The build-out of West Michigan’s nascent startup and entrepreneurial support network will be a marathon, not a sprint.
According to Amway scion Rick DeVos, the CEO of the $15 million early-stage venture capital fund Start Garden LLC in Grand Rapids, it can take up to 20 years before a region hits the “virtuous cycle” needed for companies and other stakeholders to cash out and reinvest in other startups.
“We’re a few years into this thing,” DeVos said of his and others’ efforts to bolster the West Michigan entrepreneurial support network.
DeVos spoke with MiBiz in an exclusive interview this month at the Mackinac Policy Conference, where he participated in a panel discussion on the growth of the Internet of Things.
“It will take startups getting to a scale where they’re self-sustaining businesses or they’re exiting via acquisition, or somehow an IPO,” he said of what is needed for the West Michigan region to mature to the point where startup technology firms can thrive. “That’s when you know the cycle has kind of been completed. Once that happens, those resources — both financial and intellectual — can be cycled back into the ecosystem and push that virtuous cycle faster.”
DeVos and others who aim to bolster the support network available to entrepreneurs in West Michigan have been working to speed up the time it takes to hit that cycle.
As MiBiz reported this spring, the city of Grand Rapids selected SG Ecosystem Inc., a nonprofit affiliate of Start Garden, to begin administering its SmartZone, a public-private tax increment financing (TIF) mechanism aimed at growing startup ventures in the region. The affiliate took over a number of services that had previously been managed by Grand Valley State University and the now-defunct Emerge West Michigan.
The one-year, $725,000 contract between Start Garden and the city began on April 1, 2016.
Since MiBiz broke news of the plans to have Start Garden take over the regional entrepreneurial support network last October, sources at the organization have said their goals hinged on better streamlining services and programming under one roof.
DeVos, who previously had not spoken publicly on the deal, agreed with that assessment.
“It’s about breaking down those silos and trying to build a culture where companies are more and more willing to look outside of themselves to other existing, operating businesses,” DeVos said. “This whole sea change that’s going through, it’s going to require lifting your head up … much more than times past.”
Start Garden executives say they’re still determining what types of programming and “platforms” the new entity will offer.
However, Mike Morin, COO of Start Garden and director at Seamless Accelerator, an Internet of Things-focused startup accelerator, said that much of the organization’s role will be focused on analyzing metrics of the entrepreneurial ecosystem.
“Historically, we’ve viewed activity within the ecosystem as a proxy for actual startup health,” Morin said. “We have the technology and means to know where a startup was last month. (But) where is it this month and where is it next month?”
According to Morin, focusing on the metrics and digging deeper into where the companies stand in the broader marketplace allows Start Garden to be very strategic about how it allocates resources.
“We get that not all of these are going to succeed,” Morin said of area startup companies. “Part of a healthy ecosystem is a level of healthy churn. The amount of that resource that exists is not unlimited. We need to continue to have an ecosystem that helps focus … on the things that have the best chance of success.”
While it could be years before the region reaches the exits DeVos mentioned, the stakeholders involved in the delivery of entrepreneur services say there’s plenty of work to accomplish in the short to mid-term.
At present, the partners say they’re focused on luring additional capital resources to the region.
“It’s all about capital accumulation, and when I say that, I don’t (just) mean money,” Morin said. “Look at when you see financial, intellectual and social capital growing: That means you’re winning. It’s about talent attraction, landing new customers.
“At least in the startup community, that’s what we’ll be attempting to measure and to understand how different forms of capital are aggregating around those businesses.”
While Morin said multiple factors are required to propel the region’s entrepreneurs forward, he acknowledges the ecosystem’s primary need is more financial capital at this point in the cycle.
“The social capital we’re doing great on and gaining ground,” he said. “Financial capital, we’re still a little light.”