The Michigan Pre-Seed Capital Fund companies have attracted more than $18 million in matching grant and equity funds.  In 2011, the Michigan Pre-Seed Capital Fund made 12 investments totaling $2.4 million, matched with more than $2 million in investments and grants.  Combined, the Michigan Pre-Seed Fund investments have helped to create more than 100 jobs in Michigan.

“We continue to receive applications from entrepreneurs around the state who are raising their first round of equity funding for their innovative, technology-based businesses,” said Skip Simms, Ann Arbor SPARK’s senior vice president and administrator of the Michigan Pre-Seed Capital Fund.  “This interest in funding is a clear sign that Michigan’s entrepreneurial spirit is strong.”

The Michigan Pre-Seed Capital Fund supports a start-up’s commercialization efforts.  Specific innovations include:

Detroit-based Clean Emission Fluids, Inc. (CEF) manufactures patent pending clean energy technologies (FAST™ stations) that provide onsite fuels and fluids for commercial truck fleets. CEF currently has six stations deployed with six additional stations planned for delivery by the end of 2011.

“The Michigan Pre-Seed Capital Fund’s support and investment in Clean Emission Fluids is an invaluable resource to help advance our leading-edge and patent-pending FAST Truck Stops in a Box that offer on-demand and on-site blending of any fuel in any proportion,” said Oliver F. Baer, CEF president and co-founder.  “FAST stations track the performance of every gallon, proportion and fuel type dispensed – including biofuels and emission fluids – to optimize vehicle operations and lower prices at the pump. Ann Arbor SPARK and the Michigan Pre-Seed Capital Fund has been vital to our developing success and establishing a solid framework on which to build – while helping boost Michigan’s economy in high return, job creating industries.”

Estrakon employees manufacturing their LED product

Estrakon, based in Ann Arbor, is a technology company that designs, develops and manufactures custom innovative, patented LED Edge-Lit signs and displays that provide a new medium for many broad applications such as premium brand advertising and attractive consumer displays that offer significant return on investment.

“The Michigan Pre-Seed Capital Fund was instrumental in allowing our organization to stay on top of the influx of new business that we were experiencing in mid 2011,” said Matt Shumate, Eskatron founder.  “We have added new equipment, more staff and increased our production space to accommodate the rapid growth.

Ix Innovations, based in Ann Arbor, enhances the usability of electrical test and measurement instrumentation through continual product innovation. Ix’s products are used throughout science and engineering, in diverse fields including low power electronics, energy harvesting, and in teaching labs worldwide.

“The Michigan Pre-Seed Capital Fund financing allows Ix Innovations to fill key management positions,” said Ian Dailey, president of Ix Innovations.  “This funding is critical to fueling research activities and enabling us to bring our next-generation low power measurement instruments to market.”

The Michigan Pre-Seed Capital Fund is an equity fund that invests in technology-based companies to support business formation and acceleration.  Ann Arbor SPARK serves as the Fund’s administrator.

To qualify for the Michigan Pre-Seed Capital Fund, start-up companies must be based on a technology in one of the state’s identified competitive technologies and have the sponsorship of a local SmartZone.  In addition to SmartZone sponsorship, companies must have received grant, angel or venture capital funding as a match with the Michigan Pre-Seed Capital Fund investment.

The Michigan Pre-Seed Capital Fund is an equity investment fund that receives the same returns as the third party investor.  The returns that the Michigan Pre-Seed Capital Fund receives from its investments will be redeployed by the Fund as first round capital to Michigan-based start-ups.

Funds for this initiative were provided by the 21st Century Jobs Fund, a Michigan Strategic Fund program designed to accelerate the growth and diversification of Michigan’s economy.  The Michigan Economic Development Corporation (“MEDC”), a public-private partnership between the state and local communities, provides administrative support for the 21st Century Jobs Fund.  The MEDC markets Michigan and provides the tools and environment to drive job creation and investment. For more information on the 21st Century Jobs Fund initiative, visit www.michiganadvantage.org.

Tangent’s history with SPARK dates back to 2009, when they participated in Entrepreneur Boot Camp program. Tangent was named “Best of Boot Camp” the year they participated. Many graduates of Boot Camp take the knowledge they gained and go on to win business plan competitions or secure funding.  In this case, Tangent went on to receive funding through SPARK’s Pre-Seed Capital program in 2010 to help their innovative technology move beyond proof of concept. Funding for this program is provided by the Michigan Strategic Fund and the Michigan Economic Development Corporation, and is focused on moving companies forward to commercialization.

With the support of this 4.5 million venture capital investment, Tangent will be able to once again take the next step forward in growing their business.

“Companies that received support from the Michigan Pre-Seed Capital Fund are currently employing 285 people throughout the state and have attracted outside investment.  Matching support from other funding sources totaled $16.4 million for these Michigan companies.

A combined $2.5 million in Michigan Pre-Seed Capital Fund investments in 2010 were awarded to:

• Advanced Battery Concepts
• Armune BioScience, Inc.
• Current Motor Company
• Downstream, LLC
• Intervention Insights
• Innovative Surgical Solutions
• InfoReady Corporation
• InPore Technologies
• Inventure Enterprises
• NextCAT, Inc.
• Tangent Medical Technologies

Photo courtesy of San Fransisco Business Times

Noted venture capitalist Tom Baruch offers insight on where we’re  getting it right and what other states can learn from Michigan.

Since the Michigan Microloan Fund Program was established in July 2009, 42 companies have received over $1.6 million in subordinated loans.

Read more about the news here.

The Smart Zone Award is sponsored by the Michigan SmartZones, funded through the Michigan Pre-Seed Capital Fund and administered by Ann Arbor SPARK. It was created to benefit early-stage entrepreneurial companies that have written a strong, technology-based business plan and are already moving ahead with implementation. Statewide, 84 companies initially applied and of those, 21 competitors submitted full plans which were reviewed by venture capital firms located in Boston, the Bay Area, and Chicago.

InPore is producing a unique platform technology in the form of Silapore™ particles, highly porous, sub-micron sized silica material.  Silapore™ particles will be used as an additive for reinforcement in many polymer based products.  InPore Technologies’ Roston intends to utilize the SmartZone award to quickly expand product testing and to enhance the development of Silapore.

…Goldschmidt is one of the nearly 70 new startups that have begun working with Ann Arbor Spark this year, a roughly 25 percent increase from the same period in 2008, according to Skip Simms, director of business acceleration services at Spark.

Much of the spike is driven by an increased awareness of the resources available to Ann Arbor’s entrepreneurial community and an increase in those resources, Simms said.

For example, Spark has about $1.5 million in micro-loan funds available for startups that the agency lacked last year. The funds pay for things like company prototype completion, pre-revenue stage ramp-up costs, market research, marketing efforts and other early stage needs.

Spark’s new cash is available through three separate funds. The state of Michigan allocated about $1 million to Spark from its 21st Century Jobs Fund for the Michigan Pre-Seed Capital Fund.

Another $275,000 is available from the Ann Arbor/Ypsilanti SmartZone through the Local Development Finance Authority and Spark, as well as about $225,000 for startups in Eastern Washtenaw County through the Eastern Washtenaw County micro-loan fund, according to Simms. …

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•    White Pine Systems, sponsored by Ann Arbor SPARK, received $225,000.  White Pine Systems is an internet-based medical records service to securely store and manage personal information such as medical and legal records.

•    OcuSciences, sponsored by Ann Arbor SPARK, received $250,000.  OcuSciences, a spin-out company from the University of Michigan, develops the OcuMet™ line of ocular metabolic imaging products.  OcuMet allows detection of several diseases through indicators in the eye, several years earlier than current clinical methods.

•    RealKidz, sponsored by Ann Arbor SPARK, received $142,000.  RealKidz is an on-line retailer of large size kids clothing and social network.  The company is a tenant of SPARK East and received “Special Forces” training through the Ann Arbor SPARK Business Accelerator.

Since this is 21CJF money it is limited to the four technology sectors in the legislation creating the 21CJF.  Those sectors are: Advanced Automotive, Manufacturing, and Materials; Alternative Energy; Life Sciences; and Homeland Security and Defense.

The fund was originally and still is a collaboration among the states SmartZones.  To apply for pre-seed investment a company must work with a SmartZone which will perform the initial due diligence and validate eligibility.  The SmartZone will also make sure the applicant is adequately prepared and in some cases help the company raise the required match from outside investors or non-state grants.

There is more news to come regarding this new funding, so stay tuned.