MACKINAC ISLAND, Mich.–(BUSINESS WIRE)–May 30, 2003–

Plan is Modeled After Oklahoma’s Early Stage Venture Capital Fund

The Michigan Venture Capital Association today announced it is working with Lansing legislators to formulate a new bill to establish a $150 million venture capital fund for investment by Michigan’s VCs in state-based businesses that are in information technology, alternative energy, life sciences and advanced manufacturing.

The plan was unveiled by a panel of leading venture capitalists here at the annual Detroit Regional Chamber Leadership Policy Conference. The bill is now being drafted in Lansing and will be sponsored by Senator Michael Bishop, Republican of Oakland County. It will ask the state’s legislators to approved tax credits that the VCs can use to support loans for start up and early-stage companies. No investment will be sought from the state.

“The tax credits will be used only to back up the loans made to the new fund by banks and other financial firms,” said Dick Eidswick, president of the MVCA and managing partner of Arbor Partners in Ann Arbor. “VC firms have an average annual return of more than 20 percent and if we provide that return, the tax credits will never be used,” he pointed out.

Eidswick said the intent of the new bill will be to create investment in high-risk, high-yield companies that are either start-ups or early-stage. The Fund would provide money to VC firms that in turn would invest in companies in their areas of specialization such as technology, life sciences, manufacturing and alternative energy sources.

Since the legislation will not be introduced for some time yet, it is expected that — if approved by legislators — the fund would become operable next year. The plan being developed is like the highly successful Oklahoma Early Stage Venture Capital Fund, a 10-year-old fund that has provided an average annual return of 22 percent.

Michigan lags other states in the Midwest in terms of the amount of venture capital that is available. Michigan has some $600 million already under management while other states such as Ohio and Illinois have two to six times that amount.