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— Analysis —
Or so hopes David Brophy, a professor of finance at the University of Michigan's Ross School of Business and founder of the Michigan Growth Capital Symposium. With the decline of the U.S. auto industry taking its toll on Michigan, Brophy says the state's best hope for economic recovery may lie in technology startups. Rich with research universities including the University of Michigan, Michigan State and Wayne State University, Michigan also has a workforce trained in manufacturing, an asset for companies in alternative energy, life sciences and medical devices, Brophy says.
-- Browse related stories from this regional report -- Route 128 revisited Potholes, bioengineering and public money The marriage of theory and practice High hopes for high tech Meanwhile, the state is enticing manufacturers with tax incentives to build factories in Michigan. Venture capitalists have taken note. Silicon Valley's Vinod Khosla has backed three startups: Sakti3 Inc., an Ann Arbor developer of car batteries; EcoMotors International Inc., an engine designer in Troy; and Draths Corp., a chemicals company in Okemos. And Ann Arbor-based pharmaceuticals company Lycera Corp. raised a $36 million Series A from VCs all over the country. The Deal spoke with Brophy about Michigan's startup culture. The Deal: How does Michigan compare with other high-tech regions? David Brophy: We now face what Northern California and New England faced in the post-World War II period -- the need for new industry to replace the old and the need for entrepreneurial focus to accomplish it. When professor Fred Terman, provost of Stanford University in the late 1930s, saw the brain drain from Northern California to the Midwest, he led the university to encourage and support Stanford's graduate engineers and faculty to commercialize research from their labs. When William Shockley moved his invention, the semiconductor, to Palo Alto, he found a knowledge-based community ready to serve as a test bed for the team of eight engineers who became the drivers of Silicon Valley. Preparation and opportunity met and produced Silicon Valley. New England was devastated in the immediate postwar period when the Southern states passed right-to-work laws, which meant you could go to work in a factory and you didn't have to belong to a union. The leather goods and textile businesses in New England moved to the South virtually overnight, leaving a gap that was famously filled by the tech firms built on university research from Harvard and MIT that came to populate Route 128 around Boston. Michigan participated only modestly in this wave of high-tech development, concentrating instead on the automotive industry. It was, at the time, the strongest and best industry in the world -- and we thought it would stay that way forever. What does Michigan offer startups that other places don't? Along with a steady stream of research, we've got a rich pool of talent in tacit engineering skills here, ingrained practical manufacturing skills, based upon experience and engineering education. With an excellent quality of life, we are able to attract management talent from other parts of the country and retain our graduates at an increasing rate. How have other places that have tried to become the next Silicon Valley fared? While many regions have started out with the goal of being "the next Silicon Valley," only Route 128 around Boston has come close, and that region is only one-third the magnitude of Silicon Valley by most metrics. Others in the hunt include Austin, Texas; Boulder, Colo.; Minneapolis; New York City; San Diego; and Research Triangle in North Carolina, but all of these remain B-level spots, significantly behind the top two. The good news is that the more appropriate goal is being achieved, to build a knowledge-based industrial business community around research universities around the country to commercialize and build businesses spawned by government-supported R&D. What obstacles does Michigan face? Michigan lacks a strong set of financial institutions and will need to import skilled management in order to develop tech-based growth companies. The quality of Michigan's flow of research and university faculty and students can propel it past the communities named above to at least B-plus level if its universities interact with their alumni and local communities to bring their research to market through commercialization and offer a legitimate reason for faculty and students to stay and for managerial talent to gravitate to the state. Comments |
Move over, Motor City. Make room for Startup Central.
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There is hope for Michigan yet despite what Washington, Congress, and the Admininstration is doing to Detroit and the auto industry.