The Michigan Venture Capital Association in Novi, a nonprofit trade association dedicated to increasing capital and talent for the state’s entrepreneurial and investment sectors, has released its 2024 MVCA Impact Report.
The report reveals Michigan venture capital firms, defying national trends, experienced one of the best fundraising years in over a decade.
Produced by PitchBook, this comprehensive analysis showcases the positive impact of investment activity within the state in 2023. According to the report, four major firms collectively secured nearly $500 million in capital, indicating a notable shift towards larger, later-stage funds.
“In a year in which firms across the country struggled to raise capital, Michigan venture capital firms demonstrated immense success. The strength of our VC firms and start-up companies makes Michigan stand out as an emerging ecosystem” says Patricia Glaza, managing director of ID Ventures in Detroit and MVCA Board Chair.
Investment activity in 2023 also demonstrated the strength of Michigan’s entrepreneurial ecosystem, with more than $1 billion invested into Michigan-based portfolio companies. Reflecting a broader market trend, this investment activity was driven by more mature companies, with 2023 seeing record-high average and median ages for funded companies.
Despite a slow pace of exits and a scarcity of unicorn returns, there is a silver lining: Detroit has emerged as a major player on the global stage, ranking second among startup ecosystem growth worldwide, according to PitchBook’s recent Growth Score research.
“It is gratifying to see the continuation of Michigan’s strong investment and fundraising activity amid a continued national slowdown — I think this is indicative of the underlying quality of opportunities in the state” says Dan Kidle, managing partner at Arboretum Ventures in Ann Arbor and chair of the MVCA Research Report Committee.
“However, we must continue to push hard to ensure that the necessary infrastructure, capital, and talent is in place to support the early-stage companies that will be the future drivers of innovation, growth, and employment in our state economy.”
Some additional key findings from the 2024 MVCA Impact Report include:
- 2023 saw the most capital raised by Michigan-based funds of the past decade, overtaking 2016’s tally of approximately $450 million.
- Overall, venture activity has plateaued in 2023, indicating that Michigan remains somewhat insulated from national trends. Despite the collapse of key banking partners causing several weeks of uncertainty and prompting critical discussions about company banking practices, Michigan founders and venture firms ended the year on par with 2021 and 2022. While deal value in the Great Lakes region dropped from $17 billion to $6 billion, Michigan maintained steady investment levels with $1 billion invested.
- The majority of venture capital deal value in Michigan for 2023 was concentrated in Series B funding. This highlights the critical need for increased pre-seed funding to support the growth and development of the startup entrepreneurial community in the state.
- The Michigan venture community composition broadly indicates 70.4 percent of survey respondents identified as male. Female VC professionals made up 29.6 percent of respondents, which compares favorably with national averages. Recent research indicates that women represent around 11 percent of investing partners at VC firms and approximately 21 percent of all investment professionals.
- Exits at scale have been increasingly difficult to achieve in the US over the past few years. In 2023, exit value totaled $67.6 billion from just over 1,000 completed exits, both figures being the lowest since 2016. Michigan reflects this trend, with no significant surge in exits beyond 2021.
“The past few years have demonstrated Michigan’s need for a robust pipeline of talented entrepreneurs, supported by resources from the venture community. To remain competitive within the Great Lakes region, Michigan must proactively provide funding that enables VCs to deploy more capital into our ecosystem,” says Ara Topouzian, executive director of the Michigan Venture Capital Association.
MVCA collaborated with PitchBook, MVCA members, and received support from the Michigan Economic Development Corporation to create the 2024 Impact Report.
More than 400 individuals are members of MVCA, and represent 100-plus organizations across the nation. For more information, visit michiganvca.org/.
To view the report, visit here.