Michigan's growing private-equity culture is slowly helping to diversify the state's economy and starting to change the employment landscape, local business professors say.
Venture-capital investments in Michigan start-ups increased from $90.8 million in 2005 to $152.2 million last year, moving the state from 24th to 18th in U.S. rankings, according to the National Venture Capital Association. In the last year, the state added five venture-capital firms, an increase of 25%, the Michigan Venture Capital Association said.
But start-ups, like the four GM Ventures companies that have Michigan ties, often function for years with small staffs. The new jobs often pay less than those lost in recent years.
"Start-ups don't replace factory jobs. Fine with me," said David Brophy, who directs the University of Michigan's private-equity studies. Not only does Michigan need to open itself to new industries, but "we're going to have different kinds of jobs in the auto industry. If we don't do it, the cars are going to be made elsewhere."
GM Ventures has funded Rochester Hills start-ups that have added about 400 jobs.
Start-ups with auto industry ties are drawn to Michigan's automotive expertise. But Michigan workers need more education to qualify for higher-technology jobs, Brophy said.
"The amount of technology we put into these companies, the more opportunity there will be for higher-paying jobs," he said.
A growing venture-capital environment will help Michigan retain entrepreneurial talent and attract risk takers from out of state, Michigan State University economist Charles Ballard said. Wider change to Michigan's economy and growing new industries less dependent on auto companies will take more time.
"You have to take some risks," Ballard said. "We don't know for sure what the next big thing is. But if we take a strategy of not trying, that's guaranteed not to find it."
