Venture capital firm with Ann Arbor ties lands first investment from Venture Michigan Fund 2
A venture capital firm with an office in Ann Arbor landed funds from the Venture Michigan Fund 2, the second version of a statewide investment vehicle created to spark investment in early-stage companies.
MK Capital — which invests in emerging digital companies, software startups and companies developing technology for educators — is the first recipient of money from Venture Michigan Fund 2. The venture capital firm maintains offices in Ann Arbor, Chicago and Los Angeles.
VMF 2, which is managed by global financial firm Credit Suisse’s Customized Fund Investment Group, plans to invest $120 million in venture capital firms with offices in Michigan.
In a news release, VMF 2 said that venture capital firms that receive funds "will be required to invest at least as much in Michigan-based companies as they receive in capital commitments."
Venture capitalists typically invest in promising early-stage companies that need a big influx of cash to develop their technology and get it to the market. If an investment reaches an "exit" — that is, a sale of the company or an initial public offering — the investors can reap big returns for themselves and their own investors.
“We expect the execution of the VMF II program to play an important role in building a stronger venture capital and entrepreneurial community in Michigan,” said Tom Kinnear, chairman of the Venture Michigan Fund board and executive director of the University of Michigan Ross School of Business' Zell Lurie Institute for Entrepreneurial Studies. "This will help the state attract and grow high technology companies and industries, which I believe will have a major favorable impact on the future of the Michigan economy.”
The Venture Michigan Fund was formed in 2006 to provide funds to Michigan venture capital firms in hopes of encouraging investments in Michigan startup companies and cultivating a vibrant venture investment industry.
The funds, which don’t come from the state’s budget or the Michigan Economic Development Corp., are being loaned by institutional investors to Credit Suisse, which will distribute the funds over a three-year period. In the case of very poor investment returns, the loans have the backstop of state tax vouchers, which would kick in and allow investors to reduce their losses.
The first version of Venture Michigan Fund, or VMF 1, totaled $95 million. Credit Suisse distributed those funds to 11 venture capital firms, which had invested more than $38 million in 15 Michigan-based startups as of February.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
David Briegel
Wed, Apr 27, 2011 : 12:28 a.m.
say it plain, my but you have hit the nail on the head! We just have to trust that all these COOL TeaPublicans have a clue! It's all in the DEAL!
say it plain
Wed, Apr 27, 2011 : 12:18 a.m.
I'm confused about this 'funding' scheme... so, the funding is not from the state, but it is through the company Credit Suisse, via yet other investors in *them*, and it is backed by "state tax vouchers" so that investors can recoup losses (how much?!) in case returns are disappointing...sounds like a *lot* of middlemen...we're giving state-money (only potentially, right?!) to people who invest in yet *other* firms who do the actual business of finding viable start-up businesses. We don't catch any of the venture-capital upside, merely hope that the businesses stay in the state long enough to catch some of the benefit of their being here, but we take losses? So, these investments don't have to be in MI companies either, but the firms receiving these funds are required to spend "at least" as much as they are getting in VMF2 monies on actual MI companies, *that's* positive lol. Am I misunderstanding the language, or can that mean that the VMF2 funds just becomes part of their total pool so that maybe they can use this 'partially guaranteed' money for a riskier part of their total portfolio (and have that be based in whatever state they feel like?)? Nice deal for these venture capital firms, at all the layers of them involved! By how much would the state tax vouchers reduce losses I wonder?
Kai Petainen
Tue, Apr 26, 2011 : 10:37 p.m.
Sweet! Congrats!