rss icon

Sunday, 25 October 2015 22:00

Start Garden, Emerge West Michigan explore merger

Written by 
Rate this item
(4 votes)

GRAND RAPIDS — Early-stage venture capital firm Start Garden LLC and Emerge West Michigan, a public-private partnership focused on services for entrepreneurs in 13 counties, are exploring a merger, MiBiz has learned.

While the process remains in the early stages, a merger of the two organizations — one a $15 million venture capital firm started by Amway scion Rick DeVos, the other a nonprofit operated largely by Grand Valley State University with public and private funding — would offer a number of synergies, said Craig Hall, vice chair of the board for Emerge West Michigan.

The goal of the possible merger: growing and streamlining services for the community of entrepreneurs and startups in West Michigan, which stakeholders had been clamoring for in recent years, he said.

“The partnership is to be able to create more focus on the ecosystem,” Hall said. “It’s a little confusing with all the programs, and part of the mission is to add clarity. … There’s too much synergy and potential not to explore these opportunities.”

Emerge West Michigan bills itself as the “go-to resource for early-stage entrepreneurship support in West Michigan.” The nonprofit currently includes five main programs:

  • A web portal linking to entrepreneurial support organizations in the 13-county region
  • Mentor Connect, a network of senior executives who advise startup businesses
  • Emerge Incubate, previously known as GR Current, which manages business incubator space at Grand Valley State University’s Cook-DeVos Center for Health Sciences
  • 5x5 Night, a business pitch competition originally started by Rick DeVos that preceded Start Garden
  • Emerge Xcelerate, an early-stage business accelerator for startup companies that includes funding, services and mentoring and that culminates in a Demo Day for entrepreneurs to present their ideas to investors.


STREAMLINING SERVICES

If the plan goes through, the two merged entities would most likely be called Start Garden and host the “ecosystem cultivating efforts” that both organizations had previously offered, according to a memo obtained by MiBiz.

Hall said the parties continue to discuss the corporate structure of the new organization, but one likely outcome would be to have a nonprofit parent with Start Garden continuing as a for-profit venture capital firm underneath it.

An attorney MiBiz spoke with said this would most likely be done for tax purposes as it could allow for invested funds to go into a pool that could be used for investment down the road, as opposed to returning capital directly to investors.

While the memo did not spell out a timeline for the merger to be completed, stakeholders involved in the discussions said more information would begin to emerge over the next 60 to 90 days.

Under a merger, Start Garden would become directly connected to many of the other entrepreneurial support systems and economic development programs available to startups, sources said.

The various support programs have worked collaboratively for the last few years, said Mike Morin, who’s in portfolio relations at Start Garden, which lists GVSU and GR Current as sponsors.

By having a single point of access for entrepreneurs under the merged organization, Start Garden and its other affiliates can help to break down barriers to access for entrepreneurs, particularly in terms of their ability to obtain capital, he said.

“It’s about innovation as a culture in the community,” Morin said of the drivers behind the possible merger. “The type of innovation that comes from startups … tends to be a little more radical and disruptive than the type of innovation that comes from within an enterprise.

It’s really more about having a balanced approach to innovation in the region than it is about startups versus enterprise or even job creation, per se. I think it’s safe to say that if we have a high level of innovation happening in the region, it’s a good indicator for things like job growth.”

COMMON GROUND

Like Emerge, Start Garden also offers a membership-driven office space for entrepreneurs at its headquarters at 40 Pearl St. in downtown Grand Rapids, where a new entity would likely be based. Start Garden also provides startups with connections to mentors from successful companies in West Michigan. As well, the venture capital fund runs the tech-based Seamless Accelerator, for which Morin serves as director.

Programs such as the former GR Current, an incubator for early-stage technology and biomedical companies that houses the Grand Rapids SmartZone, a tax incremental financing district, would also most likely fall under the Start Garden banner, according to sources familiar with the plans.

The city-run Local Development Finance Authority (LDFA) administers the SmartZone and provides funds to various Emerge West Michigan programs, including GR Current, Mentor Connect and Xcelerate.

According to Kara Wood, the city’s economic development director, the LDFA has discussed redrawing the boundaries of the SmartZone district to include Start Garden’s office. The LDFA also would be able to contract directly with the potentially merged entity for programs that align with the public agency’s goals.

“At the core of the SmartZone mission is science and technology jobs,” Wood said. “There will be a thorough analysis of what appropriate programming will be. Our ecosystem has matured in the last five years, and it’s a great time to analyze the services we provide.”

The LDFA’s 2016 fiscal year budget for “science and technology initiatives” totals $1.68 million, including about $1.5 million in funding for various Emerge and GVSU entities. The majority of those funds come from tax increment financing.

SEEDING INNOVATION

Any newly merged organization could still receive LDFA funds as long as they would be used for public purposes, according to a local municipal attorney who asked not to be identified. However, what constitutes a public purpose is very broad and typically gets left up to individual municipalities to define, the attorney said.

The potential change in the administration of the SmartZone would mark the second time in the last three years that the service delivery model has been realigned. In 2012, the LDFA sought a new administrator for the SmartZone program with the goal of increasing the “churn” rate of companies and establishing “better ROI from the life science companies that call the SmartZone home,” as MiBiz reported at the time.

When asked about the SmartZone’s performance over the last three years, Wood said, “We can always do better.”

The West Michigan region has had no shortage of business startup support agencies and programs over the years, and it’s common for communities to explore ways to better streamline them, said Phil Torrence, a partner focused on securities and corporate governance in the Kalamazoo office of law firm Honigman Schwartz Miller Cohn LLP. The potential merger of Start Garden and Emerge would help further enhance those business support systems, given that Grand Rapids doesn’t have a large pool of companies and investors like communities in Silicon Valley or Boston, he said.

“These type of ecosystems take decades to mature,” Torrence said. “As long as it advances the ball for these companies, it’s a good thing. Even if it needs to evolve over time, it’s still better than doing nothing.”

Read 4774 times Last modified on Monday, 26 October 2015 16:34

Breaking News

September 2018
S M T W T F S
26 27 28 29 30 31 1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 1 2 3 4 5 6

Follow MiBiz