the R&D tax credit package (HB 5100-5101) with a bipartisan vote of 86-23, facilitating Senate approval. Once enacted, Michigan will join many other states that offer a state-level R&D tax credit, making it more competitive in attracting high-tech businesses.

R&D Tax Credit Structure:

• 10% credit (up to $2 million) for businesses with 250+ employees.
• 15% credit (up to $250,000) for businesses with fewer than 250 employees.
• An additional 5% credit (up to $200,000) for businesses collaborating with Michigan-based research universities.

This initiative seeks to incentivize innovation, encourage business growth, and strengthen partnerships between companies and research institutions. As a result, Michigan is poised to enhance its reputation as a hub for cutting-edge advancements.

Closing Thoughts:

The Michigan Innovation Fund Secures $66 Million Fueling Startup Growth, reinforcing the state’s commitment to strengthening its business ecosystem. By closing funding gaps and incentivizing cutting-edge research, these initiatives create a solid foundation for long-term economic expansion. With these programs in place, Michigan is on track to boost job creation, attract investment, and position itself as a top hub for startups and innovation.

Want to stay updated on Michigan’s latest startup funding opportunities, business incentives, and economic developments? Subscribe to our newsletter and get the insights you need!

FAQs

1. What is the Michigan Innovation Fund?

The Michigan Innovation Fund, a $60 million initiative, supports Michigan-based startups by increasing investment through nonprofit funds like Ann Arbor SPARK and the University of Michigan Accelerate Blue Fund.

2. How will the R&D tax credit benefit businesses?

The R&D tax credit will offer tax incentives ranging from 10% to 15%, helping businesses reduce costs and reinvest in technological advancements and innovation.

3. Who qualifies for the Michigan Innovation Fund?

Startups and early-stage businesses in Michigan can benefit from venture capital investments through nonprofit investment funds supported by the program.

4. When will the Michigan Innovation Fund investments begin?

The Michigan Innovation Fund will begin initial investments in 2025, supporting over 500 startups and attracting billions in additional funding.