Ara Topouzian, executive director of the MVCA, told Crain’s that the steady fundraising that Michigan saw, and the startup and venture capital ecosystem’s success through the past several years is putting the state on the radar and in conversations with tech communities like those in the coastal regions.
Last year, Michigan saw the highest ever deal value of outside investors, reaching a total of $543.7 million. Coastal investors from the Bay Area and New York firms participated in a combined 55 venture rounds in 2023.
“I think that we’re a cohesive venture ecosystem, which means that, to me and to the community, that these outside investors want to do business here. They want to collaborate here. And I think that’s a good thing,” Topouzian said. “On the other end of it, too, we should also be fostering our Michigan venture community. VCs are typically the first boots on the ground for finance, for helping the startups, angel investors and in VCs. And I think that we have to do as much as we can to help support them as well.”
According to the report, Michigan venture activity remains primarily centered in software in areas such as AI, manufacturing, health tech, robotics and more. Investments in life sciences, health care, and software companies continue to dominate.
Michigan remained steady in its venture capital deals this past year, with seven fewer deals in 2023, with 182 valued at $1 billion, a slight decline from the 189 deals at $1.1 billion that the state saw in 2022.
“Key deals that drove the total of VC invested included the $300.0 million funding of battery tech developer Our Next Energy, the $109.0 million infusion in autonomous transport software platform May Mobility, and a $75.0 100% million financing of cybersecurity provider Censys,” the report states.
2023 had the most capital raised by Michigan-based funds of the past decade, with four funds raising around $500 million, overtaking 2016’s tally of approximately $450 million.
Most venture capital investment in the state remains concentrated in Southeast Michigan in the Detroit-Warren-Ann Arbor metro area.
“A record $8.9 million in average financing value in 2023 suggests that investors still have plenty of capital to invest in the best-prepared, best-positioned startups,” the report states.
Michigan had 11 exits at approximately $700 million in 2023, an increase from the 13 exits valued at $200 million in 2022.
According to the report, the bulk of exits occurred via strategic acquisition, as opposed to buying or public listing. The exit value was primarily driven by the $630 million acquisition of Auburn Hills-based VIA Motors by Ideanomics.
In the Great Lakes region, VC deal value dropped significantly between 2022, with 1,343 deals in 2022 valued at $17.2 billion, whereas 2023 saw only $6.8 billion for 1,194 deals.
Topouzian said the progress that Michigan has seen the past several years shows great potential for the state’s venture capital and startup ecosystems. The MVCA is part of the coalition behind Gov. Gretchen Whitmer’s proposed $60 million to establish the Michigan Innovation Fund, outlined in the budget she is expected to sign this month.
“We were part of that coalition of the Michigan Innovation Fund, and it’s definitely a good start, and I think that the momentum has been picking up within the state, and the attention to venture has probably been more prominent in these last couple of years than it has been in years past, so I think that’s great,” Topouzian said. “Is the $60 million fund going to be enough to make a difference totally? No, we need more … it’s a great start for the ecosystem, no question, but we need more of it.”
MCVA also backed the $105 million counterproposal bill package sponsored by Reps. Jason Hoskins, D-Farmington; Alabas Farhat, D-Dearborn; and Greg VanWoerkom, R-Norton Shores.
