Michigan reps seek $105M state fund for startups

A bipartisan group of legislators in the Michigan House of Representatives announced a package of bills Friday that would establish an evergreen fund to support early-stage startups in Michigan.

Reps. Jason Hoskins (D-Farmington), Alabas Farhat (D-Dearborn) and Greg VanWoerkom (R-Norton Shores) are sponsoring the three-bill package that would establish the $105 million Michigan Innovation Fund. The initiative is backed by more than 25 partners across the state of Michigan, including Michigan Central, Michigan Technological University, Detroit-based venture capital firm Renaissance Venture Capital and more.

As proposed, the $105 million fund would create an estimated 5,000 jobs and provide funding to 500 startups, Hoskins said.

“The Michigan Innovation Fund will help ensure we have funding this year and in the future and is an important first step to really nurturing our innovation ecosystem,” Hoskins said. “There’s real potential here for us, for Michigan, to lead and create and grow innovative startups. Other states, especially along the coast, have figured this out a long time ago and most recently, our neighboring states. We are very concerned that if we don’t do what we need to do, if we don’t make serious commitments to our entrepreneurs here, they will be forced to start startups and other states that offer greater early stage capital opportunities.”

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The $105 million fund would be provided to five established Michigan-based nonprofit early-stage evergreen funds, which would then invest the funding in startups. The coalition includes Ann Arbor Spark, Detroit-based ID Ventures (the venture capital program of Invest Detroit), the Michigan State University Research Foundation, University of Michigan Accelerate Blue Fund and the Biosciences Research and Commercialization Center of Western Michigan University.

In her 2024 State of the State address, Governor Gretchen Whitmer called for $60 million in the budget to be put toward a Michigan startup fund.

“With this, we can launch hundreds of new scalable Michigan-based startups and create thousands of jobs. We can build an ecosystem for innovation here in Michigan,” Whitmer told the Democratic-led House and Senate budget committees in February.

Farhat told Crain’s that the $105 million proposal is the same as the $60 million Whitmer is seeking, but $45 million larger.

“The reason we’re proposing a higher dollar is because we believe that this program has a huge affinity for people to benefit. So we want to invest as much as we can, as much as possible for these funds and to the entrepreneur ecosystem,” Farhat said. “The only difference is the dollar amount.”

Funding for the Michigan Innovation Fund “will not impact the general fund but rather re-direct returns for the Venture Michigan Funds I and II,” the news release said. “The VMF has seen recent returns equaling more than $100 million and the bills call for the state to redirect $105 million in VMF funding for the Michigan Innovation Fund this year as well as dedicate future returns to the Innovation Fund.”

The fund would reach evergreen status, meaning that the exit returns will be continuously reinvested into Michigan startups for perpetuity and that the fund is operationally self-sustaining.

The recommended disbursement of the Michigan Innovation Fund includes 85% to support the state’s existing evergreen-focused funds to support long-term sustainability goals. The funds would be required to allocate at least 80% for financial investments in startup companies but could use up to 20% for admin/operations and programming, including technical assistance, coaching and mentoring.

The other 15% is recommended to be allocated to support ecosystem organizations that provide programming, technical assistance, or other support to promote the growth and development of startup companies, founders and funds to support an innovation ecosystem in this state, according to the ID Ventures website.

For every $149 of academic research expenditures in Michigan, there is $1 of VC investment. In California, the ratio is $7 of academic research expenditures to $1 of VC, according to data from UM Innovation Partnerships.

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