
When COVID-19 hit Michigan in March, many companies, including those involved in venture capitalism, feared the worst — that 2020 would be a really bad year. Fortunately, most businesses, including venture capital firms, have been steadily rebounding ever since they were allowed to operate.
At the start of 2020, hopes were high for venture capital activity, especially coming off a record year of investment. Last year, nearly $2.1 billion was pumped into state businesses across 71 deals, highlighted by the $1.6 billion investment in Plymouth Township-based electric truck company Rivian, according to the Michigan Venture Capital Association (MVCA) in Novi.
Beyond the Rivian deal, which involved investors from outside the Great Lakes State, venture capital investments statewide totaled $514 million through 70 deals, which still was a record amount and more than 1.5 times higher than five years earlier.
“I might have had a different response a month into COVID-19, but now my hope is that COVID-19 hasn’t put a major damper on the amount of investment that’s been going on,” says Ara Topouzian, executive director of the MVCA. “We were on track to have as good a year this year as we had last year. COVID-19 caused a short downturn.”
Brian Demkowicz, managing partner of Huron Capital in Detroit, expects 2020 to be down a tick from 2019.
“It’s probably going to mimic what we’re seeing nationally, which is a significant slowdown in the second quarter and a little bit of a bounce-back in the third quarter once (businesses) got their legs back under them — and then a bigger bounce-back in the fourth quarter,” Demkowicz says.
“We’ve seen the financing markets in Michigan bounce back. We’re seeing deal flow pick up. My guess is that when the final chapter is written, the fourth quarter will see a bit of a rebound. But as a year, it’ll likely be below (2019).”
Once COVID-19 hit, Topouzian says the VC community jumped into action, helping its portfolio companies prepare to withstand the pandemic. Once that was accomplished, it started doing deals again — just not as many.
“I think that deals are getting done, albeit not as many rounds. My understanding is some folks are writing bigger checks, but not as many checks,” he says.
He points to the early November acquisition of Ann Arbor supply chain design and planning firm LLamasoft by California’s Coupa Software for $1.5 billion. “That’s a big deal,” Topouzian says. “That’s a unicorn. That’s nice stuff, and during a pandemic.”
The LLamasoft deal is one indication of the Michigan venture capital ecosystem’s maturity.
“Over the past 10 years or so, the Michigan venture capital market has blossomed to become a legitimate market,” says Charles Rothstein, founder and senior managing director of Beringea in Farmington Hills, which specializes in providing later-stage venture capital and operational expertise. “Ten or 12 years ago there were just a couple of institutional-sized venture capital firms (in the state),” he says.
Rothstein says the Venture Michigan Fund 1 and 2, along with the 21st Century Investment Fund, helped to grow Michigan-based and Michigan-focused investors. “Our state has benefited from that,” Rothstein says. “Those programs have (since) lapsed and now there’s talk of perhaps resurrecting either of those fund-to-fund programs, which have helped to grow community venture funds.”
Dr. Tom Shehab, managing partner of Arboretum Ventures in Ann Arbor and a former chairman of the MVCA, points to the geographic expansion of the Michigan VC community as a welcome sign of more growth to come.
“There’s been a lot of progress made over the last 15 years,” Shehab says. “We have more venture capitalists than we’ve had previously. We have more assets under management than we had previously. And while much of the venture capital community is focused in Ann Arbor and Detroit, we now have growth of the ecosystem out into other places like Grand Rapids, Flint, and other areas.”
Topouzian says that although much progress has been made in Michigan’s VC community, it’s still not as large as those on the East and West coasts. Any assistance the state government can provide to help it overcome that handicap would be worthwhile, he adds.
“We’re growing, but some of the same issues that existed in the last few years still exist, which means we still need an influx of funding in the state for venture capitalists to invest,” Topouzian says. “We also need more interest from out of state to look at the wealth of what we’ve got here in Michigan. If there are other things Lansing can do to create more capital in the state, we’re open to whatever that is.”
Once word gets out about the benefits of investing in Michigan, Rothstein says, “There are many reasons why building a business in the state is very compelling. The amount of R&D that takes place in the state, the engineering talent, the cost of doing business, the cost of living, the quality of life.
“And if it’s cheaper to run a business, it also should provide better returns, theoretically, for the venture investors who put money into those businesses.”
Brian Demkowicz
Huron Capital • Detroit || Focus: Low End of VC Market || Assets Under Management: NA

Huron Capital in Detroit is among Michigan’s busiest investors, having completed more than 200 acquisitions since its inception in 1999.
The milestone 200th acquisition came last August, when its High Street Insurance Partners in Traverse City acquired Capital Insurance Group in Bloomfield Township. Since then, High Street has added insurance companies in New York and Connecticut.
“In every case, we’re partnering with the entrepreneur — the owner that built the business,” says Brian Demkowicz, managing partner of Huron Capital. “They typically get it to a point where they need additional resources beyond capital, so we have an entire strategy and operations group that we like to think of as a CEO toolkit. We bring a lot of resources that business owners may not have access to on their own.”
Huron Capital, which has raised and invested approximately $2 billion since 1999, focuses on growing lower middle-market companies through what it refers to as its high-impact and differentiated buy-and-build investment model. Acquisitions tend to be between $50 million and $75 million. There are more than 20 companies currently in the Huron Capital portfolio. Each, like High Street, is hyper-focused on growth and expansion.
“They, in turn, bought another 30 or 40 companies over time,” Demkowicz adds. “We’re looking to dramatically grow the companies we invest in, so we build a plan to build value.”
We’re looking to dramatically grow the companies we invest in, so we build a plan to build value. — Brian Demkowicz
According to Demkowicz, Huron Capital focuses on making flexible and customized control and noncontrol equity investments in companies with revenue between $20 million and $200 million. Its platform is comprised of two complementary strategies: flagship equity (majority private equity transactions) and flex equity (minority transactions).
“We have a focus on three industries: business services, consumer, and specialty industrial, and we go deeper into a couple of sectors like facility services,” Demkowicz explains. “We have a fair number of companies operating in that space. It could be energy-efficiency, fire and safety, mechanical services, or airflow quality.”
Huron Capital typically holds on to a company for five to seven years. On average, the portfolio companies double or triple in size before being sold to what Demkowicz calls “a strategic acquirer, someone larger in the industry that would find strategic value in what we’re building.”
In a standard year, Huron Capital closes between 20 to 25 transactions. So far in 2020, far from a standard year, the firm has closed 14, with another six or seven in the hopper.
“We’ll end up having a fine year,” Demkowicz says. “Our engine for deal flow has been strong. There was enough in the pipeline that sustained us through that whole (pandemic slowdown).”
Matt Tsien
GM Ventures • Detroit || Focus: Automotive || Assets Under Management: NA

It’s a good bet that if General Motors Co. in Detroit is successful in achieving its future goal of zero crashes, zero emissions, and zero congestion, the technology will come from GM Ventures.
A decade ago, the automaker formed GM Ventures to invest in automotive-related startups that are developing advanced technology
for eventual application in the automaker’s vehicles, manufacturing facilities, and operating businesses.
It focuses on six areas of technology that support GM’s mission to drive innovation and impact the future of mobility, including advanced propulsion; connected vehicle; advanced materials; sensors, processors, and memory; advanced manufacturing technology; and value chain and business model.
“We derive innovation from inside the company, GM Research, and suppliers bring innovation to us,” says Matt Tsien, president of GM Ventures and an executive vice president and chief technology officer at GM. “A third source of innovation is from the entrepreneurial community. That’s one of our primary motivations to be involved in corporate venturing — to look for great ideas that can enhance our products and support our bottom line.”
To date, GM Ventures has invested in a total of 26 companies. One of the most recent (October 2020) is U.K.-based Envisics, which developed holographic augmented reality that GM intends to use in head-up displays.
“This augmented reality takes head-up display to the next level,” Tsien says. “It creates another plane display out beyond the vehicle, where it can show navigation or highlight a pedestrian. It will be on one of our upcoming products very soon.”
Another GM Ventures highlight is Tula Technologies, headquartered in Silicon Valley. It also has a local office in Plymouth Township, in which GM invested several years ago. Tula has devised a cylinder deactivation strategy that dynamically fires the optimal number of engine cylinders to maximize fuel economy while maintaining a smooth ride and enhancing passenger comfort.
“It takes electronic vehicle control philosophy to the next level,” Tsien says. “We have literally hundreds of thousands of trucks on the road using this technology.”
Charles Rothstein
Beringea • Farmington Hills || Focus: Later Stage VC || Assets Under Management: NA

Beringea’s metro Detroit office, set in a restored Victorian manor along 12 Mile Road in Farmington Hills, is a symbol of the care it takes to last through the ages.
To establish and build from a solid foundation, Beringea centers its investments on later-stage companies, from Cleveland-based Complion, a supplier of electronic regulatory solutions for clinical researchers to Atlas Space Operations in Traverse City, which is working to change satellite-based communications by providing a new approach for sharing data.
Another Beringea company is Floyd, a Detroit-based furniture manufacturer that sells its wares online. “It’s a business that’s growing rapidly,” says Charles Rothstein, founder and senior managing director of Beringea. “It hits all of the high points of a business we think we can help, and (we can) benefit from their success — really stylish furniture, thoughtful, sustainable, and very easy to put together and take apart.”
Beringea, which also operates an office in London, has invested in more than 60 companies with investments between $3 million and $12 million, according to Rothstein.
The firm specializes in later-stage venture capital, commonly called growth capital, meaning Series B or Series C funding. The businesses already have proven their product or their service has an established market. “They’ve already cracked a little bit of the code of success,” Rothstein says. “They need more capital to really take advantage of that particular opportunity.”
Rothstein says Beringea has a specific set of criteria it looks for in investment opportunities.
As an international business, we got the sense early that this was going to be a crisis that would get to the United States and (is) unlike any other year that we’ve dealt with. — Charles Rothstein
“The types of businesses we’re looking for have strong year-to-year growth, are selling into a large addressable market, are positioned for the future, are capital-efficient, and have to be led by a strong and inspiring management team,” he explains. “These are people we (believe) have proven leadership capabilities, and it usually isn’t a one-person show.”
He says Beringea shies away from businesses involved in, say, heavy manufacturing or pharmaceuticals. “Those are less capital-efficient businesses that take a lot of capital to get somewhere,” he says.
According to Rothstein, Beringea’s international footprint, portfolio of technology companies, and focus on later-stage investing helped its portfolio companies survive and grow through the pandemic.
“As an international business, we got the sense early that this was going to be a crisis that would get to the U. S. and (is) unlike any other year that we’ve dealt with,” he says.
Early in 2020, Beringea advised its portfolio companies to prepare for a very tough year and to rationalize all expenses being made.
“There were other companies in our portfolio that were well-positioned for the economic landscape that we faced,” Rothstein says. “That would include e-commerce businesses like Floyd and companies involved in telemedicine, which grew significantly.
“By investing in later-stage businesses, (we know) they’ve had to deal with issues to get to that stage, so they’ve had some experience with adversity. Our businesses (are) a bit more seasoned, (rather than) a newer company that hasn’t had to endure major challenges.”
Jan Garfinkle
Arboretum Ventures • Ann Arbor || Focus: Health Care || Assets Under Management: $700M

When Jan Garfinkle founded Arboretum Ventures in Ann Arbor 18 years ago, health care costs were 12 percent of GDP. The goal was to invest in companies that could drive the cost out of health care.
Now, with health care costs at 18 percent of GDP and climbing, Garfinkle is one of the nation’s leading female venture capitalists in the wellness sector.
“(Arboretum Ventures) was based on the premise that the cost of health care was climbing too quickly at that point, but I had a fundamental belief that we should be able to find companies that could drive costs out of the health care system and still provide great clinical care,” Garfinkle says. “We invest in everything in health care; roughly half of what we invest in are medical devices and diagnostics that require FDA approval. The other half is in the unregulated area, meaning it doesn’t require FDA approval. That’s health care IT, life science tools, health care service companies, and pharma adjacencies.”
Arboretum currently has $700 million under management and is on its fifth venture fund, which is at $250 million. Garfinkle says the firm has had “at least a dozen very large exits.”
The most recent completed deal was an Ann Arbor infectious disease testing equipment company called NeuMoDx Molecular Inc., which sold in October 2019 for $248 million in cash to Qiagen N.V. in The Netherlands. Qiagen had acquired a 19.9 percent stake in the company in 2018. All told, it was Arboretum’s largest ROI.
Another big win for Arboretum was its $15 million investment in Envision, a West Coast-based firm that developed a diagnostic tool for the early detection of ovarian cancer. Envision was sold for $275 million.
Inogen, a company that makes transportable portable oxygen concentrators for patients requiring 24/7 oxygen support, is yet another Arboretum success story.
“They developed a 3-pound device that can be carried like a purse for a woman or as a backpack for a man,” Garfinkle says. “It really was a novel technology that provided a lot of freedom for these patients that they wouldn’t have otherwise had.”
“We mentor the founders and the management team,” adds Dr. Tom Shehab, managing partner. “We bring a lot, not just money. We connect them with key strategic partners.”
Terrence J.L. Reeves
Commune Angels Detroit || Focus: Consumer Products, Technology, Life Sciences || Investments Made: NA

Morgan Stanley recently reported that the venture capital community is missing the boat — a boat worth about $1 trillion — by not investing in companies owned by women and multicultural founders. Detroit-based Commune Angels is trying to get more investors to the loading dock.
A new player on the angel investing scene, Commune was started in August 2020 by Terrence J.L. Reeves, an investment attorney, and four others who all work as volunteers. As of this writing it has yet to make an investment, but it has conducted two pitch meetings with its 20 member investors and is in the process of doing due diligence on a pair of startups.
Commune Angels is a community of investors united by their common interest in high-growth ventures and strengthened by the diverse experiences of its members — who are, themselves, entrepreneurs, business leaders, experienced angels, and new investors.
“There’s a huge opportunity to increase diversity around greater participation in angel investing to generate generational wealth, but also to help angels make better decisions,” says Reeves, a high school dropout who eventually graduated from Eastern Michigan University and Wayne State University Law School, and earned an MBA from the University of Notre Dame. “When people hear diversity in an angel group, they assume it’s only for minorities and women. That’s not our goal. Our goal is to create a unique platform that’s inclusive of all people.
“Angel investing is a place where pooling capital is important,” he continues. “The way you get into the best deals is to write larger checks. The more people you can bring together, whether they’ve previously invested in real estate or the stock market, is really important.
“The VC community is premised on what we call the warm intro, which assumes that you have a network that overlaps with the VC,” Reeves explains. “Folks in minority communities might not have a relationship with a venture capitalist or an angel investor. The warm intro doesn’t really lend itself to finding diverse startups.”
Even if an angel group or VC finds a minority-owned firm, “the investors in that room might not understand it (like we do) because it’s not part of their perspective.”
Go to accompanying 2021 Michigan Investment Organizations list
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