Thanks to a new statewide program, entrepreneurs like Greg Northrup have had at least some relief with their legal expense bills.
“It’s $10,000 I didn’t have to find elsewhere,” said Northrup, who 14 month ago founded Sustainable Partners LLC, an alternative energy firm.
The Grand Rapids company, which develops systems that turn agricultural biomass into energy, is among those that benefitted from free legal services that Varnum LLP offers to support startup and young companies that want to grow to the next stage.
Known as MiSpringboard, Varnum’s effort is part of Pure Michigan Business Connect, an $8 billion, public-private initiative that Gov. Rick Snyder launched in June 2011 to get Michigan businesses doing more business with Michigan businesses as the state recovered from the recession.
As part of the program, the Grand Rapids-based law firm pledged to provide $1 million over five years in free legal services and advice to eligible companies. Companies accepted into the program receive at least $2,500 in services, or 10 hours of service. The law firm – which has offices in Grand Rapids, Kalamazoo, Grand Haven, Lansing and Novi – determines the maximum amount on a case-by-case basis.
Through July, Varnum provided about $200,000 in free legal services to 34 companies statewide. The firm received 50 applications to the program. Services range from doing articles of incorporation and investor agreements to working out terms and conditions of vendor and customer contracts and negotiating real estate leases.
Perhaps as important to Sustainable Partners as the free legal services was the validation the company received when it was accepted into MiSpringboard. Participants have to meet eligibility requirements that include an analysis of their business plan.
That validation helped when Northrup was seeking to raise capital because the company’s business plan had been vetted by a third party.
“When we talk to investors, they look at that and say, ‘These guys are serious,’” said Northrup, who found the advice received during the vetting process was invaluable.
“They helped give me the confidence that what I and my partner were doing made sense,” he said. “It’s a whole different benefit that comes out of the discussion process.”
Varnum was an original partner and is the one of several Michigan companies involved in Pure Michigan Business Connect, a product of Gov. Snyder’s effort to “reinvent Michigan” by providing more support to startup and existing companies, a practice known as “economic gardening.”
The law firm was already looking to make “some kind of big give” that it could do beyond traditional pro-bono legal work, said Scott Hill, a corporate attorney and partner at Varnum who leads MiSpringboard. As the Michigan Economic Development Corp. began pushing the idea of economic gardening, the firm decided on a program to provide free legal work to entrepreneurs up to a certain level.
“There’s a process of entrepreneurship that happens and there’s mountains to go over,” Hill said. “Our goal is to help them move their process along.”
Varnum is one of several participants large and small in the state’s Pure Michigan Business Connect initiative. Others include:
• Huntington Bank committed $2 billion to small business lending over four years. The bank said in late June it had surpassed $1.5 billion in loans made to about 2,500 companies since the program was launched a year earlier.
• Fifth Third Bank joined the effort in November with a $2.5 billion lending commitment.
• Law firm Platcha, Murphy & Associates in Grand Rapids agreed to donate $125,000 annually for four years in legal services to businesses.
• DTE Energy pledged to shift $750 million in spending to Michigan suppliers over five years. The electric and gas utility, in recently releasing quarterly results, said it has spent $346 million on Michigan-based suppliers through June and has targeted spending $575 million in 2012 under the initiative.
• Consumers Energy Co. pledged to increase spending on business contracts with Michigan companies by $250 million over five years.
• The latest entry in Pure Michigan Business Connect is accounting firm Rehmann, which this month pledged to provide $200,000 in free services over five years to entrepreneurs. The firm has 12 offices across the state, including Grand Rapids and Muskegon. Each participant chosen will get 20 hours of free service and counseling.
“We really wanted to demonstrate that we believe in Michigan,” said Mary McCune, a principal at the firm who heads practice development and client relations. “If we can help new businesses grow and gain some momentum, it will help all of our existing clients.”
While the firm is committed to the philanthropic nature of the program, there is a business development aspect as well, McCune said. Rehmann hopes that some of the companies it helps can become permanent clients, she said.
“That’s the gravy,” McCune said.
At Varnum, five of the companies accepted into MiSpringboard have since become paying clients, Hill said.
That includes Sustainable Partners, which has spent “significantly more” with Varnum than the $10,000 in legal services it received at no cost, Northrup said.
Now more than a year into MiSpringboard, Varnum is working to evolve the initiative into what Hill calls “2.0,” or “how we make MiSpringboard better.”
The law firm is working to network more and refer MiSpringboard clients to organizations that support entrepreneurism – such as to the Michigan Small Business Development & Technology Center, Grand Rapids Opportunities for Women, Start Garden and local business incubators. Varnum is also refining its focus to better “find those businesses that have the ability to grow,” Hill said.
The first year of the initiative has brought some internal lessons for Varnum as well, Hill said. Attorneys involved in the project and working with entrepreneurs have “caught the fever,” Hill said.
“We hoped we would learn how to deliver services better and more efficiently and we have done that,” he said. “What we underestimated was the amount of energy picked up that we get from these entrepreneurs.”