VC report finds dollar amount down, but number of investments up

ANN ARBOR — Investments were up, but the dollar volume was down. That was the story of the Michigan Venture Capital Association’s annual report on venture investing in Michigan, released Wednesday.

The group fuond 68 startups received $179 million in venture capital investment in 2017. That’s up in terms of investments from 2016, when 54 companies received funding, but down in terms of dollar value from 2016, when a total of $222 million was invested.

The all-time high for venture investing in Michigan came in 2015 with 74 companies getting $282 million in investments.

The survey found 134 venture-backed companies in Michgian, and 29 venture capital firms headquartered with or with an office in Michigan. As for employment, the survey found 87 venture capital professionals and 797 angel investors working in Michigan. The survey found $41 million of angel investment in 70 Michigan startups in 2017.

The study also tracked the diversity in the investments, with $9.1 million invested in minority-led startups, $2.3 million invested in women-led startups, and $1.7 million invested in LBGTQ-led startups.

Total capital under management in Michigan in 2017 was $3.88 billion, down from $4.02 billion in 2016 and $5.26 billion in 2015. Capital under management by Michigan-based firms was $2.17 billion in 2017, $2.4 billion in 2016 and $2.21 billion in 2015. Capital under management by firms based outside Michgian with a presence in the state has fallen dramatically, from a peak of $3.1 billion in 2014 to $1.71 billion last year.

Information technology attracted the greatest number of investments last year, 35, followed by health care and the life sciences, with 19.

Venture capital is money invested in high-tech, high-growth companies that are too early in their development to secure traditional funding from banks. Venture capital firms raise money from a variety of individuals, corporations, pension funds, universities, economic development agencies, and other sources, and reinvest that money into companies in return for a percentage of ownership. The goal is that as the company grows in size and value, the percentage of ownership becomes more valuable. When the company is eventually purchased by a larger organization or goes public, the venture capital firm is then able to sell their percentage of the company at the new value, pay back their investors, and start a new pool of money for future investing.

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