GRAND RAPIDS – Earlier this year, 13 Small Business Development Center representatives from six states ? Illinois, Minnesota, Georgia, Louisiana, Delaware, and California ? came to Michigan to learn about its Small Business and Technology Development Center’s technology commercialization initiative.
The MI-SBTDC presented its history, tools and processes for assisting technology companies, and its approach to partnering with the state’s economic development and entrepreneurial support organizations. The visitors met with several MI-SBTDC clients and economic development partners in the Southeast Michigan area.
Each of the 13 visitors left with a similar impression, summarized well by Clinton Tymes, Director of the Delaware SBTDC ? “You are very fortunate to not only have such a strong, innovative and effective program in your SBTDC, but the overall infrastructure Michigan has to support entrepreneurship and innovation, as well as the excellent collaboration that exists among these resources is simply extraordinary.”
Michigan does not always receive national headlines about positive impact, but economic developers around the country are learning that Michigan, the state that the recession hit first and hardest, is also the first state with some of the most creative and impactful economic development efforts launched over the previous ten years.
Depending on who you ask, you are likely to get a different definition of “economic gardening” ? but most agree that a gardening approach to economic development focuses on supporting and building a fertile environment for a state?s own small businesses with high growth potential as opposed to “hunting” for large companies or “smokestack chasing.” The Michigan Economic Development Corporation (MEDC) is often portrayed as a hunter, and this may be due to the sizeable press attention given to each successful large company attraction compared to the many, MANY small business successes that each create a handful of jobs but add up to a significant sum (and often strengthen attraction efforts ? think T/J Technologies and A123.) But through its Smart Zone program and the many 21st Century Jobs Fund (21st CJF) programs, the MEDC has demonstrated some of the best economic gardening in the country, and it?s making a difference.
Launched in 2000 by the MEDC, the 15 Smart Zones are designed to cluster the activities and assets of universities, industry, research institutions and local communities to accelerate the commercialization of technologies and foster new ventures and job creation. The Smart Zone program facilitated tax capture from Local Development Finance Authorities, who along with state and county governments and the private sector, fund business incubators, business accelerators, networking and educational events, and financing programs. Each Smart Zone provides a different set of services depending on the region?s assets and initiatives. Emerging technology companies receive consulting from industry experts; microloans and pre-seed investments; discounts on specialized equipment or wet lab space; multiple day intensive business training; access to university student projects and internships; connections to potential customers, strategic partners, management, and investors; and many more services through Smart Zone business accelerators and incubators.
As one example of a Smart Zone business accelerator, over the past year Ann Arbor SPARK provided consulting projects to 64 high growth potential companies, enabling the creation and retention of 185 full time jobs and over $6 million in capital raised. SPARK’s business accelerator also trained 28 companies through 2 sessions of its 2 day intensive Entrepreneurs Boot Camp and held multiple networking and educational events for hundreds of entrepreneurs each week.
An excellent example of a Smart Zone business incubator is the Southwest Michigan Innovation Center (SMIC) in Kalamazoo. Playing a central role in Kalamazoo?s vibrant life sciences economy, 25 companies have been launched in and have graduated from or currently reside at the SMIC. The collaborative strength of the SMIC companies brings international attention and dollars to the region. The SMIC was recognized with the Innovation Award in 2006 by the National Business Incubator Association.
Smart Zones actively engage Michigan’s universities and facilitate collaboration with the private sector to ensure commercial utilization of university assets, contributing to Michigan?s economic development. For example, Michigan State University Technologies (technology transfer office) and Business CONNECT (recently established to connect businesses with MSU faculty) are housed in the Lansing Regional Smart Zone?s East Lansing Technology Innovation Center. As MSU President LuAnn Simon said, this helps MSU “to interact with companies and investors in a cutting-edge business environment.”
Similar activities and impact take place in the 15 Smart Zones statewide.
These efforts have all been supported by the 21st CJF, the MEDC?s 10 year, $2 billion initiative launched in 2005 to create a fertile climate for entrepreneurship and begin the transformation and diversification of Michigan’s economy. However, the initiative has also:
Made direct investments in high growth technology companies;
Made indirect investments in additional high growth companies through venture capital firms, banks, and economic development programs; and
Built upon the existing business support infrastructure to help Michigan companies develop business plans, enter new markets, submit successful research proposals, raise capital, and conduct other critical activities involved in growing their businesses.
Technology focused economic development initiatives require a long-term focus by nature and are not intended to be a quick fix. Even so, five years into the 21st CJF initiative, the results are impressive and making an important contribution to Michigan?s recovery. The Foundation for the New Michigan Economy report recently released by the MEDC indicates that the 21st Century Jobs Fund has provided direct support to almost 1,500 companies, enabling them to create and retain 24,407 jobs. 21st CJF programs have been very successful in leveraging third party funds. Over $1.8 billion of third party funding has been leveraged; a rate of more than 4 third party dollars to each state dollar.
The 21st Century Jobs Fund plays an important role in building what just about any entrepreneur will tell you Michigan needs; a stronger financing environment with support available at different stages of a company?s development. The initiative addresses this by creating multiple programs, each with a different sweet spot.
The Michigan Emerging Technologies Fund (managed by the MI-SBTDC) provides commercialization funding to companies at their earliest stage when they receive federal R&D grants. Thirty companies have been funded with the first $2.4 million of this program, leveraging $17.7 million in additional capital and creating and retaining 230 jobs.
The Michigan PreSeed Capital Fund (managed by Ann Arbor SPARK in partnership with the Smart Zones) enables companies to achieve or accelerate early sales and/or meet milestones necessary to raise larger, institutional rounds of financing. Forty three companies were funded with the first $9 million deployed by this program, leveraging over $34 million and creating nearly 500 jobs.
The 21st Century Investment Fund (as well as a few other similar state initiatives) strengthens Michigan?s venture capital environment and has helped grow Michigan?s venture investment community to 16 venture capital firms with $1.1 billion under management. The 21st Century Investment Fund invested in 11 venture capital firms, who in turn invested $33.9 million in 13 companies, leveraging almo
