As a venture capitalist in sunny (and smug) Santa Monica, who happened to often travel to Michigan, I'd heard every possible joke and put-down about the Michigan economy (you know, how it's cheaper to buy a foreclosed house in Detroit than a decent used car, but at least you can live in the car if you have to, ha ha ha.) Well, I'm not laughing any more. This summer, I decided to move my wife and three little kids away from the sunny beaches and new media millionaires of Southern California to -- you guessed it -- Michigan.
Yup, we bought a one-way ticket to Michigan. Five of them, actually.
What was I thinking? Don't worry, you're not the first to ask. For several months I've been explaining my decision to friends, family and work colleagues. Why walk away from good weather and a sweet gig investing in new media companies for a cold, Rust Belt state that's been hemorrhaging jobs and hope for decades?
Quite simply, because I believe it's a hell of an opportunity -- despite the jokes, the put-downs, or the perceptions of Detroit as a lost city -- I wouldn't be moving to Michigan if I didn't.
The opportunity does not lie in saving General Motors, rather in giving primarily non-automotive related entrepreneurs and technologists the capital and market access to enable their companies to achieve their fullest potential. Knowledge-based and high-growth sectors like clean tech, life sciences and health care are perfectly suited for Michigan's deep engineering, research and advance manufacturing base (a welcome legacy of the automotive industry), not to mention the ample natural resources of the state, notably fresh water, wind currents, vast forests and agricultural lands - valuable assets for a "greening" U.S. and global economy.
Yes, the current economic situation stinks, but Michigan has a lot to work with, namely a hard-working, well-trained labor force, an infectious local pride, and a united desire to make things better. History has shown us numerous times that desperation and misery are often the muses of creativity and innovation. Michigan has the misery bit nailed, and I'm betting that the innovation will indeed follow - I see it in the entrepreneurs I have the honor to work with every day. We just need more of it.
Though it is indisputable that Michigan's economy been kicked in the proverbial groin, the upshot is that the state's culture of entrepreneurship has gotten a much-needed kick in the pants as a result. Some of America's historically most successful companies were created by Michigan entrepreneurs. Everyone knows about Henry Ford and the great run many Detroit businesses had with the auto industry, but Michigan spawned other global success stories as well, such as Dow Chemical, Kellogg's and Whirlpool. But in hindsight, this historic success was a bit of a curse for entrepreneurship in the state.
For several generations in the latter half of the 20th century, it took an inspired Michigander to assume the opportunity costs of starting an entrepreneurial venture rather than joining the local assembly-line workforce or simply going to work for someone else. Confronting the entrepreneurial risks typically experienced in launching a new venture, or simply making the decision to work much more than 40 hours a week creating a new business, were options that were easily dismissed when a comfortable middle-class lifestyle awaited those willing to simply work for someone else.
Clearly, this middle-class "nirvana" has not proven to be eternal and even feels like Hell to some at present, as many of Michigan's largest employers have downsized or disappeared all together. But the silver lining to this dark cloud may be that the current economic environment is forcing Michiganders to find their inner-entrepreneur once again. We receive scores of business plans each week from Michiganders applying their world class engineering skills or research abilities to new, rapidly growing markets. The turnaround of the Michigan economy will not occur overnight; however, the challenges brought by the current economic crisis are inspiring an entrepreneurial surge that I expect will engender a long term, diversified and sustainable rebirth of the economy.
I'd like to get into more details in future posts, but my hope here is to start a dialogue: tell me about your ideas to rebuild and re-energize the Michigan economy, or even more broadly, the Rust Belt economies. Tell me about your company, your innovation, your product, your town. Though my firm invests in a variety of sectors, we are focusing our Michigan efforts on clean technology and health care. We feel the best opportunities are there, and the dealflow of our first year seems to have verified our gut instincts. But we could be wrong. See, I'm going against the grain yet again - a VC that admits to not having all of the answers!
I do sincerely welcome your views. Just do me a favor and keep the Michigan jokes to yourself. As if putting up with the Detroit Lions isn't enough, there's just nothing funny about 15% unemployment. However, if you've heard any good California jokes, I'm all ears...
Jeff Bocan is a Managing Director at Beringea, LLC, a global venture capital firm which manages the Invest Michigan! Growth Capital Fund, amongst others.