Skip Simms: Venture Capital in Michigan

I must say that before watching this interview, I never really knew much about venture capitalists. After watching this, I actually found this field to be quite interesting. After listening to this interview, it actually filled my head with questions. For instance, how does a venture capital firm always know when they will return their investment? How do they know what firms will in turn be a good investment? How do they know what is the right amount to invest into a company? As I would like to have my own business someday, this might be a area that would be of concern to me as a way to fund my business. Is a venture capital firm a good way to go even if you are a small firm with a revenue income under a $1,000,000 or should you look elsewhere? This interview was very interesting and also helpful to me.

Venture capitalists are one of the most interesting topics for business students, especially those looking to one day start a business of their own. As the interview mentioned, the state of Michigan is in the middle, nationally, of the VC pool, with funds in the $20-$75 million range. One of the most refreshing parts of this video was what wasn’t said, that even in Michigan, with its struggling economy and high unemployment, there are still VC firms looking to invest in the future. As well, these companies keep lending money in the face of a significant credit crisis that is impacting economies around the world. Although they make up about 7% of the funding for all private businesses, VC firms have been involved in bringing some of the biggest companies in the world to life, including Google, Microsoft, Apple and FedEx. Entrepreneurs looking for VC support need to be well prepared for the extremely high cost of doing business with this type of firm. Like all debt financing, a solid business plan must be in place long before contacting a VC. Firms tend to take many months deciding where to put their money, and often look for an established track record of success as well as a viable exit strategy and the ability to recover some of their investment. As well, the VC will demand a hefty percentage of the company, as much as 70% at times, in return for their investment. They will also expect a seat of the board of directors of the company. VC firms are going to challenge the competency of management, determine whether or not the company has a competitive edge and look at high growth industries before lending money. If they do choose to invest, they are going to do it strategically with multiple cash injections at various times, limiting their exposure as the new company evolves. On one hand, these VC companies can seem vicious, with their demands and expectations. However, they come with significant experience and resources that can make the different in a fledgling company. I was surprised to learn that it is becoming common for multiple VC’s to work on the same companies, with one taking the lead. This is quite a departure from the early 21st century, when VC’s fought tooth and nail to get their money into many of the dot com companies. Obviously like the rest of us, the VC’s realize we are dealing with a significantly different economy.

It doesn’t surprise me to hear that MI with the way the economy is right now is in the half to lower tier for states when venture capitalist is measured. However, I do appreciate the fact that the venture capitalist that do work with Michigan's entrepreneurs are working with smaller businesses. I believe that there are a lot of potential business owners that need help when it comes to investment needs in Michigan. It seems that the only way I was able to get financing would be through debt capital. As you know this will require me to have to pay interest on my loan which could add up to be a hefty sum, depending on how much I require. I really appreciated this interview because I was not aware of the benefits and opportunities that VC in Michigan offers to new entrepreneurs. However I was wondering what you would suggest for someone like myself who is thinking planning on opening a small bakery. As you might know a bakery is probably not going to seek investments of $3 million to $10 million in the first year to make it worth a VC while to invest in my business. What would you suggest? Would you as a fund manager see investing in a smaller? Sincerely Jennifer Ahlers

Like the last segment on venture investors Skip Simms interview was a lot clearer. He explains how venture capital would help your business venture. Rather then the Terry Cross Angel investor’s interview. Skip gives you a lot of insight on what an investor is looking for and what an entrepreneur should be looking for out of an investment. I also like how Capital Ventures is searching for investment in the technology field in the state of Michigan. With investments in the technology industries that will help bring jobs to the state economy, who knows they might invest in a technology entrepreneur that would help the auto industry in the state of Michigan. The thought of if an entrepreneur receives investments for an out of state investor that they still have to stay instate is a vast economic strategy. To me personally Capital Venture seems to be a more promising investor then Angel investors, even if you have to do research or more then likely know some one that works for them. Capital venture also seek to provide a return of two to four to their limited partners investors, over a ten year life investment fund.

Having a venture capital firm in Michigan would be very helpful, if I were planning to stay in Michigan. I have to wonder if they would be willing to look at my plan and consider investing in my Florida based business. Simms provided a lot of information on what I would need to have in order to get an investor to consider investing in my business idea. It is no surprise to me, however, that Michigan ranks in the middle at best amongst the states, becuase Michigan's economy is getting worse and worse by the day. This idea of Venture Capital is something that I'm going to have to look into more.

I found the interview with Skip Simms to be very insightful because I don't know much about venture capital. I like the fact that he broke down which type of capital would be best for a each type of business. I think that most people starting a new business would think that they need a larger firm to back them in order to be successful. I like the fact that venture capital would like the companies to stay in Michigan even if the funding is from out of state. I think this could help Michigan by providing more jobs in the state. I think that venture captial is trying to do their part in making Michigan a successful place to start a business.

I am always interested in how businesses get funded and this video has shown me another aspect of that process. I always thought that venture capitalists only invested in potential multi billion dollar companies. But as the video pointed out, they could invest in multi million dollar companies as well. I also was not aware of the fact that several different venture capitalists will team up and invest in one company. This form of financing seems extremely risky for venture capitalists and I would be interested to see the process they go through before they decide on investing in a company. This activity would be way to risky for me.

My name is William Shaffer and I am a student at Eastern Michigan University. I am a member of an Entrepreneurship class at Eastern Michigan University and my professor has asked us to look on this website and comment on Michigan’s Innovators new ideas and entrepreneurial opportunities. Michigan’s venture capitalists investments are slim to non and many of those investments are not even staying in our state. This is a huge problem, and how are we (“we” being the state of Michigan”) supposed to come out of this recession if we are receiving the funding that we need? I feel this problem starts at the top, and the top would be our state government. Tax incentives could be implemented or other incentives for investments that stay in our state, and will benefit our state. I think the next in line is Michigan’s Universities and the research of our Universities, especially the big universities (U of M, MSU, etc) to see which opportunities they are offering their graduates to bring their innovative ideas into the market. Most innovators will go through one of these universities, and this is where their first opportunities should be presented to them, their university. I feel if these students are paying thousands of dollars, sometimes up to one hundred thousand dollars for their education, the least the university can do is present them with an opportunity upon graduation, as long as they have earned it, of course. No matter how good of an innovation one has, the final factor of getting that innovation into the market sadly is money and financing. I feel there are many of great ideas and innovations that are looked over or not giving a fair opportunity because the lack of financial reasons, therefore, something should be done to give these innovations a chance to make themselves and this state some profit.

I have always wondered how the venture capital companies in Michigan operate. With the interview, it became a lot more clear to me where the state of Michigan stands in terms of venture capitalists. I would have thought that we would have ranked higher on the list then where we do. With the auto industry, shipping and renewable energy companies that are already here or on the way to growing I think over the next 10 years we are going to see a jump on the list from where we are now.

One of the biggest questions I have had throughout completing a business plan is where to find venture capital. More importantly, I was interested to know whether looking out-of-state versus in-state is a better idea. From watching the video here my thinking is that it would be beneficial to first look in-state and work with local venture capital firms and then expand later if need be. The main factor with searching out venture capital, from what I have learned, is that it really depends on the amount of revenue that the start-up company has projected to make. There is no reason for a venture capital firm to invest $100,000,000 in a company whose goal is to earn revenue of only $10,000,000. I found it very helpful to learn more about how venture capital firms invest as far as having a lead firm and then some other partners so that on venture capital firm does not assume all the risk when investing in a new company. Likewise it was very helpful to learn about how venture capital firms view having at least one venture capital firm involved that is in the same state, or city, as the start-up company as well as on the board of directors for the company so that it is easier to see the progress of the investment. Having already had the opportunity to speak with some people who are venture capitalists, hearing the information provided through this interview helps me understand some possible scenarios that may arise down the road. Thank you Mr. Simms for sharing this information. B. A. Anderson

Venture Capitalist companies are a really cool way of funding new businesses. This video really opened my eyes as to the money side of getting a business of the group. Skip says that Michigan’s venture capitalist funding is somewhere in the middle when compared to other states across the nation. Actually we are a little lower than the middle. I believe the reason for this is the economy. If our economy were strong, these venture capitalists would probably be willing to invest more money. He stated that Michigan’s funds were in the 20-75 million dollar range, this compared to some states that have funds that exceed 200 million dollars is not a very high amount. Not only would the venture capitalists invest more money if the economy was strong, I think they would be willing to invest in riskier businesses because even still, in a strong economy, there is a higher chance of success. He also touched on the strategies that these venture capitalists use. They will invest an initial million dollars, for example, to a new company. In the back of their head they have plans to invest more millions into the company. They can see how the company manages and uses the initial million. If the company poorly manages the money or there is already events that are showing that this company they are investing in is not going to be successful, they don’t have to invest anymore money into that company. This is a great strategy because the investors are not putting all their eggs in one basket. It is a lower risk of investing rather than giving the company all the money they want up front and watching it all flushed away when the new business does not succeed. They are still gambling with a lot of money but if these VCs invest wisely they can get a very high ROI.