Vol. 2 Spring 2011
Continuum of Capital
How to engage in a continuum of funding sources to catalyze rapid, and sustainable growth for your company. GVSU Center for Entrepreneurship & Innovation
Seidman College of Business
As the new Executive Director of the
Center for Entrepreneurship and Innovation, it is my pleasure to welcome you to the second issue of neu the Center for Entrepreneurship & Innovation’s biannual magazine that focuses on the important work and accomplishments of our clients and partner organizations. I am honored to serve the Seidman College of Business, Grand Valley State University and West Michigan in my new role. The CEI team’s work will cultivate tomorrow’s leaders and lay the foundation for a new Michigan economy: I invite you to join us in this mission. Feel free to call upon me, offer advice or lend a helping hand. Working together, we will create an
encouraging and welcoming entrepreneurial climate: one that celebrates the pursuit of new ideas and enterprises, that applauds efforts both successful and failed, that rewards perseverance and persistence, and that acknowledges entrepreneurs as community heroes. The past year has been a wonderfully busy time for the region’s entrepreneurs. We’ve experienced an exponential increase in requests for support services and educational engagements, which can only mean good things to come when enterprises launch.
The main theme of this issue revolves around start-up funding: what it is, where it comes from, and how to get it. We hope you enjoy this second issue of neu and that you continue to support us as we move forward with a strong vision, an innovative mind-set, and a collaborative spirit. As always, please feel free to contact us with your requests and ideas.
Cheers, Kevin McCurren and the CEI Team Center for Entrepreneurship & Innovation Seidman College of Business Grand Valley State University
Contents CEI Updates
12 Family Owned Business Institute 13 MAREC
Letter from the Director CEI Accountability Report
5 The Continuum of Capital 9 Capital as Water 10 Q&A with Investor Skip Simms 11 The Evolution of Open Innovation
14 15 16 17
Inventor K-12/Collegiate Venture/Lifestyle Social/Family
Staff Executive Director Kevin McCurren
Art Director Mike Schulz
Operations Manager Shorouq Almallah
Designer Chelsea Godmer
Outreach Coordinator Ryan Vaughn
Photographer David Chandler
Graduate Assistant Adam Ingraham
Underwritten By Grand Valley State University, Seidman College of Business
Graduate Assistant Austin Dean Editor StĂŠlios Alvarez
18 neu Events 02
CEI IS WORKING DILIGENTLY TO LEAD THE DEVELOPMENT AND SUPPORT OF ENTREPRENEURIAL EFFORTS IN THE REGION. DURING THIS PAST YEAR WE’VE REFINED OUR MISSION TO BETTER MATCH THE NEEDS OF THE WEST MICHIGAN ENTREPRENEURIAL COMMUNITY: THE CENTER FOR ENTREPRENEURSHIP & INNOVATION (CEI), IN THE SEIDMAN COLLEGE OF BUSINESS, AT GRAND VALLEY STATE UNIVERSITY, SERVES TO CHAMPION AND CATALYZE THE VOCATION OF ENTREPRENEURSHIP. TO ACCOMPLISH THIS MISSION, THE CENTER FOCUSES ON TWO AREAS: TALENT DEVELOPMENT, WHERE WE CONCENTRATE ON THE FUNDAMENTALS OF ENTREPRENEURIAL PRACTICE (CREATIVITY, COMMUNICATION, COLLABORATION, AND CRITICAL THINKING) AND COMMERCIALIZATION SUPPORT, WHERE WE CONNECT IDEAS TO ADVISORY RESOURCES.
CEI Accountability Report 03
CEI, in collaboration with the Seidman College of Business, has changed the minor in entrepreneurship to focus on 21st century job skills. The coursework, which will be taught by Seidman faculty and regional entrepreneurs, is highly experiential, exercising skills in the why, how, and what of starting and managing a new business. Startup and small business internships will be integrated to allow for direct application of classroom learning.
CEI provides scholarship awards to students who demonstrate evidence of their interest and experience in entrepreneurship as well as their intention to participate in starting a new venture. Scholarships are made possible by the generosity of American Photo Marketing and the Robert H. and Barbara Wood Foundation. Their interest in and commitment to promoting access to higher education provide a stepping stone to students resulting in the economic growth of West Michigan.
The center has initiated a rigorous benchmarking study to seek out the best practices of international Centers for Entrepreneurship. The focus is primarily on regions with a high concentration of start-up activity with leadership from the business sector in governance and fundraising.
MGT 380 is a class dedicated to the design and development of studentowned businesses serving GVSU. Three teams of five students completed the class, with their final exam being a seed-capital pitch to the Grand Valley Research Corporation. Minute Men, centered on delivering computer services to students in Allendale, received the GVRC nod to develop its operational plan..
Collegiate Entrepreneurs Organization (CEO)
The GVSU Collegiate Entrepreneurs’ Organization (CEO) is part of a nationwide network that develops start-up business fundamentals and builds student interest in entrepreneurship. With CEI leadership, CEO provided project support to local businesses and led the GVSU Idea Pitch Competition.
2010 Idea Pitch Competition (IPC) The GVSU Idea Pitch Competition was held in October 2010. Over 60 students prepared and presented three-minute “pitches” on their new-venture concepts. Judges included entrepreneurs, investors, and consultants. Frank Leonard took home the first\-place prize of $1,500 for his “Keg Regulator” idea.
2011 Business Plan Competition (BPC)
In March 2011, seven Grand Valley State University business plans were presented to a panel of esteemed judges. The BPC is a great opportunity for Grand Valley students to organize their creative ideas, research them for feasibility, prepare solid business plans, and address the raising of start-up capital. Along with promoting critical thinking, this competition also acts as a great resource for students to network with and gain feedback from West Michigan entrepreneurs.
Teen Entrepreneur Summer Academy (TESA)
Designed for high school students, the academy is a week-long opportunity for over 35 area teens to interact on a college campus and work with college faculty and GVSU students. Students learn fundamental business concepts and essential entrepreneurship skills through hands-on, highly interactive, and creative workshops.
Business Acceleration Services
High-growth entrepreneurs can turn to CEI for direction and connections to ensure that great ideas are converted to actionable plans for commercialization. Every interaction with CEI is focused on both improving entrepreneurial skill and lowering the costs of start-up. In 2010, the center worked with over 150 entrepreneurs, reviewing their business value propositions. We assisted 30 businesses with plan-and-pitch preparation for investor presentations.
Technology Commercialization Office (TCO) In the role of the Technology Commercialization Office (TCO), at GVSU, CEI protects and facilitates the conversion of intellectual property. The Office fosters university-business relationships while participating in the economic development of the region and the state. In 2010, TCO reviewed seven inventions by Grand Valley faculty and students, and filed two patent applications.
Savvy Entrepreneur Seminar Series
This series tackles complex and relevant entrepreneurial topics. Through panel presentations and open discussions, attendees learn from the experience of local business leaders. In 2010-2011, roughly 40 entrepreneurs listened to topics ranging from “Alternative Funding Strategies” to “Market Valuation and Seeking Capital.”
Business Connections to Grand Valley State University
Grand Valley is dedicated to sharing opportunities, knowledge, and expertise within the West Michigan business community and beyond. Two key CEI projects linked businesses with student teams to prepare thorough strategic marketing plans. Three others coupled businesses needing prototyping and engineering design with faculty and students eager to engage on priority projects.
Continuum of Capital Growing a young company requires capital. Ideally, revenues are initially and continually generated through sales. For some businesses, though, the cost of start-up outweighs initial revenues; even though future revenue opportunity is significant, it may take three to five years to realize it. For tech businesses, which have to move at warp speed, the window of opportunity for market
entry and profitability is especially tight, demanding such rapid execution that bootstrapping is almost impossible. For companies in this situation, itâ€™s necessary to engage in a continuum of funding sources to catalyze rapid and sustainable growth. Understanding where a business venture fits into the continuum of capital is critical. Itâ€™s all about the right capital at the right stage of development.
The 50K Run
$50,000 and Friends-Family-Fools Very early on in the life of a company, entrepreneurs must work with minimal resources to build and implement their business plan. The funding sources that are most frequently approached at this stage of development are the “3 F’s”: Friends, Family, and Fools. While the 3 F’s are in many respects the easiest to obtain funding from, there are some inherent concerns when involving them. One: They are made up of unskilled investors who will likely not understand the business and the risks involved. Two: They do not have the market knowledge and connections to help bring the product or service to market. Because of this, they lack a critical, educated opinion on whether the business value proposition is worth pursuing. In addition, when accepting money from the 3 F’s, be aware of the Securities and Exchange Commission (SEC) laws that govern investment transactions. Any investment in a business needs to adhere to SEC guidelines. Smart businesspeople protect their investors as well as themselves.
Grow Baby Grow
$100,000 and Seed-Capital As the business enters a more exhaustive stage of concept and prototype development, where expenses are exceeding what 3 F’s can provide, a company has the option to seek seed capital. Typically, seed capital constitutes smaller amounts of money than angel or venture capitalists offer, but it’s significantly more risky and usually requires giving up equity; the amount of equity depends on the amount of capital provided, but generally it ranges from 10 to 30%. Organizations around Michigan have launched a number of competitions for which the grand prize, on average $100,000, provides seed funding. The
Great Lakes Entrepreneurs’ Quest (GLEQ) is among the most prominent in Michigan, offering the SmartZone™ award. Seed-stage investments are also available at several business accelerators, like MomentumMI, Y-Combinator (California) and TechStars (Colorado), and triplebottom-line funds like the seed fund from Lakeshore Advantage in Holland, or SPARK in Ann Arbor. The Michigan Pre-Seed Fund is a program geared to support hi-tech start-up companies and bridge the early gap in funding between personal resources and investment. Admission into the Michigan Pre-Seed Fund means that the State of Michigan will match the investment from any outside source you can engage, up to a maximum of $250,000 per company. So, if entrepreneurs are able to raise $250,000 from friends and family, or from an interested angel Investor, the State of Michigan effectively doubles those fundraising efforts.
Granting Wishes $150,000+ Grants
Depending on the type of business and industry, state or federally sponsored grants may be an option. Grants provide stable and non-dilutive capital to a venture. Both the company and the granting body are seeking to accomplish clear objectives: The business seeks to advance technology development while the granting body receives rights to the use of the technology. The grantor also receives peripheral benefits, such as credit for creating jobs, promoting education, or supporting a particular group. The majority of federal grants are provided at two key stages of business development. The first stage is for research, usually granted to nonprofit research universities and institutions, with the intention that the discoveries provide opportunities for new technologies, with consumer or business applications down the line. The second stage for federal
grants is through the Small Business Innovation Research grant, or SBIR (with a university partner, the grant is referred to as a STTR). SBIRs provide early-stage seed funding to small, for-profit businesses that are working on the commercialization of new technologies. Federal agencies are required to provide 2% of their annual budgets to SBIR funding in an effort to drive innovation from research to market application. Funding is provided in phases, with award amounts ranging from $150,000 to over $1 million. Many states, including Michigan, provide some level of matching funds to awardees, which stretches those allimportant start-up dollars even further.
Oh When the Saints… $250,000 and Angel Capital
Moving through the continuum of capital, the next stop is angel funding. Angels are high-net-worth individuals, in many cases experienced entrepreneurs who provide both capital and expertise. They can operate individually, although in many cases they collaborate to fund deals jointly. The process of securing angel investment typically starts with securing commitment from a single angel, at which point they will introduce the deal to other angels and look for those willing to take part in the opportunity. Locally, the Grand Angels invest in companies starting at an investment level of $250,000. The idea that raising angel capital is easier than raising venture capital is simply not true; either type of funding is difficult to obtain. Both angel and venture capitalists are motivated by return on investment, but while that generally is the only motivation for venture capitalists, angels may also have other motivations. For instance, angels often invest out of a desire to give back to the community by helping the next generation of entrepreneurs, as well as a desire to stay current with the latest technology and techniques in their field. It is therefore highly important to understand what
Friends, Family, & Founders
Angels & Grants
motivates an angel before seeking funds.
Returns, Returns, Returns
$250,000 and Venture Capital If your company is in a later stage of development, raising venture capital may be a great way to grow. Venture capitalists are entrepreneurs in their own right. Typically, they start their funds by raising money from high-networth individuals, with the promise that the money will be invested into a portfolio of companies that will yield a high rate of return. In other words, when dealing with venture capitalists, it is important to understand that they are dealing with other people’s money and have their own responsibility to their investors. 07
Since betting on young companies is an inherently risky proposition, many venture capitalists lose on their investments. A smaller percentage may break even, and a very small percentage will be successful. Because the winners need to win big enough to make up for all the losers, venture capitalists invest in opportunities that are likely to yield a high rate of return in less than five years. Venture capital is the equivalent of rocket fuel for a high-tech, scalable company.
Lessons Learned It takes money—sometimes lots of it—to build a successful startup. Sometimes bootstrapping is an effective way to build early on, but depending on the structure of the
company and how long it will take to build it to a sustainable level, additional funding may be required. Securing funding is a crucial step for any company, particularly at its early stages. For better or worse, the deals that entrepreneurs strike with investors will influence company decisions through additional rounds of funding. To provide the best chance of securing investments with favorable terms, it is important to understand where the business is positioned on the continuum of capital. Whether you’re looking for cash from one of the 3 F’s, or you’re seeking significant funding from an angel investor or venture capitalist, understanding the funding process as well as the motivations behind successful deals can make all the difference.
Capital As Water
As I watch my young adult children engage in the process of finding a life partner, I am struck by the similarities between the dating process and my recent round of visits with venture investment firms. Likewise, as an investor in start-ups I am reminded of the similarities between that and watering and nurturing a tree. As we grow new ventures in Michigan, it may be helpful to keep these two analogies in mind. I am involved in raising capital for a West Michigan company in which I am an investor and a start-up executive. This is not my first foray into raising investment capital, nor is it my first pass at investing capital in early-stage companies. I have heard hundreds of pitches as an investor and have successfully raised funds for half a dozen ventures. While you can find many books and articles that will prepare you for the process of raising capitalâ€” how to write a business plan, valuing a business, the importance of management, deal structuresâ€”I hope my personal insights on the subjective nature of raising capital will give you food for thought and help you move forward.
Capital to a new company is like water to a sapling tree. Saplings need a
measured amount of water to establish proper roots and establish a foundation upon which to support themselves as they mature. Too little water and the tree will not flourish. Too much water and the roots will rot. If the tree grows too quickly, its roots will be too small to sustain more growth. Like a tree without water, a young company without capital will not grow or prosper. Too much or too easy capital can be equally as problematic. Young companies need to struggle as they grow. It is through the ups and downs of finding the right formula for success that new companies and their management teams establish the foundational values that allow them to become successful enterprises. The struggles and decisions of where and when to use their precious capital forces new ventures to make decisions on what is important, why they exist, and what they want to be
when they grow. Prioritizing capital decisions forces young companies to seek answers to deep questions and issues such as finding the true customer, finding opportunities that provide the greatest value, establishing a business culture, and balancing long-term goals with short-term opportunities. Too much easy capital will rot the foundations of a company. The “dot.com” graveyard is full of promising young companies that did not struggle enough in their formation and perished precipitously. Like water, capital will seek the path of least resistance. We establish structures to channel and change the course of water’s path, but water will find its natural place regardless. Capital will seek the least resistance to get the best return at the lowest risk. Investments ebb and flow as the investing environment changes. Early-stage capital is affected by interest rates, the real estate market, Wall Street, and all other investment vehicles. In the end, new company investments must provide a competitive return relative to other investment opportunities. Though we temporarily change the landscape with state and local initiatives or tax incentives, capital will eventually find its way to those investments that have the best riskreward profile.
Raising Capital: Dating for Investors and Ventures Even with the growth of online dating, the dating process eventually comes down to two people who are compatible and have a certain level of chemistry that leads to a longerterm relationship. The process is challenging, maybe even messy at times, and requires a lot of give and take. In the end, though, finding the right partner is worth what it takes. Sometimes it takes timing and luck. Are the two people in the same place in terms of interests, goals, and location? Does their situation provide the time and opportunity to get together, to know each other? Are they at a time in their lives when they are ready to settle down? Raising capital is a dating process for investors and ventures. Though the Internet allows us to quickly prequalify potential investors and investments, eventually the process requires two teams deciding if they are compatible. They need to know the answers to some essential questions. Does the investment firm have investable capital? Are the timing horizons of the investment firm and the company the same? Does the investment firm have knowledge and expertise in the start-up’s business? Does the investor have competing investments? Do they each bring value to the table? Often, luck is key component of the process. A business partner of mine met an investor on a plane trip following a conference, a chance meeting that led to a $3 million investment. Eventually, the courting process between investor and venture comes down to two teams believing in each other and agreeing to exchange capital for a piece of the company. For those seeking capital, it will be wise to remember that the capital investment process is a long-term, serendipitous process. Unless you are in the game, you will never find a capital partner. Each opportunity to talk to a potential investor is an opportunity to learn about yourself and your company. Each takes you one step closer to funding.
with Skip Simms
Q What does Pre-Seed mean? A Pre-Seed is a stage of company
Skip Simms is the interim president and CEO of SPARK in Ann Arbor. He manages funding opportunities through the Michigan Pre-Seed Capital Fund and the Michigan Microloan Fund Program. With over 30 years of experience in financing, who better to interview to discuss Pre-Seed funding in Michigan?
development when the founder and initial team have taken an idea and a product and developed it to the point where it is near ready (or ready) for commercialization. This is typically the point at which companies move away from using familiar sources of funding (family-friends-fools) and move towards new capital from the private sector. This is where the Michigan Pre-Seed Capital Fund comes into the picture.
Q Are some sectors of the economy
more prone to receive funding from the Michigan Pre-Seed Capital Fund? A No. There is no industry sector more prone than the other. People do, however; have different expectations for Pre-Seed companies in different industries. For instance, life science companies have a longer period to profitability and the Pre-Seed capital is therefore much harder to raise. On the other hand, IT companies can go a very long way with $500,000 to $1,000,000. So, the industry typically dictates funding stages in terms of length and capital requirements.
Q Could you give us some statistics on
statewide Pre-Seed funding? A The Fund is starting its fifth year. We’re proud to say that we Q have made 52 investments in 50 companies over the course of four years, all over Michigan. As part of our mission, we want to cover all of Michigan, and have made an investment in almost every Smart Zone to date. Nearly 200 companies have expressed interest in funding, 100 have gone through the in-depth application process. The companies funded through the Michigan Pre-Seed Fund employ 285 people.
Q What are your expectations for
entrepreneurs getting funding? A We aren’t a grant or a handout, we expect a return. Our primary goal is to get companies up, running, and growing. We also require a matching investment from another source; this is a great way to ensure that venture capitalists or angel investors back the idea or product and put the spotlight on the entrepreneur’s ability to fundraise efficiently. Thanks to these expectations, we have seen stellar performance on the part of these companies. Five have already paid their investment back in full, plus interest, and including capital gains. This success has prompted national interest in how our program is run.
Q What is your hope for the future of the Pre-Seed Fund? A We’re well on our way to becoming fully self-funding. In order to get there, we need another large grant to push us through to 2013. After that, we’re confident that the returns on our investments will be fed back into the fund and be self-sustaining.
We would love to invest in more companies. Currently, we are funding at a rate of about one a month, and the region has experienced a tremendous and exciting uptick in entrepreneurial activity. In the end, the Fund would like to see the private sector fund more and more projects and help Michigan startups move forward.
Skip has nearly 10 years of experience in financing and investments. Prior to joining Ann Arbor SPARK, he was the managing general partner at the Ralph Wilson Equity Fund, a $31 million fund-of-funds with investments in five venture capital funds and six co-investments.
The Evolution of Open Innovation Open innovation may seem unsuited for a marketplace
where intellectual property and product differentiation are key factors of success. Yet, companies can no longer afford to be castles unto themselves. Supporting a large internal R&D capability is costly and not always productive. In a knowledge economy, ideas come from a variety of places and the ability to bring them to market is easier than ever. Many large companies are now seeing the value of bringing open innovation into their processes. Open innovation can also help small businesses. With no access to a large R&D organization, small companies have begun to reach out through technology and crowdsource ideas, creating business models that reinterpret open innovation in new and powerful ways. To understand some of the new models being developed, it is helpful to see examples of open innovation in its three platforms: outside-in, inside-out, and multi-sided.
Outside-In Proctor & Gamble (P&G) is a good example of a large company that has pursued a strategy of open innovation to reinvigorate itself. Its strategy was to bring in new ideas from the outside, allowing its sizeable R&D department to focus on the fast development of those ideas. P&G created three conduits to the outside that helped it develop new product innovations. The first was to harness senior scientists as idea scouts. Through relationships with universities and smaller companies, P&G is able to hunt down new technology and approaches that solve internal R&D challenges. Second, the company harnessed Internet platforms to access networks of problem solvers around the world (see www.innocentive.com). And, last, P&G continues to capitalize on retired scientists and engineers who hold a wealth of knowledge and are eager to share it (see www.YourEncore.com). 11
After just ten years of open innovation, Proctor & Gamble sources more than 50% of its innovations from outside partnerships. R&D productivity has jumped significantly with only a modest increase in spending. Partnering with the outside builds better ideas and provides an efficient way to create greater value. Inside-out In the late 1990s, Amway scientists, working on a best-inclass water-purifier system, had to solve the difficult problem of electrically powering a system in a small plastic housing filled with water. In response, the technical team developed “inductive coupling energy transfer” or wireless power transfer. The potential to power anything that previously needed a cord was too good an idea to apply to just this one water-filtration system. To that end, Amway pursued an inside-out model by creating a separate company, Fulton Innovation, to both develop and license out this intellectual property and technology, creating another source of income from initial R&D discoveries (see www.FultonInnovation. com). Now, Fulton Innovation has partnerships in many industries that apply the technology including computers, mobile phones, household durables, and commercial furniture. Multi-Sided Platforms You will never hear Apple say its innovations come from anywhere except Apple. However, Apple has created a platform through iTunes and i-products (iPhone, iPod, iPad) that harnesses open innovation in a much different way than those mentioned above: using its customer base as an R&D asset. As such, Apple has created a multi-sided open innovation platform. The app market on iTunes shows the power of platforms by connecting an endless pool of programmers with quirky ideas that would have been too small to commercialize at Apple. The product platform allows these small ideas—or apps—to have access to a huge audience, where they can be purchased and run from the product platform. Apple has created a great deal of value for itself, its customers, and anyone who has an idea and the ability to program it. Conclusion Companies big and small are benefiting from the power of open innovation. Outside-in and inside-out innovation work well within many companies’ current business models. Multi-sided platforms, however, take open innovation to a new level and make it an integral and interdependent part of the business model. Over the next 10 years we can expect to see many new platforms emerge, enabling world-changing innovations to enter the market. Seth Starner is Business Innovations Manager at Amway Corporation. Twitter: @SethStarner Blog: LibrarySushi.posterous.com
Pictured: (Left to Right) Roger Jansen, Mark Bissell, Matthew Haworth, and Hank Meijer discussing the positive impact of family-owned businesses in West Michigan.
issues related to business ethics, governance, succession planning, leadership, and sensitivity to public policies and regulations provide rich opportunities for research. The Institute collaborates closely with the Family Business Alliance, a partnership between the Grand Rapids Chamber of Commerce and the university, to share the expertise of GVSU faculty with regional familyowned businesses.
Family-owned businesses play a critical role in local, national, and global economies. Grand Valley State University’s Family Owned Business Institute’s (FOBI) mission is to promote, preserve, influence, and impact family businesses through quality academic research, curriculum, and information services. To that end, FOBI supports rigorous academic research relevant to the creation and sustained success of family-owned businesses. Unique
As part of its research mission, the Family Owned Business Institute created the Research Scholars Program to underwrite the conducting of original, quality research. This research involves a broad range of issues and methodologies including theoretical, empirical, and case studies. FOBI research scholars are expected to disseminate the results of their research through meetings, seminars, publications, and classrooms. The Family Owned Business Institute continually builds upon West
Michigan’s remarkable heritage of family-owned business innovation, entrepreneurship, and leadership. This May, the Institute hosted the annual Family Enterprise Research Conference (FERC) at Grand Valley’s Seidman College of Business. This conference is dedicated to cultivating an international community of scholars interested in conducting research to improve the understanding of familyowned business. West Michigan’s unique business environment has a high concentration of successful family-owned businesses that are critical to the region’s economic development. Several of these businesses are successful on the world stage. By providing support through research, curriculum, and knowledge management, the Family Owned Business Institute serves to develop, retain, and expand the influence, as well as the recognition, of family businesses. www.gvsu.edu/FOBI 12
MAREC MAREC, the Michigan Alternative and Renewable Energy Center, is a business incubator that provides a variety of services necessary to the creation of viable alternative energies. As a research and development center, it links business, education, and government resources for the development and commercialization of existing and new renewable energy technology. MAREC produces much of its own electricity and allows people to use it to recharge their electric cars. Its mission is to serve as an economic development catalyst and business accelerator. MAREC’s Business Incubation Program recruits alternative and renewable energy entrepreneurs and business startups. MAREC provides 4,000 square feet of space for start-ups, along with knowledge and support resources. The program works collaboratively with others engaged in similar R&D efforts, develops mentoring relationships, promotes educational opportunities, and uses GVSU resources and student talent to support entrepreneurs. Through its partnership with the Michigan Small Business and Technology Development Center™ (MI-SBTDC™) and its on-site staff presence, MAREC offers conferences, workshops, training, and individual consultation to entrepreneurs. MAREC’s director, Arn Boezaart, promotes alternative and renewable energy technology as an opportunity for economic development. Accelerating the research and development of new technologies is central to the center’s mission. Over the past 18 months, multiple business-oriented programs have been offered at MAREC, from workshops to consulting. The dedicated community of entrepreneurs housed under MAREC’s solar roof is growing. The renewable energy incubator serves these current tenants: Smart Vision Lights, Logical Lighting Systems, Energy Partners, and McKenzie Bay International Ltd.
Located on the area formerly known as Edison Landing, the revitalized brownfield site hosts the state-of-the-art MAREC building. The Muskegon Lakeshore SmartZone, established in partnership with the Michigan Economic Development Corporation, the City of Muskegon, and Grand Valley, was one of the state’s first SmartZone areas designated to encourage development of new technology. MAREC is the realization of the SmartZone vision of the State of Michigan and the culmination of a cooperative effort involving the following organizations: • Grand Valley State University • The City of Muskegon • Michigan Economic Development Corporation • Muskegon Chamber of Commerce • Michigan Public Service Commission • Muskegon Area First • Muskegon Community College • Community Foundation for Muskegon County www.gvsu.edu/MAREC
Entrepreneurial Pursuits Entrepreneurial Pursuits
His idea for Chext occurred when Ryan Montgomery realized that finance-related disagreements with his wife were easily avoidable through communication. Instead of dealing with such problems after the fact, Montgomery invented Chext, a mobile tool that promotes day-to-day financial communication that helps couples actively communicate through text messaging. It’s all about transparency. With bank-level security, Chext is a real-time checkbook that doesn’t need to be balanced. It’s simple to understand and operate, and the results are immediate, reporting the balance of a checking account in real time. Stopping for gas on your way home? Text 42.50 Gas and your balance will be updated instantly. Even if a couple has separate checking accounts, Chext makes each person accountable for adhering to budgets and achieving common spending goals. That way, if an unexpected purchase looms, people can stop themselves from buying something before they break their budget. Parents are also adopting Chext as a way to educate their teens and get them to communicate about their financial transactions. Since most teens are very comfortable with texting, it turns an otherwise touchy topic into a no-stress learning tool. Chext requires no software or hardware and works on any phone in the US and Canada. It is instantaneous and secure. So, for example, when your mother sends your son a birthday card, he’ll text +50.00 Thanks Grandma. Both you and he will get an updated balance: bal +375.00. That night, when he’s enjoying himself with friends at a restaurant, he’ll text -15.00 B-Day Grub, with his new balance returned at bal +360.00. This way, you can give him some breathing room while he feels empowered to make his own spending decisions. The transparency that Chext provides can be invaluable in improving relationships and promoting shared responsibilities.
K-12 Ram Cafe Business Management Independent Study and follows one of many tracks, including sales, inventory control, marketing, and expense analysis. Last year, the Ram Café generated a net profit over $5,000, with sales exceeding $40,000. The students take their jobs very seriously and are responsible for all the core functions of the business.
Walk into the Ram Café at Rockford High School and you will see firsthand the power of a student-run small business. During lunch, a talented student plays the guitar with a glass full of dollar bills nearby, a busy barista serves a delicious peppermint hot chocolate, and a group of teens lounges and chit-chats. Students from the media center get a quick beverage before sitting down to study. During the slower hours of the day, a Spanish
class uses the café to engage in a real-world conversational situation, while other students check out school netbooks to do homework. Operated by 60 students, the coffee shop is open from early morning to the end of the school day. The Ram Café, directed by Peggy Schoenborn, is a hands-on way to show students how a small business is managed. Each student enrolls in a
Collegiate Varsity News Network
Varsity News Network (VNN) covers all sports at a given high school, not just football, basketball, and the usual media attention-getters. Launched by Ryan Vaughn of GVSU and Matt Anderson of Saginaw Valley State University, it serves as a network of high school sports publications. The idea came to Vaughn in 2009 and brewed for almost a year until he was accepted into the 12-week Momentum-MI seed accelerator program in 2010. Vaughn partnered with Anderson, a “heck of a designer” and hit the ground running. After its first year in existence, VNN generates more than a million page views per month and continues to grow. Through VNN, athletes get recognition and have a reliable source to read up on fellow athletes’ performances.
After closing a register, two financetrack students count bills and update the ledger before locking up the cash in the school safe. Students are expected to be proactive and must submit an original idea to improve the café every week. From decoration to product offerings and charity fundraisers, students have built the Ram Café into a highly successful student-operated business. It shows that Rockford High School understands the power of hands-on, experiential learning and that Rockford students are eager to get involved.
for the local community. It also allows schools to involve media students in the creation of articles, pictures, videos, and more, providing them with real-life media experience.
Parents love the fact that less-visible sports can also have a spotlight. VNN provides schools with consistent, highquality branding and a rallying point
Being a collegiate entrepreneur is a challenge and a blessing for Vaughn. “It’s difficult to juggle your course work with your VNN workload,” he says. “It’s very easy not to care about school when you get a taste of what your business can offer you.” But the partners stuck it out and earned their degrees. They plan to expand their service to all Michigan schools in the next year and to go national in 2013. Courage, determination, ambition, intelligence, and agility are traits of a good athlete. They’re also qualities that helped VNN’s founders become collegiate entrepreneurs.
Venture GRAM The next big pharmaceutical breakthrough could be produced in downtown Grand Rapids. Grand River Aseptic Manufacturing Inc., located on Grand Valley’s downtown Pew Campus, will soon be filling sterile injectable drug products for the biopharmaceutical and pharmaceutical industries. Its building is often referred to as the “GMP facility,” a name referring to Good Manufacturing Practices (GMP), the manufacturing and testing guidelines mandated by the FDA for the pharmaceutical, diagnostic, medical device, and food industries. Grand River Aseptic Manufacturing began in 2006 as a joint venture between the Van Andel Institute and GVSU, after the need for a pharmaceutical manufacturing facility geared towards producing smaller batch sizes was identified. As the FDA’s
www.grandriverasepticmfg.com scrutiny of clinical trials has increased, many pharmaceutical companies are now opting to outsource the development and production of new products. Currently, there are very few pharmaceutical contract manufacturers positioned to address the stringent requirements of pharmaceutical contract manufacturing. Jerry Arthur, CEO and chairman, believes the company will be well received by the pharmaceutical industry. “The pharmaceutical world will embrace a company that fills their product right. In this industry, it
Lifestyle Marie Catrib’s
can be challenging to find a contract manufacturer that will truly work with you, and that is how Grand River will set itself apart from the competition.” Over the last year, Grand River has added 11 full-time positions and has plans to add three additional full-time positions in 2011. “What is really going to make this company a success is the team. So far, the Grand River team has proven itself to be extremely cohesive. I’m very excited to be a part of this, and I know that the team is excited to be a part of the growing life-sciences community in Grand Rapids,” Degen said.
www.mariecatribs.com The vibrant atmosphere at Marie Catrib’s restaurant, bakery, and delicatessen reflects Marie Catrib herself. This isn’t a push-along franchise; it’s a local attraction. Regulars hug her as they come in before diving into menu items and specials. All her patrons are faced with a terribly good problem: a wide range of sandwiches and entrées, Marie’s famous seasoned potatoes, and many vegan and gluten-free options, as well as mouth-watering desserts, all prepared by the engaging and unique Marie and her team. Marie, originally from Lebanon, her two sons, a small army of 38 employees, and appreciative customers make the small restaurant come alive. She says that one of her sons warned her of a six-month honeymoon period when they first opened, during which customer activity might be misleading. But even he affirms that six years later, it still feels like a honeymoon. Marie takes the idea of a lifestyle business
seriously; she’s in the kitchen from 5:45 a.m. to close Monday through Saturday. After moving from Michigan’s upper peninsula to go to culinary school at the New England Culinary Institute in Vermont and then working in North Carolina and Wisconsin, Marie Catrib has found a home in Grand Rapids. Her desire to create food from scratch and to offer homey, yet eclectic, dishes brings families and friends around the table again and again. Even the LEED-certified building at the corner of Lake Drive and Diamond is distinctly Marie; it’s decorated beautifully and reflects her bubbling imagination. The whole place shows how Marie has managed to balance her work with her lifelong passion for great food.
Social MI Raza MI Raza president Mayra Martinez is a role model for the Hispanic Community of West Michigan. She was recently named to the Grand Rapids Business Journals 40 under 40, in recognition of the role she plays in promoting and supporting Hispanic and minorityowned businesses in the region. A Latina business owner herself, Mayra runs a successful family chain of three Mexican restaurants, in addition to catering the family’s culinary authentic cuisine. True to the calling of the social entrepreneur, she thrives on harnessing the communitys potential to fill a need. Minority-owned businesses face unique problems, both cultural and linguistic. Maya recognized the common need among her peers to address those challenges, so she established connections within the Hispanic
business community. As the President and Founder of MI Raza, Mayra wants to ensure that the organization promotes the growth of Hispanic businesses, while ensuring that they remain true to their cultural heritage. MI Raza helps minority owned businesses break barriers and find success through a variety of educational programs and resources. The organization offers customized learning and education training workshops. From computer literacy classes to workshops on how to start a business, the educational series are taught by a team of experienced facilitators and business consultants. Beyond training, MI Raza ensures that networking opportunities are made available to their members. Mayra is proud that aspiring minority entrepreneurs can learn from
Family Crane Orchards
Only four miles off the expressway, Crane’s Orchards brings you back to times past. Upon entering the pie pantry and restaurant, a fragrant mix of Michigan cherry pie and hot apple cider fill the air. Behind the counter, Lue Crane shows off one of her umpteen varieties of pies, cheerfully made by an experienced team of chefs. The West Michigan institution’s distinct food and atmosphere makes it a destination spot for people from Chicago to Detroit. Visitors come to indulge in a cup of homemade chili with a grilled cheese sandwich in the winter months. And
the experiences of MI Raza mentors. Less than a year old, MI Raza has over 70 members and continues to grow. Two new groups have even branched out under MI Raza’s umbrella: The Alliance for Entrepreneur Latinas which is dedicated to providing support and networking opportunities to businesswomen, and the Latino Leadership Group to unify the voice of Latino leaders.
Crane’s Orchards comes alive in the summer and fall, when apple, cherry, or peach picking competes for visitor attention with their corn maze and homemade donuts. Crane’s is proof that a great place can draw crowds even in a relatively remote location. Owned and operated since 1880 by the Crane family, the fully functional farm entered a time of crisis in the mid 70’s, during which it struggled to survive. In debt, selling apples as a wholesale commodity, there was little hope for the family farm to continue without change.
In the late 1970’s, Lue and her husband Bob bought a cider press and donut machine in Holland, in an initial effort to diversify. She then tasked herself with selling apple pies, an effort which did not start well. Her first batch was so bad her husband took them to the back of the property and buried them. However, Lue was stubborn, and so she tried again with an improved recipe, and the rest is history. Her latest pies are wildly popular, and can be found at the orchards or in their downtown Holland shop.
July 25-29, 2011 The Michigan Green Technology Entrepreneurship Academy www.migtea.org
(GTEA) is an innovative, intensive 5 day course designed as a springboard for moving new cleantech ideas out of the university lab. The program is tailored specifically for science and engineering faculty, post docs and PhD students who want to learn how to commercialize their research, prepare for a career in the industry, or take the first steps toward launching a brand new venture. Attendees will experience a rigorous training course in entrepreneurship best practices that combines lectures and readings with active, hands-on participation, mentorship and networking. We are looking to demystify the commercialization of technology and the development of an early stage business. GTEA cultivates success by setting up a support network of top tier mentors and national instructors that will persist long after the training. Researchers will receive an in-depth view of how to validate their technol ogy, their market and their business as well as learn how to build a team and their company. They will also receive guidance on such key topics as how to protect intellectual property and how to raise investment capital.
May 03, 2011 Empowering Entrepreneurship
May 04, 2011
World Trade Week West Michigan
May 06-08, 2011
Family Enterprise Research Conference he Family Enterprise Research Conference (FERC) will be in Grand Rapids in May, 2011. FERC is an international conference of academic scholars dedicated to research in the field of family enterprise. The central research topic for the May conference is entrepreneurship and innovation in the family-owned business. Globalization, women as leaders, and multigenerational issues will also be addressed.
May 18, 2011 EPIC Awards
May 18, 2011
West Michigan Entrepreneur Celebration
May 19, 2011
The Michigan Lean Startup Conference Presented by Momentum, the Michigan Lean Startup Conference is an event designed to unite those interested in what it takes to succeed in building a lean startup. The day long event will give startups, aspiring entrepreneurs, technology professionals, investors, educators and entrepreneurial stakeholders the opportunity to hear insights from national leaders in the lean startup movement and learn what it takes to build a lean startup.
June 20-24, 2011 Teen Entrepreneurship Summer Academy (Grand Rapids)
July 11-15, 2011
Teen Entrepreneurship Summer Academy (Holland)
July 18-22, 2011
Teen Entrepreneurship Summer Academy (Muskegon)
July 28, 2011
Momentum-MI Demo Day
Center for Entrepreneurship & Innovation 401 Fulton Street West, Suite 272 C Grand Rapids, MI 49504 www.gvsu.edu/cei
Published on May 10, 2011
The main theme of this issue is start-up funding: what it is, where it comes from, and how to get it. We hope you enjoy this second issue of...