By John Bebow - August 1, 2008
Lost in all the scandal news this week was an important new economic development tool announced by Gov. Jennifer Granholm.
The new Invest Michigan program will take $300 million from the pension fund piggybank for state retirees and use it to provide venture capital for small- and medium-sized companies that are growing and expanding in Michigan.
It's an approach much in line with strategies for entrepreneurialism, economic diversification and expanded venture capital resources outlined by the 1,800 community conversations participants to date in the Michigan's Defining Moment Public Engagement Campaign.
Using pension and other public dollars as an economic stimulus is also an increasingly common tactic used by other states in which Michigan is often in competition. Examples:
As the Detroit Free Press editorialized earlier this year, such public investment strategy comes with potential pitfalls: "Home-state investments need evaluation by a truly independent third party who will not be subject to accusations of political favoritism and who will not be swayed by home-state boosterism that might interfere with clear-eyed decision-making."
Granholm answered that concern by assembling a top-notch, bipartisan Business Leadership Council to manage the new venture funding. The council includes:
- Jon Barfield, chairman and president, The Bartech Group
- John Brown, chairman, Stryker Corporation
- Ben Carter, executive vice president and chief operating officer, Detroit Medical Center
- Dan Gilbert, chairman, Quicken Loans, Inc.
- James Hackett, president and chief executive officer, Steelcase, Inc.
- Jim Herbert, chairman and chief executive officer, Neogen Corporation
- George Jackson, president and chief executive officer, Detroit Economic Growth Corporation
- Thomas Kinnear, Ross School of Business, University of Michigan
- Josh Linkner, founder and chief executive officer, ePrize, LLC
- Andrew Liveris, chairman and chief executive officer, Dow Chemical Co.
- Mark Murray, president, Meijer, Inc.
- Bob Naftaly, former chief operating officer, BCBS
- Roger Penske, chairman and chief executive officer, Penske Corp.
- Rich Peters, managing director, Transportation Resource Partners
- Mary Petrovich, chief executive officer, AxleTech International
- Sandra Pierce, president and chief executive officer, Charter One Bank (Michigan and Indiana)
- Rebecca Smith, East Michigan regional president, Huntington National Bank
- Ken Whipple, chairman, CMS Energy.
Here's the dark cloud in the announcement... Instead of concentrating on the significant public policy and business issues this kind of venture capital strategy provokes, the Free Press manipulated the press announcement of the fund to wrangle Penske into talking about the Kwame Kilpatrick mess. It was just one more example in a mountain of anecdotes about the overwhelming negativity and distraction surrounding the mayor and the equally scandal-plagued Detroit City Council.
4 Comments
Why should the state become involved in the venture capital business?
If private venture capital firms (and other private financing sources) have decided to not invest in these companies, what makes the state think it knows better?
If the subsidized firms haven't exhausted all potential sources of private funding, why not?
Do they just see the state as a big pile of cash that's easier to tap into?
Because other states are willing to risk public employee pension dollars this way, does not necessarily mean it's a worthwhile idea.
As a taxpayer, I know full well I'll be asked to cover any pension-fund damage caused by this foray into the venture capital business.
The state would achieve better results by providing an improved business climate through reduced taxes and regulation; and then just staying out of the way!
Where are the venture capital experts on the advisory panel. The effort appears more for public/political relations than for economic development - even the name of the program "Invest Michigan!" doesn't use correct grammar, an increasingly common phenomenon in our "PR" world.
What is this "Leadership Council" going to do? What are the specific goals? Who will they be assisting, themselves?
I can tell you, based on the private business owners I work with every day, there is NO FUNDING available for distressed firms in Michigan. We spend more than half of our time contacting sources outside the state for our clients, because there are no longer any sources in Michigan. Even the out of state firms that used to be helpful have pulled out because they feel there is no support for them to attempt to help distressed firms here.
Why doesn't the governor set up a distressed business fund? That sort of organization would be more to the point than this hooye of a council.
Give businesses a shot at a simple $50,000 or $100,000 line of credit. A few million dollars could fund hundreds of businesses and save thousands of jobs. Those jobs are going away otherwise. Some of the companies that are still afloat could make a go of it now, with a little cash flow assistance.
If anyone wants a list I can give you a list of firms to address, contact me.
I think this idea is one of many long term plans that could help re-create the future of Michigan. Investing in ourselves is critical to turning this economy and the negative mentality that supports it around.
However, we need to think much broader and much more long term than helping the "next hot start up". Last week the Wall Street Journal ran a special edition on successful regional economic development. They selected seven cities in the world to focus on and our own Kalamazoo, Michigan was right there on the cover!( Hat's off! Kalamazoo!)/. Thanks to the long term thinking and generosity that created the Kalamazoo Promise, that region is attracting new business. But far more important to our future than the average run of the mill tax break or venture capital start up fund, the reason for the growth is directly tied to the promise of education and the ability of this draw to bring in families that are focused on the values that will sustain true economic investment and long term capital development.
While I commend the Governor and legislature for having the confidence to invest in new business, I believe our State would boom if we could figure out how to take the model of Kalamazoo and create the Michigan Promise.
Now that would be an investment!
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