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Report: Ann Arbor leads Michigan in entrepreneurial resources

A new statewide guide to entrepreneurial resources shows that Ann Arbor easily tops other Michigan cities when it comes to funding opportunities and other support for startups.

The 2016 Michigan Entrepreneurial and Investment Landscape Guide was released recently by the Ann Arbor-based Michigan Venture Capital Association. The document features more than 140 profiles on venture capital firms, angel groups, support organizations, and service providers active in the state's entrepreneurial and investment scene.

Ann Arbor is particularly rich in resources, with more than half of the state's 44 venture capital firms based here, as well as two angel groups and 17 entrepreneurial support organizations.

"Washtenaw County by far leads the charge in resources that are available for entrepreneurs," says Maureen Miller Brosnan, executive director of the MVCA.

The area is one of the fastest-growing entrepreneurial communities in the state, Brosnan says, thanks in part to work coming out of the University of Michigan in high-tech and life science industries.

Launched last year, the annual guide and companion interactive map helps connect young companies to funding and leadership with a focused approach that Brosnan says wasn't available before.

"The guide was designed to fill that hole we were seeing," she says. "This is the quickest way for startups to find partners."

Another key market for the guide is out-of-state investors, to whom Brosnan says Michigan presents a "vitality" of entrepreneurial activity not seen in other parts of the country.

"For every $1 invested in Michigan startups, $4.31 comes in from out-of-state investors," she says. "We are really good at leading the charge with deals and able to acquire partners from outside the state of Michigan."

The full guide can be downloaded as a PDF from the MVCA website. Printed versions of the guide will be available at MVCA events, including the organization's upcoming 2016 awards dinner in November.
 

Delphinus Medical Technologies lands in larger HQ in Novi

Newer, bigger and better offices often come to startups that lock down a multi-million-dollar venture capital raises. Add Delphinus Medical Technologies to that list now that it has moved on up to a newer, bigger and better headquarters in Novi.

The biotech startup has called Plymouth its home for most of its five years. Then it landed one of the largest rounds of venture capital in Michigan history last fall. The $40 million Series C round (led by Farmington Hills-based Beringea) will go toward developing and selling its whole breast ultrasound system, growing its team and finding a bigger place to house that team. At 21,000 square feet, the company's new home in Novi is three times larger than its previous office in Plymouth.

"It's just a fabulous facility," says Mark Forchette, president and CEO of Delphinus Medical Technologies. "It has a great, inspiring cultural vibe to it."

Delphinus Medical Technologies is creating a new way to detect breast cancer utilizing technology spun out of Wayne State University and the Karmanos Cancer Institute. SoftVue is a whole breast ultrasound system that allows physicians to image the entire breast, including the chest wall. The technology platform incorporates a circular ultrasound transducer, producing cross-sectional ultrasound cross-sections through the entire volume of breast tissue. 

The new headquarters will provide more space for research and development of SoftVue. Delphinus Medical Technologies has hired eight people so far this year, growing its team to just shy of 50 people.

Delphinus Medical Technologies signed a lease on its new office with the idea of providing enough room for R&D and also to act as a showcase for that technology. Forchette expects to host frequent visits from healthcare leaders, customers and vendors, so the company has added a dedicated demonstration room.

"We have room to grow," Forchette says. "We have a facility here that is multifunctional. We have lab space and office space and demonstration space."

Castle closes $2M seed round from Silicon Valley investors

Castle, a property management software startup, hit a big milestone last week, locking down a little more than $2 million in seed capital. Model D recently profiled Castle, just before it announced this seed round.

The Detroit-based company has raised $2.75 million to date over its first two years of business. The startup's seed round was led by Kholsa Ventures out of Silicon Valley. SV Angel, and Point Judith Capital, also participated in the round.

"It's an incredible opportunity," says Max Nussenbaum, co-founder & CEO of Castle. "But it's not a success in and of itself. This is the fuel in the tank, not the end game."

Nussenbaum was part of the inaugural class of the Venture For America, serving his two-year fellowship in Detroit. He co-founded Castle with two other VFA Detroit fellows (Tim Dingman and Scott Lowe) while the trio renovated a tax foreclosed mansion in Virginia Park. Today that house is their home and the headquarters of Castle, but the company is also looking to move into its own offices in the greater downtown Detroit area later this year.

The trio of VFAers also used the experience renovating that house as a compelling story to help get Castle admitted to Y Combinator, arguably the most prestigious startup accelerator in the world, earlier this year.

Castle has developed a software platform that makes property management easy by automating communication between tenants and property managers, rent collection, and repair requests. It currently manages 525 units, almost all of those are single-family homes or small multi-unit buildings. All of the rentals are in Metro Detroit and about 60 percent are in the city of Detroit.

Castle's leadership teams plans to use the seed capital to continue building out its software platform. It's also looking at expanding outside of the Detroit market, potentially opening up a new market early next year. It hasn’t chosen a specific one yet, but among the candidates are Baltimore, Phoenix, Atlanta, and Florida.

"The early markets will be in line with Detroit," Nussenbaum says. "They are the ones that are underserved by our competitors."

Castle currently employs a team of about a dozen people and is still adding staff, including a head of growth in Detroit. The company’s team is currently aiming to double its units under management by the end of the year. Most of its new customers come from word-of-mouth recommendations.

"It's an incredible vote of confidence in us and we are so appreciative of it," Nussebaum says.

Read more about Metro Detroit's growing entrepreneurial ecosystem at SEMichiganStartup.com.

Automation Alley sinks seed capital into six local startups

Automation Alley is continuing its investment in local startups, sinking seed capital into another six companies in the first quarter of this year.

The most recent startups to receive investments include RazorThreat, Len & Jerry's Modular Components, MEISelectric, The Automation of Things, MagWerks LED and Quipzor. All of these companies have participated in Automation Alley's 7Cs program, which is focused on helping local companies integrate advanced manufacturing methods into their business models.

RazorThreat is a Pontiac-based software firm that specializes in online security. Len & Jerry's Modular Components is a manufacturing company that works in custom tooling in Clinton Township. MEISelectric is based Clawson and works in conceiving and creating prototypes.

The Automation of Things creates software for industrial applications and is based in Sterling Heights. Oxford-based MagWerks LED works in LED light products. Quipzor calls Bloomfield Hills home and helps enable pre-surgical collaboration between hospitals, physicians and surgical device company representatives.

The investment comes from Automation Alley's Pre-Seed Fund. The $9 million fund invest tens of thousands of dollars into each startup, sometimes hundreds of thousands of dollars. It has invested in 54 locally startups since 2004.

Detroit tech community leads venture capital boom in Michigan

Michigan's venture capital community continues its rise with another year of growth, and Detroit's tech scene is playing a significant role.

With $328 million in 2015, Michigan enjoyed its best year of venture capital investment. That's up from $224 million the year before, and $246 million from the second highest year in 2012, according to a new report from the Michigan Venture Capital Association. In total over the last decade, Michigan has seen a 150 percent increase.

Detroit's rise as a center for tech mirrors that climb. There was little to no venture capital activity downtown 10 years ago. Today, it's home to several venture capital firms that make early stage investments in tech firms, many of which are based in or near Madison Block. One of Michigan's two largest VC funds, the Renaissance Venture Capital Fund, a fund so large it only invests in smaller VCs, is also located downtown.

"Detroit is a big area of focus," says Maureen Miller Brosnan, executive director of the Michigan Venture Capital Association. "Automotive and IT technologies are a great areas of growth."

VC growth is happening at a time when it's on the wane across the U.S. According to the same Michigan Venture Capital Association report, the number of venture capital firms headquartered in Michigan, their total capital under management, and number of venture capital investments made in Michigan, has doubled and in some cases tripled while those numbers have decreased nationally.

That build up has come from a combination of capital from private and public sources. While the Renaissance Venture Capital Fund has accumulated its money from private funds, it's counterpart the Venture Michigan Fund got its backing from government. The Michigan Department of Treasury helped establish local VC infrastructure over the last decade, including the Venture Michigan Fund, by providing investors with up to $450 million of tax-voucher certificates.

Future support from the state of Michigan, however, is not guaranteed. That doesn't mean anyone is deterred. Rather, they're striving for greater self-sufficiency.

"Firms are looking at this and saying we’re going to have to do this on our own," Brosnan says.

Michigan venture capital growth outstrips national averages

Venture capital in Michigan has come a long way over the last 15 years, and a new report from the Michigan Venture Capital Association puts some numbers to that growth.

The Ann Arbor-based non-profit released its annual report this week showing growth with some impressive numbers for the venture capital in the Great Lakes State. Michigan enjoyed its best year for venture capital investment in 2015, clocking $328 million. That's up from $224 million the year before (it's third best year) and $246 in 2012, its second best year. Venture capital in Michigan is up 150 percent over the last decade, according to the report.

Michigan-based venture capital firms have $2.2 billion under management, up 47 percent in the last five years and more capital under management than ever before. Michigan venture investors finance nearly every Michigan venture-funded startup. The report concludes that local venture capital has gone from practically non-existent in Michigan 15 years ago to having firmly taken root and growing steadily.

"There are a lot of factors at play at this point," says Maureen Miller Brosnan, executive director of Michigan Venture Capital Association. "Venture capital has firmly established its role in as an economic driver in Michigan."

Ann Arbor is widely seen as the capital for venture capital activity in Michigan thanks to its proximity to the University of Michigan. There is also a large concentration of local VCs headquartered in Ann Arbor and a number of out-of-state VCs with offices in Tree Town.

The report also shows a rise in angel investing in Michigan. There are currently 128 startups in Michigan that have received funding from a locally based angel group, a 42 percent increase in the last five years. Membership in Michigan’s nine angel groups hit 294 investors, a 59 percent increase in the last five years. Michigan’s Grand Angels was listed among the three most active angel groups in the country, and a new angel group in the Upper Pennisula, Innovation Shore Angel Network, launched last year, according to the report.

"Grand Angels has set the pace for growth of the nine angel groups in the state of Michigan," Miller Brosnan says. "There has been tremendous growth there."

Source: Maureen Miller Brosnan, executive director of Michigan Venture Capital Association
Writer: Jon Zemke

Tech startup aims to raise $1M for visual content platform

This is the year tech startup TernPro expects to take off.

They believe its visual content software platform, Slope, will gain traction with customers and hit some significant milestones. The biggest one TernPro is closing a $1 million seed round later this spring. It's also looking to bring its platform, which is currently in private Beta, online to the public.

"This year it's really about product development and customers," says Brian Bosche, co-founder & CEO of TernPro. "Once we close this round we want to perfect the product and get it out in the field."

Bosche is a member of the inaugural 2012 class of Venture for America, a two-year program that pairs talented college grads with startups in economically challenged cities like Detroit. He worked with the leadership team at the Bizdom startup accelerator in downtown Detroit during his fellowship, helping many of the startups in the incubator tell their stories through short videos.

Bosche and fellow VFAer Dan Bloom launched TernPro in downtown Detroit two years ago, primarily as a full-service digital video agency. Not long after they started developing Slope, a software platform that enables novice digital media users to design, store, produce, and collaborate on creating visual content.

TernPro was accepted to the Microsoft Ventures Accelerator last year, a program that helps startups build their technology and scale their products. The TernPro team was attracted to it because of Microsoft's expertise in developing enterprise software, and opened an office in Seattle after completing the accelerator.

"We still work very closely with them," Bosche says. "It's been a great relationship."

TernPro has a team of eight people after hiring three in UIX design and software development in the last year. The company recently moved to the Elevator Building overlooking the Detroit Riverfront.

The company released Slope in private Beta in late 2015, and plans to make it public later this year to start building out its customer base.

"It's a fully functioning product but we are still building it out," Bosche says. "We even got our first paying customer."

Armune BioScience lands $4M investment, chases another $25M

Armune BioScience closed on a newly expanded Series A worth $4 million last week, and the life sciences firms has its eyes on even bigger things this year.

"We're on hunt for a $25 million Series B round," says David Esposito, president & CEO of Armune BioScience. "We have brought on Mavericks Capital out of Palo Alto to help us land it."

The Kalamazoo-based company, it also has a laboratory in Ann Arbor, is developing an innovative, non-PSA blood test to aid in the early detection of prostate cancer. Apifiny went to market last year with Armune BioScience hope to sell 1,500 tests.

"We have done a little more than 5,000 billable tests," Esposito says. "That exceeded our expectations for the test for our first year on the market."

That growth allowed Armune BioScience to expand its Series A by $1.5 million. It also prompted the company to hire another three people, all of them medical techs, for the Ann Arbor lab. The company now employs 10 salaried employees and another 10 consultants. The new infusion of seed capital is expected to add more staff this year.

"We'll probably go another five people in the laboratory by the end of the year," Esposito says. "Those will probably be medical techs and PhDs."

Source: David Esposito, president & CEO of Armune BioScience
Writer: Jon Zemke

Plymouth-based Celsee finds customers for its cancer-detection technology worldwide

Plymouth-based Celsee Diagnostics firm is currently building out its team and growing revenue streams that support its cancer-detection technology.

The life sciences startup formerly known as DeNovo Sciences employs 11 full-time employees and 10 part-time employees after hiring two more over the last year. Those new hires include a new chief science officer and vice president of commercial operations.

"We're building out a leadership team to get our commercialization up and moving quickly," says Kalyan Handique, CEO of Celsee Diagnostics.

Celsee Diagnostics is developing a platform for early detection of cancer from blood samples. Its fully automated system can detect cancer, primarily breast and colon cancers. The idea is to create a less-invasive method than the traditionally painful route of biopsies. Celsee is in the midst of starting clinical trials on this platform. The trials for European approval are expected to be done within six months. U.S. trials are expected to run into next year.

Celsee Diagnostics also raised a small amount of money from investors last year, but it is focusing on generating more revenues to cover its expenses, selling its platform to researchers in the U.S. and overseas.

"We expect to cross $1 million this year," Handique says. "It will make investing in our product easier."

Celsee Diagnostics is also selling its platform in Israel and some developing countries, including Brazil and China.

"We're starting to get more traction in those countries," Handique says.

Source: Kalyan Handique, CEO of Celsee Diagnostics
Writer: Jon Zemke

Solar panel work powers triple-digit growth at GreenLancer

To say GreenLancer has been on a growth streak in recent years might be a bit of an understatement.

The alternative energy startup watched its revenue jump 340 percent last year, including a 1,440-percent spike in permit-ready plan sets for solar projects produced in that time. That allowed GreenLancer to hire a couple dozen people, going from 10 employees in January 2015 to 34 today. The new hires included solar engineers, software developers, human resources, and accountants.

"Really all across the board," says Zac MacVoy, CEO of GreenLancer.

The downtown Detroit-based startup, with offices in the Ford Building, facilitates the design and execution of permit-ready plans for installing solar panels. Its software platform and team provides its customers with everything needed to install alternative energy infrastructure. That ranges from feasibility studies to concept designs to permit packages to installers.

"GreenLancer helps solar panel installation companies scale and be more efficient," MacVoy says. "We help them sell and install more, and improve their inefficiencies."

GreenLancer works primarily in solar energy, which has become increasingly popular now that costs to install a solar array have dropped significant in recent years. Almost all of GreenLancer’s projects are on the residential side, but GreenLancer is looking to generate more work from commercial projects in 2016.

"It's all going to depend on the traction we can get," MacVoy says.

MacVoy came onto the GreenLancer team as CEO early last year shortly after the startup raised a $5 million Series B round. The company is currently looking to raise a "substantially bigger" Series C in 2017, but MacVoy wants to spend more time in the interim on building up the company's clientele and fine-tuning its business model.

Inmatech expects breakout year for its battery tech

Inmatech has some grand ambitions for its battery technology in 2016. The Ann Arbor-based firm is looking to close on a couple of partnerships, bring its platform to market, and hire a lot of people along the way.

The University of Michigan spinout is developing advanced battery technology that greatly improves the performance of super capacitors for electronics. These super capacitors enable the batteries to improve the delivery of energy and increase energy density.

"We would be able to charge and recharge faster," says Les Alexander, CEO of Inmatech. "Our energy density is two-to-three times that of the other super capacitors on the market today."

The Inmatech team of eight people has been working on the technology for five years, mainly out of the University of Michigan's Venture Accelerator in the university's North Campus Research Complex. It made significant strides forward in 2015, hiring six people. The new hires range from technicians to executive leadership, including promoting Alexander from COO to CEO.

Inmatech expects to hire even more this year, a move that it will force it to find its own office space. First it needs to land some investment in order to make the commercialization of its battery technology possible.

However, Inmatech isn't going the traditional venture capital route. It is working to broker joint development agreements with two corporate partners. One would put Inmatech's technology in automotive applications.

"It’s a huge step forward for us," Alexander says. "It puts us on the path toward commercialization."

Inmatech is currently proving its battery technology through prototypes. It is currently at the later end of that process, which has helped the company land on Michigan’s 50 Companies to Watch list.

Source: Les Alexander, CEO of Inmatech
Writer: Jon Zemke

Seat Side Service expands smartphone software to pay for event concessions

Growth at Seat Side Service isn't just about offering the best mobile concession services at events. It's about giving people more options. "The product has expanded tremendously," says Barak Leibovitz, founder & CEO of Seat Side Service.

The Ann Arbor-based startup got its start four years ago developing a mobile concession software. The platform enables spectators at athletic events to order and pay for food and beverages through their smartphone. Their order is delivered from a centralized kitchen, enabling vendors to only have to carry the food ordered.

Seat Side Service got its first start working with the Toledo Mud Hens, the AAA affiliate for the Detroit Tigers. It developed its original idea over a couple of minor league baseball seasons, but has expanded how it does business over the last year. Users can now place an order on the system and go pick up the food and the system can be used by cashiers at a venue.

"We're more of a full-service, point-of-sale system for entertainment venues," Leibovitz says. "The utility of the product has grown tremendously along with the applications for it."

That has allowed Seat Side Service to add more types of clients, such as concert venues, golf courses, and amplitheaters. Seat Side Service has also closed a six-figure seed capital round late last year and is in the midst of leveraging it to grow its footprint across North America.

Source: Barak Leibovitz, founder & CEO of Seat Side Service
Writer: Jon Zemke

LLamasoft moves into Google space shows best value comes from local firms

Drive through downtown Ann Arbor and it's hard to miss the giant Google sign atop one of the city's premier office buildings. For years it has been one of the corporate names locals like to point to with pride. Now it's coming down as the tech giant plans to build its own office on the city's outskirts.

And that's a good thing.

LLamasoft, an Ann Arbor-based supply chain software firm, is taking up the lions share of prime downtown office space Google is leaving behind. The move is necessary to accommodate the firm’s rapid growth. Yes, rapid growth is a term thrown around much too often in today's media but LLamasoft is the real deal.

The 13-year-old company has raised tens of millions of dollars in seed capital, including $50 million from Goldman, Sachs & Co to fund its growth. It has hired nearly 100 people in the last year, rounding its staff out to 400 folks around the world. The bulk of them, 220 people, are in Ann Arbor. Its downtown offices are so cramped the company’s leadership doesn’t know where it’s going to put its new hires between now and when it moves into the new space later this summer.

"The 6-month wait we have is painful," says Toby Brzoznowski, co-founder & executive vice president of LLamasoft. "I am looking at ways to give up my office so 2-3 more people can cram into it so we can make it work until we move."

LLamasoft will take up the second and third floors of the McKinley Towne Centre, at 401 E. Liberty. That’s 60,000 square feet in one central location. Today, LLamasoft’s downtown Ann Arbor headquarters is split between several floors of the 201 S Main St building. Brzoznowski expects the new headquarters will give it the headroom the company needs to grow.

"There is absolutely room for growth," Brzoznowski says. "We have averaged 50 percent growth every year."

Betting against LLamasoft growth is not where the smart money is going these days. The company is one of the handful of tech darlings that is surpassing its big expectations. Google's AdWords office in downtown Ann Arbor never really lived up to its expectations. Where people expected a growth leader of a company that would be the center of the local tech scene turned into a side note in elevator pitches.

Yes, Ann Arborites are happy Google is here and prefer it in Tree Town, homegrown startups like LLamasoft are the real future. LLamasoft's executives are the ones who will create gobs of jobs and serve as one of the main leaders in the local entrepreneurial ecosystem.

Homegrown companies like LLamasoft are the ones that deserve to have their names in big lights atop Ann Arbor's skyline.

Source: Toby Brzoznowski, co-founder & executive vice president of LLamasoft
Writer: Jon Zemke

Michigan eLab bridges the gap between Silicon Valley and Ann Arbor startups

Michigan eLab opened with an idea for bridging the startup economies of Silicon Valley and Ann Arbor. Most people would assume that means focusing on California first, then Michigan. The team at the Ann Arbor-based venture capital firm has found the opposite to be true.

"We just wrapped up our eighth investment with this fund," says Doug Neal, co-founder & managing director of Michigan eLab. "We are on pace to do an investment per quarter. We did two investments in the fourth quarter of last year."

That last investment is in an artificial intelligence startup based in Ann Arbor. Neal declined to disclose the name at this time but believes it can become a household name in tech. The investment before that was in a startup called Rachio, which was co-founded by a University of Michigan alumni. The startup's technology helps maximize the water used by sprinkler systems through wifi and software.

"Think of it as nest for your lawn," Neal says. "It saves people as much as two thirds of the water they would use on their lawn."

Michigan eLab raised nearly $25 million in this investment fund with a focus on investing in early stage tech startups. So far about half of the fund is committed and Neal expects to make a number of investments later this year.

"Were off to a good start," Neal says. "We're close on one right now. That will be our first quarter investment. We have found that deal flow is not a problem for us."

Source: Doug Neal, co-founder & managing director of Michigan eLab
Writer: Jon Zemke

Millendo Therapeutics scores big VC round, Duo Security clocks record growth

A couple of tech startups in Ann Arbor are making a splash with some big headlines. Millendo Therapeutics reports that it has raised a $62 million Series B investment round, setting a new record for venture capital investment in Michigan. Duo Security also is reporting 200 percent revenue growth for 2015 over the previous year. Both are banner headlines for a couple of Ann Arbor’s most promising growth firms.

Millendo Therapeutics, formerly Atterocor, is a biopharmaceutical firm working on treatments for endocrine diseases. The University of Michigan spinout is focused on developing novel, disease-modifying treatments for specialty and orphan endocrine diseases caused by hormone dysregulation. It recently signed an exclusive license agreement with AstraZeneca for the worldwide development and commercialization rights to test a new compound for the treatment of polycystic ovary syndrome.

Millendo Therapeutics Series B investment round will fund clinical trials for that new compund and expand its testing of the drug ATR-101, a treatment for adrenal cancer patients. Among the investors in the Series B is the University of Michigan MINTS (Michigan Investment in New Technology Startups) program.

Duo Security also announced some big growth news in its recent revenue gains. The downtown Ann Arbor-based company specializes in providing cloud-based access security through two-factor authentication. Last sprung Duo Security launched its Platform Edition, which builds on two-factor authentication to offer cloud security and endpoint visibility.

Over the last year, Duo Security has doubled its customer base, serving a broad spectrum of companies and institutions including American Public Media, Duke University, DraftKings, and King.com, the makers of Candy Crush. Duo Security analyzed nearly 2 million devices with 1 million users, and handled nearly 2 million authentication events per day by the end of last year.

"It's all about ease of use and keeping our customers happy," Dug Song, CEO and co-founder of Duo Security, said in a press release. "We're passionate about continuing to be the most loved company in security. People are feeling the pain of the cumbersome security products and we're here to make it painless for them."

Source: Millendo Therapeutics and Duo Security
Writer: Jon Zemke
454 Venture Capital Articles | Page: | Show All
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