Study: Michigan Shows Decrease in Venture Capital Deals in 2022

Michigan increased venture capital with nearly $1.2 billion invested in 2022 among 164 deals while overall investing in the U.S. decreased last year, according to the latest study from the Bloomfield Township-based Michigan Venture Capital Association.
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The latest MCVA study states that Michigan has stayed ahead of some other states in getting venture capital investments in 2022, but a stronger infrastructure is needed to keep investments coming. // Stock photo

Michigan increased venture capital with nearly $1.2 billion invested in 2022 among 164 deals, but the deal and company count decreased, according to the latest study from the Bloomfield Township-based Michigan Venture Capital Association.

In 2021, the state’s venture capital firms invested just over $1 billion, with a record 193 deals among Michigan firms.

In 2022, Michigan-based venture firms raised over $50 million, and a near-record value of $1.2 billion was invested across 164 deals, impacting 156 companies. Although deal value increased by 11 percent from 2021, deal and company count were reduced by 18 percent and 15 percent, respectively, across the state.

While the state had a good year overall in 2022, however, two Michigan-based firms raised a combined $25 million last year. That’s down significantly from $140 million raised among 13 different Michigan-based venture capital firms in 2021.

The decline is due in part to rising interest rates, a slow year on Wall Street, and a drop in the number of SPAC deals that saw a big uptick in 2021, but have since fallen.

Within the Great Lakes region, Michigan has seen venture capital increasing since 2006, with a growth rate of 13.7 percent. This is higher than the region’s growth rate of 11.7 percent and the national growth rate of 10.8 percent during the same time.

The MCVA study further states that there is a need to increase the amount of capital available in the state to ensure the success of companies at all levels during a time of declining funding for the earliest-state startups.

MCVA concludes that the state of Michigan should invest in resources to maintain and grow a strong pipeline through all stages of growth and funding in support of new companies.

“After an unprecedented 2021, U.S. venture capital activity declined significantly in 2022 amid macroeconomic instability,” says Dan Kidle, chair of the research report committee at MCVA and managing partner at Arboretum Ventures in Ann Arbor.

“With this backdrop, our state showed resilience with investment activity above 2021’s record-breaking total. This further demonstrates that the venture capital ecosystem’s staying power is critical to Michigan’s economy.”

Additional findings from the 2023 MVCA Research Report include:

  • $1.2 billion was invested in Michigan-based venture-backed startups across 164 deals.
  • Total venture capital funds under management of firms headquartered in Michigan in 2022 was $5.9 billion, a 451 percent increase over a 10-year period.
  • There were 13 exits by Michigan venture capital-backed startups in 2022, which is near the historical average but a decline from a record-breaking 2021.
  • Every dollar invested in a Michigan startup by a Michigan venture capital firm during 2022 attracted $20.68 of investment from outside Michigan.
  • In 2022, Michigan ranked second in total assets under management ($5.9 billion) in the Great Lakes region.
  • Michigan-based venture capital firms have $640 million in available funds for new and follow-on investments but are bracing for a more challenging fundraising environment ahead.
  • In Michigan, 79 startups raised more than $46.3 million from angel investors in 2022.

“Michigan has a strong pipeline of founders at all stages of growth; however, we must continue attracting more capital to fund the future,” says Ara Topouzian, executive director of MCVA. “Michigan is home to some of the finest entrepreneurs in the country and having the ability to provide adequate support is a must for our sustainability.

To access a list of venture capital firms in Michigan compiled by DBusiness magazine, along with other investment entities, visit here.

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