Detroit tech community leads venture capital boom in Michigan

Michigan's venture capital community continues its rise with another year of growth, and Detroit's tech scene is playing a significant role.

With $328 million in 2015, Michigan enjoyed its best year of venture capital investment. That's up from $224 million the year before, and $246 million from the second highest year in 2012, according to a new report from the Michigan Venture Capital Association. In total over the last decade, Michigan has seen a 150 percent increase.

Detroit's rise as a center for tech mirrors that climb. There was little to no venture capital activity downtown 10 years ago. Today, it's home to several venture capital firms that make early stage investments in tech firms, many of which are based in or near Madison Block. One of Michigan's two largest VC funds, the Renaissance Venture Capital Fund, a fund so large it only invests in smaller VCs, is also located downtown.

"Detroit is a big area of focus," says Maureen Miller Brosnan, executive director of the Michigan Venture Capital Association. "Automotive and IT technologies are a great areas of growth."

VC growth is happening at a time when it's on the wane across the U.S. According to the same Michigan Venture Capital Association report, the number of venture capital firms headquartered in Michigan, their total capital under management, and number of venture capital investments made in Michigan, has doubled and in some cases tripled while those numbers have decreased nationally.

That build up has come from a combination of capital from private and public sources. While the Renaissance Venture Capital Fund has accumulated its money from private funds, it's counterpart the Venture Michigan Fund got its backing from government. The Michigan Department of Treasury helped establish local VC infrastructure over the last decade, including the Venture Michigan Fund, by providing investors with up to $450 million of tax-voucher certificates.

Future support from the state of Michigan, however, is not guaranteed. That doesn't mean anyone is deterred. Rather, they're striving for greater self-sufficiency.

"Firms are looking at this and saying we’re going to have to do this on our own," Brosnan says.

Read more about Metro Detroit's growing entrepreneurial ecosystem at SEMichiganStartup.com.