Overview

Michigan's SmartZones -- collaborations between universities, industry, research organizations, government, and other community institutions -- have formed a consortium to establish the Michigan Pre-Seed Capital Fund. The mission of this fund is to support high-tech, high-growth start-up companies throughout Michigan as they near commercial viability. The focus is on companies that are creating the newest technologies in the following competitive areas:

• Advanced automotive, manufacturing, and materials
• Alternative energy
• Homeland security and defense
• Life sciences

The Pre-Seed Fund is now addressing the need for “investigative” capital through a microloan program to help companies achieve milestones that will make the company more attractive to equity investors or achieve first sales. Microloan funds can be used to further flesh out a competitive analysis, prepare financial pro formas, develop plans to cross regulatory hurdles, finish a prototype, complete a market study, travel to customers or partners, or other issues that are typically required by investors before they will invest.

Eligibility

A company can only be approved for funding once. Although a single investment decision will be made for each company a company may reapply for funding one additional time if initially rejected.

Companies must meet the following criteria before applying for funding:

• Be located in Michigan
• Have the rights (ownership or license) to innovative technology, or be seeking a strong IP position
• Be pre-revenue
• Funding is to be used for the development of a business that is focused on the commercialization of technology of interest to the 21st Century Jobs Fund
• Loans may not be given for a publicly held company, but may be utilized to spin technology out of a public company and establish a new private entity.
• Have potential for rapid growth and sales over $10 million annually in five years.

Use of Funds

Award funds are directed mostly toward activities between proof of principal and working prototype. Examples of eligible pre-seed funding activities/projects would include but not limited to: intellectual property investigation (direct funding for IP protection is not eligible), market assessments, technology assessments, prototype development and testing, partner relations, and first customer attraction. It is assumed that these Companies will be past the concept development and analysis phase, but have very specific needs to achieve commercialization milestones to meet the requirements of an investor. One goal for this loan would be that the company would find a match for an application for investment from the Michigan Pre-Seed Capital Fund. Approval of this loan does not, however, guarantee approval for investment by the pre-seed fund.

Funding Levels

Funds must be used for business development services; capital improvement, salary or production expenses do not qualify. Michigan SmartZone business accelerators will screen Business Accelerator Fund applications, channel funds to service providers, and monitor the use of funds on behalf of approved applicants.

SmartZones will review deal submissions as submitted and recommend funding or not. They may recommend an amount different than the request. They will provide constructive feedback for all proposals as an added value. The review criteria will assess the company’s potential to become a viable, robust, high growth Michigan-based business, and ultimately repay the loan. Funded companies will continue to work with their referring SmartZone for mentoring and business acceleration. The SmartZone will be responsible for providing information about milestone progress to the Fund administrator. Just as traditional seed investors must provide their portfolio companies with hands-on help, direct involvement by SmartZones will ensure that the deal is actively managed to agreed-upon milestones and thereby enhance the chance for success of each new venture funded.

Please review the loan document.

Loan Details

A Subordinated Note will be used for the loan. The note will not require a personal guarantee and will be subordinate to any current or future debt from commercial institutions or private investors.

Before actual funding occurs the following documents will be provided and placed in the administrator's files:

• Background Check Reports
• Certificate of Good Standing with Michigan
• Business Plan
• Promissory Note

After investment, the following information will be required of each successful company, in addition to any specific milestone information on an annual basis:

• Number of new patents, copyrights, trademarks applied for and issued
• Annual sales/revenues
• Number of new jobs, existing jobs, and projected new job growth
• Average salaries
• Follow-on investment figures and other metrics to gauge the positive effect on Michigan's progress toward building a competitive edge technology economy
• The total number of new licensing agreements by institution and the number of new licensing agreements entered into with these firms
• Products commercialized

This data will be collected through an annual survey

Application Process

The Pre-Seed Fund will accept applications at any time. Requests, if complete, will be forwarded for review within one week.

The submission package must include:

• Business Plan (10 pages) including:
  • Company overview
  • Market information
  • Operations
  • Product description
  • Summary of Management talent
  • Use of funds
  • Strategy for future funding/financing
• Separate  financial workbook including:
  • Current balance sheet
  • 12 month P&L projection
  • Multi-year cash flow projection
• Bio/resume of founder and top management team (2 pages maximum for each)
• Certificate of Good Standing from the State of Michigan
• Recommendation by SmartZone on milestones to be accomplished and role the SmartZone will commit towards facilitating to help achieve such milestones

Submit all documents and contact information to cei@gvsu.edu with a message briefly describing your business and how you intend to use the capital.

Contact Info & Questions

Kevin McCurren
Executive Director, Richard M. and Helen DeVos Center for Entrepreneurship & Innovation
mccurrke@gvsu.edu

Shorouq Almallah
Business Accelerator Fund Intake Counselor
almallas@gvsu.edu