New VC fund has life science tech focus

Michigan taxpayers are backing a new venture capital fund based in Grand Rapids that aims to invest in life sciences and technology start-ups.

In addition to the $6 million investment from the state’s 21st Century Jobs Fund, managed by the Michigan Economic Development Corp., Grand Valley State University is putting money into Michigan Accelerator Fund 1 LP.

Also providing financial or advisory support are Van Andel Research Institute, Hope River Ventures, West Michigan Science & Technology Initiative, Grand Angels, Michigan State University Foundation, The Right Place and Lakeshore Advantage.

Dale Grogan and John Kerschen, principals of The Charter Group, which is primarily a mergers and acquisitions firm, will manage MAF1.

Grogan said the goal is to raise at least $10 million and possibly as much as $15 million for the fund.

“Ten million is the minimum. We would like to do a lot more,” said Grogan, managing director of the firm that has some investment management experience in addition to mergers and acquisitions.

“That would give us the opportunity to make more investments and invest more per company. When you’re talking start-ups, capital is just the lifeblood of it.”

Grogan said that, like private venture capital firms, once MAF1 picks an investment, it will bring not only money but as many other resources as it can muster to make a successful, jobs-providing business out of the start-up.

That’s where the collaboration of all the partners will come in, he said, from GVSU and WMSTI research facilities to mentors-in-residence and advice from the regional economic development groups The Right Place and Lakeshore Advantage.

“We want to help start up companies, incubate them,” Grogan said. “We don’t want to spend a ton of rent — that’s why we’ve got incubators. We’re more interested in investing money into product development as compared to them paying rent.

“The Charter Group is just the tip of the iceberg. The whole approach of collaboration includes all these folks, the whole connected business community.”

The money must be invested in Michigan-based companies operating in one of the 21st Century Jobs Fund’s target industries: advanced manufacturing, alternative energy, homeland security and life science and health care, Grogan said, although MAF1 plans to concentrate in life sciences and health care.

Grogan said he and Charter Group partner John Kerschen expect to begin talking with start-ups before the end of the year, with the first investments coming in early 2011.

Linda Chamberlain, executive director of the Center for Entrepreneurship and Innovation at GVSU’s Seidman College of Business, said up to 10 GVSU students will be offered internships at The Charter Group for the first five years of MAF1’s 10-year lifespan. She said the request for proposal from the state emphasized participation by a university.

“We were able to work with The Charter Group as that partner for development of the proposal itself as well as building the collaboration around the proposal, as well as having the university be an investor,” Chamberlain said. She declined to reveal the amount GVSU is investing.

“(It) is a wonderful opportunity for students to understand the investment process, what is the process of due diligence of companies prior to investment as well as holding companies accountable to the investment dollars they receive. As well, we look at opportunities for faculty engagement and staff engagement with the fund as it is making decisions.”

Chamberlain said GVSU will supply expertise on three MAF1 advisory boards.

Grogan said that even though the Midwest attracts less than 6 percent of the nation’s venture capital, there are plenty of exciting start-ups in Michigan worthy of MAF1’s resources.

“It is important for folks to note that West Michigan has a mature, well-developed, good infrastructure for investment, not only at the start-up phase, but as companies tend to mature, this fund is really going to provide the continuum of capital that smaller companies need.”

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