Monthly ArchiveSeptember 2010
Uncategorized 29 Sep 2010 02:00 pm
Earlier this year, 13 Small Business Development Center representatives from 6 states – Illinois, Minnesota, Georgia, Louisiana, Delaware, and California – came to Michigan to learn about its Small Business and Technology Development Center’s (MI-SBTDC) technology commercialization initiative. The MI-SBTDC presented its history, tools and processes for assisting technology companies, and its approach to partnering with the state’s economic development and entrepreneurial support organizations. The visitors met with several MI-SBTDC clients and economic development partners in the Southeast Michigan area. Each of the 13 visitors left with a similar impression, summarized well by Clinton Tymes, Director of the Delaware SBTDC – “You are very fortunate to not only have such a strong, innovative and effective program in your SBTDC, but the overall infrastructure Michigan has to support entrepreneurship and innovation, as well as the excellent collaboration that exists among these resources is simply extraordinary.”
Michigan does not always receive national headlines about positive impact, but economic developers around the country are learning that Michigan, the state that the recession hit first and hardest, is also the first state with some of the most creative and impactful economic development efforts launched over the previous ten years.
Depending on who you ask, you are likely to get a different definition of “economic gardening” – but most agree that a gardening approach to economic development focuses on supporting and building a fertile environment for a state’s own small businesses with high growth potential as opposed to “hunting” for large companies or “smokestack chasing.” The Michigan Economic Development Corporation (MEDC) is often portrayed as a “hunter,” and this may be due to the sizeable press attention given to each successful large company attraction compared to the many, MANY small business successes that each create a handful of jobs but add up to a significant sum (and often strengthen attraction efforts – think T/J Technologies and A123.) But through its Smart Zone program and the many 21st Century Jobs Fund (21st CJF) programs, the MEDC has demonstrated some of the best economic gardening in the country, and it’s making a difference!
Launched in 2000 by the MEDC, the 15 Smart Zones are designed to cluster the activities and assets of universities, industry, research institutions and local communities to accelerate the commercialization of technologies and foster new ventures and job creation. The Smart Zone program facilitated tax capture from Local Development Finance Authorities, who along with state and county governments and the private sector, fund business incubators, business accelerators, networking and educational events, and financing programs. Each Smart Zone provides a different set of services depending on the region’s assets and initiatives. Emerging technology companies receive consulting from industry experts; microloans and pre-seed investments; discounts on specialized equipment or wet lab space; multiple day intensive business training; access to university student projects and internships; connections to potential customers, strategic partners, management, and investors; and many more services through Smart Zone business accelerators and incubators.
As one example of a Smart Zone business accelerator, over the past year Ann Arbor SPARK provided consulting projects to 64 high growth potential companies, enabling the creation and retention of 185 full time jobs and over $6 million in capital raised. SPARK’s business accelerator also trained 28 companies through 2 sessions of its 2 day intensive “Entrepreneurs Boot Camp” and held multiple networking and educational events for hundreds of entrepreneurs each week.
An excellent example of a Smart Zone business incubator is the Southwest Michigan Innovation Center (SMIC) in Kalamazoo. Playing a central role in Kalamazoo’s vibrant life sciences economy, 25 companies have been launched in and have graduated from or currently reside at the SMIC. The collaborative strength of the SMIC companies brings international attention and dollars to the region. The SMIC was recognized with the Innovation Award in 2006 by the National Business Incubator Association.
Smart Zones actively engage Michigan’s universities and facilitate collaboration with the private sector to ensure commercial utilization of university assets, contributing to Michigan’s economic development. For example, Michigan State University Technologies (technology transfer office) and Business CONNECT (recently established to connect businesses with MSU faculty) are housed in the Lansing Regional Smart Zone’s East Lansing Technology Innovation Center. As MSU President LuAnn Simon said, this helps MSU “to interact with companies and investors in a cutting-edge business environment.”
Similar activities and impact take place in the 15 Smart Zones statewide.
These efforts have all been supported by the 21st CJF, the MEDC’s 10 year, $2 billion initiative launched in 2005 to create a fertile climate for entrepreneurship and begin the transformation and diversification of Michigan’s economy. However, the initiative has also:
-made direct investments in high growth technology companies;
-made indirect investments in additional high growth companies through venture capital firms, banks, and economic development programs; and
-built upon the existing business support infrastructure to help Michigan companies develop business plans, enter new markets, submit successful research proposals, raise capital, and conduct other critical activities involved in growing their businesses.
Technology focused economic development initiatives require a long-term focus by nature and are not intended to be a quick fix. Even so, five years into the 21st CJF initiative, the results are impressive and making an important contribution to Michigan’s recovery. The Foundation for the New Michigan Economy report recently released by the MEDC indicates that the 21st Century Jobs Fund has provided direct support to almost 1,500 companies, enabling them to create and retain 24,407 jobs. 21st CJF programs have been very successful in leveraging third party funds. Over $1.8 billion of third party funding has been leveraged; a rate of more than 4 third party dollars to each state dollar.
The 21st Century Jobs Fund plays an important role in building what just about any entrepreneur will tell you Michigan needs; a stronger financing environment with support available at different stages of a company’s development. The initiative addresses this by creating multiple programs, each with a different sweet spot.
-The Michigan Emerging Technologies Fund (managed by the MI-SBTDC) provides commercialization funding to companies at their earliest stage when they receive federal R&D grants. Thirty companies have been funded with the first $2.4 million of this program, leveraging $17.7 million in additional capital and creating and retaining 230 jobs.
-The Michigan PreSeed Capital Fund (managed by Ann Arbor SPARK in partnership with the Smart Zones) enables companies to achieve or accelerate early sales and/or meet milestones necessary to raise larger, institutional rounds of financing. Forty three companies were funded with the first $9 million deployed by this program, leveraging over $34 million and creating nearly 500 jobs.
-The 21st Century Investment Fund (as well as a few other similar state initiatives) strengthens Michigan’s venture capital environment and has helped grow Michigan’s venture investment community to 16 venture capital firms with $1.1 billion under management. The 21st Century Investment Fund invested in 11 venture capital firms, who in turn invested $33.9 million in 13 companies, leveraging almost $260 million third party capital, creating over 780 jobs.
Several support organizations received 21CJF support to provide technical assistance to growing technology based companies. The MI-SBTDC Tech Team is a national best practice that helped its clients in creating almost 500 direct jobs over the past 2 years. BBCEtc, one of the top Small Business Innovative Research (federal research grants and contracts for small businesses) training and consulting firms in the country, helped its clients bring $80 million in federal research funding to Michigan through its 21CJF contract.
The programs described above are all technology focused. States implement technology focused initiatives because they have high multiplier effects and help keep their economies both diverse and competitive. But there are also several Michigan “economic gardening” initiatives without a strict technology focus. The MI-SBTDC served 15,000 small businesses in 2009, the vast majority of which were not technology companies. The MEDC has partnered with the MI-SBTDC to launch the Manufacturing Assistance Team to assist auto suppliers with their financial management and access to capital, as well as the Growth Group that helps companies with 10 to 100 employees implement growth strategies. The MEDC partnered with the Michigan Manufacturing Technology Center to launch the Keep Michigan Working initiative. This initiative hired industry experts to assist over 300 Michigan manufactures in creating and implementing plans to diversify into industries with high growth potential.
And not all 21st Century Jobs Fund financing programs are focused only on technology companies. The Small Business Capital Access Program (SBCAP) was resurrected in 2006. This financing program works with banks to extend their ability to lend to Michigan small businesses that otherwise might be considered too risky. The first $2.9 million of state money invested supported the lending of over $80 million to 1,259 companies, resulting in the creation and retention of over 12,000 jobs. More than 20 other states have recognized the success and replicated the Michigan SBCAP. The Michigan Supplier Diversification Fund (MSDF) was created to help manufacturers obtain loans to support diversification initiatives by addressing collateral and cash flow short falls. The first $6.7 million of state money invested in the MSDF resulted in $47.2 million in loans to 7 companies creating and retaining 1,728 jobs. The US Congress has borrowed the MSDF model and included a $1.5 billion national version of the program in the recently passed Small Business Jobs and Credit Act.
And there is much more. Michigan Celebrates Small Business is a growing event that highlights 50 second stage growing businesses, through a partnership with the Edward Lowe Foundation “Companies to Watch” initiative. Venture forums such as the New Enterprise Forum and the Michigan Growth Capital Symposium connect Michigan companies with investors. The Great Lakes Entrepreneurs Quest statewide business competition, in its 10th year of operation, connects companies with mentors, provides business plan critiques from investors, and awards cash prizes. The Kauffman Foundation FastTrac, a 10 week boot camp entrepreneurial training is available to help startups and growing companies with their business plans and company launch, statewide. The Centers of Energy Excellence (COEE) takes the best from both “gardening” and “hunting” models, playing a significant role in the energy storage cluster development that resulted in $5.8 billion investment and the creation of thousands of jobs, and generating early results in wind energy and advanced materials.
Obviously Michigan has a long way to go. We are still among the top states in undesirable economic indicators such as the unemployment rate and home foreclosures. And many entrepreneurs consider their situation dismal and feel they cannot get the support they need. But more and more often, one will also hear entrepreneurs say how amazed they are by the vast amount of resources available in the state. There is no doubt that Michigan’s economic development efforts are working. We just need them to work faster.
Due to the unfortunate reality of the state budget, the 21st Century Jobs Fund appropriations have declined each year since first launched in 2005. The Smart Zone tax capture is not materializing as hoped due to economic conditions. 2011 brings a new Governor and considerable turnover in the legislature. New leadership will bring new ideas, strategies, and tactics which are not only welcomed but necessary. However it’s important that our new representatives recognize that the MEDC is much more than a “hunter.” It has launched and supported world class programs that build our own entrepreneurial successes, create jobs, and diversify our economy so that job growth can occur exponentially, and so that we not as vulnerable to the business cycle and economic shifts. In order for this to happen, we need to continue to invest in these programs that are providing essential support to Michigan’s small businesses and entrepreneurs.
Phil Tepley, Technology Business Consultant, Grand Valley State University
Where is Googling Going?
Google CEO Eric Schmidt had a lot of people’s wheels turning after his interview with the Wall Street Journal, suggesting young people will one day be entitled to their names upon adulthood to escape the uninhibited comments and unsavory photos of their younger years posted on social media sites.
As a young adult studying PR, watching what you post on social media sites was always stressed to me in my communications classes. Some friends of mine use fake names to escape being found on social sites like Facebook or Twitter. But the real question is how can you escape from an image?
Google already has the technology to recognize faces. According to David Petrou, staff engineer at Google Labs, it chooses not to do so out of concern for privacy issues. Since Google has the technology to connect your image to information about you, it’s only a matter of time before it is used on the average individual.
“I don’t believe society understands what happens when everything is available, knowable and recorded by everyone all the time,” said Schmidt. The real issue is going to be how comfortable our society will be with sacrificing privacy for instant information access. We live in a time where what is posted on the Web can be linked to our geographic location. Apps like Mologogo can be downloaded to your mobile phone allowing you to use GPS to track where your friends are in real time.
Currently, Google has three general areas of business – search, advertising and applications (apps). It is most known for its search capabilities and Google AdWords (a pay-per-click system which allows you to create and run ads for your business quickly and simply). Google also has numerous apps like Google Calendars, Google Docs, Google Analytics and Google Talk.
With technology’s ever-changing nature, Google is looking to find what’s in store for the future of search. However, search is said to be slowly fading into the background with all the social media platforms and mobile phone apps that take users where they need to go without using a search engine. In the interview, Schmidt expressed his to desire to be one step ahead of search by providing users with recommendation technology. “They want Google to tell them what they should be doing next,” said Schmidt.
In order to do that, Google would have to collect enough information about you to not only know what you do for a living, but the daily habits of your personal life as well (in addition to tracking your location in real time of course). It’s tough to say how society will feel about mobile technology having the power to direct our behavior. On one hand, you could have your mobile device reminding you to pick up the milk you almost forgot; on the other hand, it could result in a bombardment of targeted ads as you turn every street corner.