Friends and Family

Download iPod Video (58MB)

The Michigan Pre-Seed Capital Fund is targeted at early stage technology companies that need in the hundreds of thousands of dollars. Skip Simms, fund manager, explains the criteria for applying and the reason for the fund's existence.

Like this? Let us know with a $5 donation, so we can do more

Filed under: Angel Investing | Ann Arbor Spark | Ann Arbor, MI | Financing Innovation | Friends and Family | Skip Simms | Venture Capital

The Michigan Pre-Seed Capital Fund is targeted at early stage technology companies that need in the hundreds of thousands of dollars. As Skip Simms, the fund's manager, explains:

• The maximum investment the fund will make is $250,000.
• The fund is a matching fund. Its contributions will always be less than or equal to those of outside investors. These investors might include angels, venture capitalists, or friends and family.
• The motivation for creating the fund came after the collapse of the first Internet bubble when angels and venture capitalists demonstrated hesitancy to invest in early stage ventures that were still trying to prove their business concept.
• People interested in the fund should apply through the nearest Michigan SmartZone where it is first reviewed. The application then goes to Skip Simms who presents it to the fund review board consisting of angels, venture capitalists, and service providers.

Additional links

• One reason that venture capitalists might be hesitant to invest in early stage companies is pressure from their own investors seeking high rates of return over a fixed time horizon.

Download iPod Video (63MB)

The Michigan Pre-Seed Fund can effectively double the impact of friends and family investments. Dennis Carmichael recounts how he first began to develop ERT systems and the role of different forms of early stage financing including the Pre-Seed Fund in bootstrapping his business.

Like this? Let us know with a $5 donation, so we can do more

Filed under: Ann Arbor, MI | Dennis Carmichael | ERT Systems | Financing Innovation | Friends and Family

We've covered the importance of putting in your own money and getting friends and family funding in the early stages of financing your innovation. Getting funding is all about networking, and your closest associates (i.e., your family) are the most likely to give initially.

In this segment, Dennis Carmichael, President of ERT Systems, describes how he got the concept started. He was giving a talk at Automation Alley on RFID tracking for industrial operations and connected with former fire chief John Ellis. Highlights are:

• The first financing game from him and John. They needed to fund a prototype proof of concept.
• They started commercial sales early, both for cash flow and proof of concept.
• Their next investment came from friends and family. They were able to double this via a matching equity investment from the Michigan Pre-Seed fund.
• They are currently seeking an additional $1 MM investment to finance rapid sales expansion.

In future segments, we will have more to say about the Michigan Pre-Seed fund and the structure of venture capital and angel investing in Michigan.

Additional Links:

• Oregon startups points to good resources on bootstrapping your business or growing your business from internal cash flow and personal investment.
• This about.com article provides links to resources on how to structure friends and family financing.