Renaissance Venture Capital Fund, an Ann Arbor, MI-based fund-of-funds, has racked up another $81 million after closing its third capital round last week.
The firm has raised a total of $205 million since it was established in 2008, says CEO and fund manager Chris Rizik.
Renaissance invests in VC funds across the country in order to help introduce them to Michigan’s startup ecosystem and its homegrown investment opportunities. Then Renaissance takes that engagement a step further by connecting those funds and their portfolio startups with corporations in search of innovation and new technologies.
“People that took a chance on Michigan nine years ago [Fund I] and five years ago [Fund II] have been rewarded,” Rizik explains. “[Fund III] is a validation that what we’re doing is helpful and we’ve done what we said we were going to do. Our whole thesis is that Michigan is underserved and there are real opportunities here for national VC funds.”
Rizik says two-thirds of the funds Renaissance has invested in had never done any deals in Michigan, and 90 percent of the funds Renaissance has backed have gone on to invest in Michigan companies. “We’re kind of a hidden gem in a lot of ways,” he adds. “We’re seeing investors come back repeatedly.”
The tens of millions of dollars that Renaissance has deployed from its first two funds has helped attract $1.3 billion back to the state, Rizik says. Renaissance has invested in more than 30 VC firms around the country, which he credits as sparking the emergence of 39 Michigan startups with a workforce of about 1,300 employees.
Ann Arbor, which is the state’s most established innovation cluster, is still the biggest draw for out-of-state VCs, Rizik says, but he predicts Grand Rapids is going to be hot in the near future. Detroit’s startup ecosystem is not growing as quickly as it was five years ago, he concedes, but is still stronger than it was nine years ago.
“The good news is that it’s not just Ann Arbor—we’re seeing interesting companies across the state get funding,” Rizik says. Sector-wise, biotech and IT are strong, he says, with cybersecurity, tech-enabled supply chain, and mobility companies on the upswing, thanks in part to Silicon Valley delivering a jolt to the auto industry as companies compete to develop autonomous vehicles.
“Ten years ago, it was tough to get out-of-state funds looking at Michigan, but there’s been enough success that the Midwest is now seen as an important growth area,” he adds.
Michigan’s venture capital community grew exponentially in the past decade after the state established and seeded investment funds. (Renaissance was formed by Business Leaders for Michigan, a private nonprofit made up of executives from the state’s largest companies and universities.) Those state-supported funds have since deployed their capital.
Michigan’s current governor, Rick Snyder, is a former venture investor who worked with Rizik before entering politics. Snyder has helped open doors for the industry, but his final term ends this year. I ask Rizik if new leadership will change the state’s VC outlook.
“It’s always been precarious here in Michigan,” he says. “We’ve never reached the point where things are running so smoothly that leadership doesn’t matter. The state has played an important role in [strengthening the VC ecosystem]. If we have leadership that doesn’t believe in it or doesn’t want to do it anymore, it will definitely affect us. We’re not established enough to run on our own without state support where there are gaps.”
The 2017 annual report released last month by the Michigan Venture Capital Association illustrated part of the story for the state’s VC ecosystem, Rizik maintains, but not the whole picture.
“Last year was a really good year for out-of-state venture capital in Michigan,” he says. “In-state venture capital was down, but total capital was up. The warning bells about in-state capital are true, and a lot of us worry we’ll need strong Michigan VC funds to keep growing, but the national reports say Michigan is still on the rise.”
Renaissance has developed a number of strategies over the past decade for drawing VCs to Michigan, such as hosting match-making events and distributing “hot lists” of 50-plus local startups ripe for investment. Rizik says other regions have been calling on his firm for guidance on how they might replicate its success. Cincinnati and Houston are two places where Renaissance has worked with local VCs to boost the ecosystem.
“We’ve open-sourced our model,” he says. “We share networks and deal flow with the idea that more funds in the middle of the country are better for all of us.”
