Michigan VC Market: Deals Up, Investments Down


tVenture capitalists invested $103 million in 68 deals in Michigan in 2013, according to the MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association. While the amount invested decreased by nearly 43 percent in comparison to 2012, the number of deals was the highest recorded since at least 1999.

t“This (the increase in the number of deals) shows that (venture capitalists) remain interested in investing in great ideas in Michigan,” says Mark McCaffrey, global software leader and technology partner at PwC, which operates a large practice in downtown Detroit.

t“The state is home to a strong labor supply, not just engineers, but also some of the entrepreneurs who are putting together these startups. It’s these startups that will help drive further venture capital investments in the market as they continue to grow,” he adds.

tThe report, based on data from Thomson Reuters, found that Michigan’s software industry claimed the most investments with $35.6 million (20 deals), followed by biotechnology with $24 million (nine deals), and medical devices/equipment with $23 million (eight deals).

tIn the fourth quarter, $58 million went to 26 deals in Michigan. The largest investments went to Ann Arbor-based Scio Security, a software company that provides Internet security solutions ($12.8 million); Kalamazoo-based ProNAi Therapeutics, a biopharmaceutical company ($10.9 million); and Ann Arbor-based Swift Biosciences, which develops technologies for genomics and personalized medicine ($7 million).

tOn a national level, venture capitalists invested $29.4 billion in 3,995 deals last year, an increase of 7 percent in dollars and a 4 percent increase in deals over 2012. The software industry maintained its status as the single largest investment sector, with $11 billion invested in 1,523 deals — nearly three times the number of deals than the second highest volume sector, media and entertainment.

tLikewise, Internet-specific companies captured $7.1 billion in 2013, marking the highest level of Internet investment since 2001.

t“Consumers can see how innovation is changing their lives in the Internet and software spaces and are eager to embrace technology at a faster and faster rate,” McCaffrey says. “Combined with the high ROI being driven by the success of recent IPOs and an active acquisition market, it is no surprise that more venture capital dollars are flowing into early stage software and Internet companies.”