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.