Chris Holman, one of Lansing’s best-known civic leaders and entrepreneurs, says the new $6 million venture capital fund he's building has two main priorities. “The number one priority is to make money," he says. "The number two priority is to get these companies to locate here."
Holman’s endeavor is specifically aimed at launching small, technology-based firms in fields like IT, bio-science, homeland security, and advanced manufacturing—the kind of companies that will bring job growth and launch the Lansing region into the New Economy.
“We don’t say no to anyone,” Holman says, but “these high tech people are the kind who grow their employee base to grow in profit. That’s who we want to locate here. . . . Big business, big manufacturing, even in the best of times, wants to get smaller in the number of people [it employs],” Holman explains. “Small business has to add people to get bigger and make more money.”
Long known for his contributions to the community through his small business ventures and as the publisher of the
Greater Lansing Business Monthly, Holman says that the idea for the Lansing-based VC fund came while traveling around the state and emceeing various small business and entrepreneurial forums.
After watching entrepreneurs all around the state giving their “three minute elevator speeches in front of a room full of venture capitalists,” he decided Lansing was overdue for its own VC fund. “I was doing these things everywhere but mid-Michigan,” he says. “I came back and said, ‘There’s a couple of things we need to do.’”
Launching Lansing VCHolman’s first VC visit was to his friend Joe Reid, CEO at Lansing-based
Capitol Bancorp Limited. A friend and business associate, Holman says he trusted Reid to give him an honest assessment of his idea.
Holman went in saying “we need two things here,” he explains. “We need a venue in which these entrepreneurs, these small businesses, can actually put out their plan, to really demonstrate it to somebody. And then we need the capital for them to actually get.” Reid was enthusiastic.
According to Holman, the fund now has $6 million pledged, primarily through Capitol Bancorp. Holman is working to secure the final $2 million from private investors over the next six to eight months.
But Holman says the fund is prepared to take proposals now, having hired
North Coast Technology Investors out of Ann Arbor to help them navigate the terrain of high tech companies.
“We know investments. All of us are business guys; we know investment. But we don’t know this sector,” he says. North Coast has "a tremendous success record; they know how to value these [technology-based] companies.”
Early successesEven as the fund is ramping up, the first product of Holman's venture capital dream might already be at work. Just down the hall from Holman’s office, Dr. Wayne Bischoff has just started a new business, Maruisha Consultants, with some direct VC help from Holman himself.
Bischoff, whose company leverages the collective power of lots of diverse associations to get them better deals on needed products and services, is a study in the need for venture capital.
“This program would not being going right now if it wasn’t for venture capital helping us," says Bishcoff. "The lag time in developing this, and getting everyone to start working in the same direction, was such that we won’t see revenue for a year and half from the point that we started. Chris Holman has provided his venture capital, and so has the
Michigan Society of Association Executives. And with those two groups putting money in behind this, our company now represents a lot of associations.”
And the strategy seems to be working. Bischoff, after only nine months of operation, has 38 associations involved in his programs in the state of Michigan. “When you add up the buying leverage of those groups, it’s over 100,000 small businesses and about a million employees that we represent,” he says.
And even more importantly, its growing fast. “We gain two to five associations interested in this program every week. We have a ten percent growth rate per month right now,” says Bischoff. “This is the New Economy.”
Transition“I’ve been preaching for ten years that small business is the backbone of the economy,” says Holman. “But what we are finding now is that, as big business—and in particular manufacturing, and really in particular automotive manufacturing—shrinks, small business, arguably, is bringing forward 100% of the job growth in the state of Michigan. So when you see a headline that says one of the big automobile companies is laying off 2,000 employees, what isn’t in the story is that 500 small businesses opened and hired four employees each. That’s what’s different, and that’s what’s been propping up the economy.”
"The jobs of the future are going to come from the small business sector," agrees Kate Tykocki with
Capital Area Michigan Works. "The more we can diversify our local economy, the more opportunities we have to be succesful in the global market. Supporting entrepreneurial endeavors and focusing on knowledge economy jobs and companies will only strengthen the region."
One way to think about the transition is if tax abatements were perhaps the business attraction tools of choice for the industrial giants of the 20th century (think Big Three), perhaps VC is the business attraction tool for the small business innovation that will drive the 21st.
In that realm, there are certain areas that are particularly exciting, suggests Holman. “There’s a tremendous amount of energy in tech transfer,” he says, and
Michigan State University is leading the charge. “Tech transfer is simply getting research and development out of the R&D stage, and into marketable products.”
And that, he explains, is the heart and soul of venture capital.
“What’s between the R&D and the marketable product is usually the lack of money to get it done,” says Holman. “Our thought with this venture capital fund is to fill that void, and help those people with a valuable product get it to a product stage. That’s the principle of the whole thing.”
And increasingly, he suggests, it might also be about helping Michigan teach its young people to be more entrepreneurial. “We’ve got to start thinking that way. We’ve got to start them thinking, ‘I don’t want to work for someone else. I want people to work for me, damn it.’”
“We did that at one time,” he muses. “Henry Ford did that.”
Brad Garmon is the managing editor of Capital Gains.
Dave Trumpie is the managing photographer for Capital Gains. He is a freelance photographer and owner of Trumpie Photography.
Photos:
Chris Holman
Capital Bancorp
Dr. Wayne Bischoff of Maruisha Consultants
All Photographs © Dave Trumpie