In the movie Moneyball, a pro-baseball manager isn't afraid to turn conventional recruiting practice on its head. When it comes to VC funding, shouldn't the same daring apply? This week software execs and entrepreneurs Pavan Muzumdar, CFA, and Neal Fairbanks have a friendly back-and-forth on the state of funding from the investor and entrepreneur points of view.
Post 2: The State of High-Tech in Michigan
Posted By: Pavan Muzumdar & Neal Fairbanks
Posted: 2/1/2012
Neal: So we closed earlier asking why we don't see venture capital beating a path down to Michigan. I'm going to take a crack at answering that today.
First of all, I think Ann Arbor is pretty much the capital of high-tech in Michigan. There's no doubt in my mind of that. I think it's because it's a great package. The school (Michigan) and the town are perfectly put together. While we have other great schools in the state, it's just not quite like Ann Arbor. I get the same feel in Ann Arbor that I get when I visit Boston or New York.
Even so, if I were in Nebraska and I had one shot at doing something in high-tech, my first choice would be Silicon Valley or Boston. Unless I had connections here, it would not be Ann Arbor. Most likely I would not have heard of it. So while we have a lot of cool stuff going on here, it's just a well kept secret.
I remember when I moved here from Connecticut, I was impressed by the amount of stuff going on around here. The number of corporate headquarters I drove by, the technology I saw, the people I met; all of that was beyond my wildest expectations. But I had no idea of it living in CT. I've got to say that moving to Michigan was one of the smartest things I did. But it would be nice to have others think the same way as well…
Pavan: Wow, Pure Michigan! You bring up an interesting situation.
I think that one of the reasons that Michigan's high-tech capabilities are such a well-kept secret is that the national media looks at Michigan as the auto-capital of the world. I think it's hard for them – and no criticism here, just an observation – to fathom one area being good at more than one thing. For example New York is the financial capital, Connecticut is the insurance capital, Southern California is the entertainment capital, etc.
I also think that there's another dynamic at play.
If we see the history of high-tech, venture capital followed the path from inside to outside the computer. The foundational technologies were developed and as those became stable, the dollars flowed to the cutting edge stuff. And that's always where the Silicon Valley guys have played.
So what got funded first was hardware followed by the operating systems, and then applications, networking, networked enterprise applications, and finally networked consumer applications to social networking platforms today.
Here in Michigan however, high-tech professionals working on automotive systems, enterprise software, and end-user applications are involved in all areas of technology and not necessarily the cutting-edge stuff. So while you're still working in high-tech, it's not the sexy sizzling stuff that gets the attention.
But that's not a bad thing however. The way I see it, it's the steak that feeds, not the sizzle. It's just that our deals may not necessarily be appropriate for venture capital. However, there are other types of capital such as later stage private equity investors and corporate investors that would find these kinds of opportunities interesting.
Neal: I think there are a couple of other things that make Michigan different also.
Next: What's Different about Michigan…