UM Venture Event Trend: Startups In Automotive

ANN ARBOR — High-tech startups are coming home to Michigan’s legacy automotive industry.

That’s the word from David Brophy, Director of the Office for the Study of Private Equity Finance at the University of Michigan, and creator of the Michigan Growth Capital Symposium.

The MGCS held its 33rd annual venture capital fest this week at the Marriott Resort at Eagle Crest in Ypsilanti. Nearly 500 people attended.

When asked to spot a trend among the 32 companies pitching to venture capitalsts at the event, Brophy didn’t hesitate before answering: “auto startups, technology in the vehicle.” That means new companies in fields like automotive infotainment, telematics, autonomous vehicles and controls.

“When the auto industry really starts cranking up these advanced technologies, I think we’re going to see a lot of really good startups associated with it,” Brophy said Thursday.

Brophy also said solid information technology ideas are also a growing trend among Midwest startups — but not companies based on a single app.

“People used to get very excited about startup companies with apps, but what’s very clear is that an app does not make a company,” Brophy said. “You have to be very judicious in how excited you get about apps. You also have to have sustainability and growth.”

Brophy said healthcare and battery companies rounded out the startup roster at the event.

And, he said, investors continue to do a growing business in Michigan.

“It’s not like we’re in first place in the country, we’re still in the low 20s (among the states in terms of venture investment), but I think there’s a real appetite and room for new investors in Michigan,” Brophy said. “I think the activity in downtown Detroit is really helping this.”

And Brophy said there are plenty of venture-backed Michigan companies whose technologies have already been vetted, and therefore somewhat “de-risked,” by the marketplace, that will soon be needing later rounds of funding before their eventual buyout or stock offering.

The cycle of startups that are founded, grow, and are usually become part of bigger companies, enriching employees who are paid in part with stock, has become a crucial part of the economy, Brophy said — especially in an era when many auto jobs no longer pay a middle class income.

“The reality is that building a company, creating wealth, creating jobs, is the key to prosperity,” Brophy said.

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