*This conversation aired August 3, 2022*
Patrick Center: Wednesday afternoon, time for our bimonthly conversation with MiBiz senior writer Mark Sanchez. Grand Rapids’ new community transformation fund becoming the model in Denver. Explain the dynamics.
Mark Sanchez: It conjures up the old line of the Arlo Guthrie song, “Two’s a Trend, Three’s a Movement” - they will make it three here pretty soon with a new community transformation fund. This was the investment fund for here in Grand Rapids a few years ago to invest in minority owned businesses and minority entrepreneurs. Why? Because as Birgit Klohs who used to run The Right Place here in Grand Rapids would explain, there's a need to diversify the economy and the economy needs to work for everybody. So if you look at the data per venture capital, a very small percentage of the venture capital in America flows to minority owned businesses by diverse founders. So this community transformation fund that was started here in Grand Rapids aims to raise 25 million dollars, it has about 10 million dollars committed so far. Part of this fund, one of the early backers of it was Bank of America. Bank of America provided Consumer’s Energy Foundation some seed funding as well as made an early investment. And out of that Bank of America touted this model in Grand Rapids. So there were other folks around the country who were talking about doing something similar, this is 2020 when DEI really was coming more and more public consciousness with the tragedy in Minnesota. So there were some connection made between Grand Rapids and Denver. Folks met and now what has resulted is the launch here a couple of weeks back of the new community transformation fund Denver. It looks to raise 50 million dollars there to do the same thing in Denver that occurred here in Grand Rapids and the folks at the fund tell me they are having conversations with their peers in other cities. They wouldn't identify where, but in the past week they talked to folks in Miami, Sacramento, California and elsewhere. And they believe that hopefully within the next couple of years they could have perhaps 10 or more other funds doing very similar work. Replicating that business model that was pioneered here in Grand Rapids and other communities across the country.
PC: What is working. Why is it being replicated?
MS: A greater public consciousness. Again, a small percentage of the venture capital invested in this nation goes to minority owned, minority led start-up companies. And the thinking again is the economy needs to work for everybody. We need greater diversity. So how do you do that? You first get capital flowing to support to more start-up businesses. And the thinking is also if you're not looking at this particular area of start-up companies led by minorities, you're missing investment opportunities. You miss the business opportunities. There's also the need to create more diversity among the people, the professionals, who work in venture capital. You are seeing this movement across the country of more venture capital funds, more investment funds, here toward creating greater diversity in the economy.
PC: We're talking with MiBiz senior writer Mark Sanchez, venture capital investments in Michigan. We're seeing a study that's out showing the growth and it is record growth.
MS: Yeah. This is an annual report that comes out a little later this year and they changed the format a little bit from the Michigan Venture Capital Association. The numbers bottom line is almost 1.4 billion dollars put into a 150 pod companies last year. This was by 1.4 billion dollars by michigan-based venture capital firms How does that compare? Well, it was about the same number of deals. But 950 million dollars last year. So there's a lot more capital flowing assets under management grew significantly from 4.4 billion to 5.4 billion. The report shows we're seeing again, more outside capital flowing in the mission. These are honestly venture firms that say, “Hey, I see a deal of a michigan-based startup. I’d like to get in on that.” Last year, there are 364 million dollars crossed 40 deals. Put into Michigan-based startups by out of state firms. That's about the same of 2019, but the industry didn’t kind of have that issue in 2020, and lingering a little bit into 21 of the pandemic. So bottom line is that this industry continues to grow in Michigan, continues to gain traction, as we quote from the report and from the gentleman who runs the venture capital association, who says straight out, “Michigan, not a flyover state” And that the term flyover state that’s been really used in the Midwest and a lot of venture capital investments in America occurs on the coast: West Coast, Los Angeles, the Bay Area, New York, Boston on the East Coast, and so the Midwest is always, for years and generations, the flyover, where those investors flew over the region. Not the case anymore. There's a lot more activity going on in the Midwest, over all, and the Great Lakes and those of thick fog on the coast to look to the Midwest in Michigan these days for deals.
PC: East Coast, West Coast. Midwest. Business takes place everywhere. And the pandemic impacted everyone. We're not quite through the COVID-19 pandemic. In some ways it feels like we are, but we know that we're not because there's been mitigation and vaccines and everything else. But there were early on laws that were passed and some of those laws are now going to be stripped away pertaining to the pandemic and business liability.
MS: Yeah, very simply. Remember back when it was two years ago, and we were in the heat of this thing or even late last year, or earlier this year when we had that wave that really filled the hospital. And you’re right, we're learning to live with this thing. This is still out there. It's still making people sick. It's still killing people. But we have vaccines, we know how to deal with it much better. We have, you know, medical treatments that are advanced. Early in the pandemic, back in 2020, the Legislature and the governor signed bills. The Legislature passed and the governor signed a bill that basically was providing some liability protections to businesses. i.e. if an employee contracted the virus at work or somebody comes into your store and contracted the virus, as long as you are following all the state and federal guidelines and rules, you have liability protections for all employees. If you tested positive and were sick, stay home. And employees and employers could not take action or punishment or retribution or whatever against employees who stay home because they believe they were sick. These were all passed in the 3 bills there in 2020, but about a month ago, the Legislature voted by very wide margins. A couple of them passed unanimously in both the House and the state senate, basically repealing these bills. They are repealed as of July 1, 2023 and no longer provide, what now those liability protections for any claim, or infection, that somebody believes they got at work or in somebody's business, that occurred after July 1, 2022. So, just one more area where again, we're learning to live with this thing and now we see those laws that were passed 2 years ago now being updated and outright repealed.
PC: And that is senior writer, Mark Sanchez. Thank you so much.
