Michigan’s Growing Startup Culture and Venture Capital Activity on the Rise

By Audrey LaForest 

All businesses had to start somewhere. For some entrepreneurs, those first ideas were last-minute light bulbs that went off in their heads and came to life on bar napkins, the backs of hands or in a dream. No matter how the idea came to fruition, it more than likely required investments for those businesses to sprout from risky ideas to established companies.

In Michigan, venture capital activity is on the rise, creating an important opportunity for investors and startups, especially in areas of automotive IT and next-generation mobility. In the third quarter of 2016, the state saw $118.8 million invested in 18 deals, ranking Michigan 17th nationally, according to an October report by the National Venture Capital Association and PitchBook, a venture capital database.

PolySync built this autonomous vehicle to test their software platform on next-generation vehicles. The company received funding for the project from RPM Ventures.

PolySync built this autonomous vehicle to test their software platform on next-generation vehicles. The company received funding for the project from RPM Ventures.

Nationally, the number of venture capital firms has decreased by 14 percent, according to the Michigan Venture Capital Association’s 2016 annual report. In Michigan, that number has grown by 257 percent over the last 15 years.

“A significant part of Michigan’s growth has been due to the amount of investment venture capitalists can attract from outside the state,” said Maureen Miller Brosnan, executive director of the Michigan Venture Capital Association.

Every dollar invested in a startup by a Michigan venture capital firm, Brosnan said, attracts an additional $4.31 of investment from outside the state.

DRIVING INVESTMENTS 

“There’s a real possibility that startups and venture capital can be a really key industry in Michigan. It’s consistently growing right now, and it’s attracting some world-class talent,” said Ted Serbinski, managing director of Techstars Mobility, a Detroit-based startup accelerator program focused on next-generation mobility technologies.

In Michigan, venture capital activity is on the rise, creating an important opportunity for investors and startups, especially in areas of automotive IT and next-generation mobility. In the third quarter of 2016, the state saw $118.8 million invested in 18 deals, ranking Michigan 17th nationally, according to an October report by the National Venture Capital Association and PitchBook, a venture capital database.

Techstars has invested in 22 companies since it was launched in Detroit in 2015. The company recently partnered with Ford Motor Co. to offer up to 12 startups $120,000 in funding and three months of mentoring and training to develop ideas and solutions aligned with Ford Smart Mobility. The plan is to take Ford to the next level in connectivity, mobility, autonomous vehicles, the customer experience, as well as data and analytics.

Techstars has invested in 22 companies since it was launched here in 2015. Among its investments is ride-share startup SPLT, which relocated from New York City to Detroit last year and is providing a sustainable solution to congested weekday commutes by offering companies a way for their employees to share the ride to work; and Lunar, another startup that relocated from NYC to Detroit that is offering a new kind of smartphone with no monthly bills.

At Fontinalis Partners, a Detroit-based venture capital  firm founded in 2009, co-founder and partner Chris Thomas said Michigan’s combination of people, intelligence and history are three factors impacting the state’s steady growth in venture capital and startups.

“We have a strong venture capital community. We have a strong and growing entrepreneurial community, and we have fantastic people,” Thomas said. “We have some of the best engineers in the world. We have some of the best workers in the world, and we have this amazing opportunity to give them the chance through funding from companies like ours to go out and develop and achieve their dreams.”

Fontinalis, which is strictly focused on investing in companies that provide solutions for next-generation mobility, has funded big names like Lyft and continues to see opportunity in Detroit’s automotive and mobility ecosystems. The firm also has investments in Karamba Security, a startup that is protecting connected cars from cyberattacks.

“We have something very special to offer here because — for better or for worse — Detroit is the largest transportation technology cluster in the world … larger than Silicon Valley,” Thomas said.

FUELING JOB GROWTH 

As venture capital investments continue to grow, startups are becoming the state’s most promising job creators.

“Startup companies and the venture capitalists that invest in them to fuel their growth bring increased employment of highly educated workers, utilize service providers like attorneys and accountants, and lease office space to support operations,” said Tony Grover, managing director at RPM Ventures, a seed and early-stage venture firm founded in 2000 with offices in Ann Arbor and Silicon Valley.

The company has invested in startups like Automatic, a company that is connecting cars on the road to the internet via an app and plug-in car adapter that can diagnose “check engine” codes, give driving feedback and track mileage.

Startups may begin as small, high-risk endeavors, but “their goal is to build industry-defining businesses,” Grover added.

“Companies like Intel, Apple, Amazon and Facebook all started with a dream of a founder that was then backed by venture capital investment to lead an industry,” he said. “Each of these companies now employs tens of thousands of employees, providing direct and indirect economic benefits to the cities and states in which they reside.”

Audrey LaForest is a metro Detroit freelance writer.

Michigan Leading the Mobility Revolution

By James Amend 

Automakers are conducting an unprecedented technology harvest, scouring the globe for the latest breakthroughs to prepare their organizations for a revolution in personal mobility.

And make no mistake, industry leaders say, the day when autonomous cars and trucks begin plying the nation’s roadways — or when people choose to borrow, share or rent a vehicle instead of owning it — is just around the corner.

Ford recently announced its intent to have a high-volume, fully autonomous SAE level 4-capable vehicle in commercial operation by 2021 in a ride-hailing or ride-sharing service.

Ford Motor Co.’s fully autonomous Fusion Hybrid research vehicle on the streets of Dearborn. Ford has been researching autonomous vehicles for more than a decade and currently tests fully autonomous vehicles in Michigan, Arizona and California.

“In the history of technology, we have been surprised often by the speed of which it matures and autonomous vehicles will be another example of that,” said Ken Washington, vice president of research and advanced engineering at Ford Motor Co. “What I don’t want to do is leave the impression that getting there is going to be easy, because it won’t be.”

To meet this unprecedented change, the industry must break away from a century old business model. Instead of designing and engineering new technologies almost entirely in-house, automakers will have to collaborate more closely with traditional suppliers, forge partnerships outside of automotive and build entirely new units within their companies focused on future modes of transportation.

Ford has already begun real-world testing of autonomous vehicles with exercises in California, Arizona and Michigan. The company expects by the next decade it will be selling cars and trucks that operate without a steering wheel, throttle or brake pedal.

“I am very optimistic that the (Ford) target of 2021 is very achievable and we’re committed to it,” Washington added.

Automakers are conducting an unprecedented technology harvest, scouring the globe for the latest breakthroughs to prepare their organizations for a revolution in personal mobilitytion of alternative fuel.

A group of Ford Motor Co. engineers work on a phone-as-car go app. When a passenger gets into a ride sharing car, he or she taps a mobile device that automatically opens an app interface giving him or her control of the radio and climate. Eventually, any controllable feature, like the passenger seat, could be added.

The real-world testing is part of Ford Smart Mobility, a plan the 113-year-old automaker expects will put it on the leading edge of autonomous vehicle technology, connectivity, mobility, customer experience, and data and analytics. The Ford plan includes strategic investments in technology companies — City Maps, Nirenberg Neuroscience LLC, SAIPS and Velodyne — meant to deepen the automaker’s expertise in emerging technologies, such as computer vision, machine learning, artificial intelligence and high-resolution 3-D mapping.

Much of Ford’s work on future mobility falls under the direction of Smart Mobility CEO Rajendra “Raj” Rao. A transformation agent, Rao previously built out the digital prowess of companies such as IGATE Capital, Brunswick Corp. and 3M. Rao underscores the gravity of future mobility work at Ford by calling the opportunity to lead Smart Mobility a “culmination” of his career.

Other automakers are taking similar steps. General Motors has partnered with a pair of San Francisco-based companies, Lyft and Cruise Automation, to speed development of its ride-sharing and autonomous driving initiatives. The company also launched its own personal mobility service, Maven, in January.

FCA US LLC has leapt into autonomous research through a partnership with Google, arguably one of the world’s leading technology companies. The unlikely duo has cloaked their work in secrecy for competitive reasons, but it reportedly consists of outfitting 100 Chrysler Pacifica minivans with Google’s autonomous vehicle technology.

“What develops from here, we’ll see,” FCA CEO Sergio Marchionne told journalists in Windsor recently.

Volkswagen, which is remaking its business after a damaging emissions-cheating scandal, hired Johann Jungwirth away from Apple to lead its digitization efforts as the German automaker stretches into autonomous vehicles and the mobility services of ride-hailing and car-sharing.

Jungwirth recently disclosed plans for a standalone brand at VW entirely devoted to urban mobility services.

At Toyota Motor Co., professors and scholars are encouraged to pursue research in green energy technology to explore the next generation of alternative fuel.

At Toyota Motor Co., professors and scholars are encouraged to pursue research in green energy technology to explore the next generation of alternative fuel.

Toyota has put its autonomous vehicle development under the auspices of Gill Pratt, a robotics genius who previously led the U.S. Defense Advanced Research Projects Agency centered on driverless cars and machine learning. Pratt is CEO of the Toyota Research Institute, an Ann Arbor hub for the Japanese automaker tasked with developing artificial intelligence systems, so its cars can someday learn the intricacies of driving.

But Pratt said even an engineering giant such as Toyota must go outside its organization to achieve unquestionably safe driverless cars.

“Coopetition is actually the goal here,” he said. “Our great hope is for constructive competition and also collaboration between all the car manufacturers, the IT companies, different governments and hardware manufacturers.”

James Amend is a senior editor at WardsAuto in Southfield.