LANSING – Businesses would potentially be able to get venture capital funding earlier in their development process and the state could see more venture capitalists under a proposal unveiled Wednesday to the Strategic Fund Board.

Under the plan, $6 million of the funds that had gone through the Strategic Economic Investment and Commercialization Board for grants and loans would instead go to venture capital funds. The money would be used for investment in earlier stages of companies and to allow companies to attract the talent they need to bring technology to market.

In addition to providing investment funds, as the Strategic Fund has done for venture capital funds in other areas, the plan would provide additional administrative fees to those funds to allow them to hire additional staff.

“The goal would be better vetted deals and better funded deals,” said Ned Staebler with the MEDC. He said the plan would arguably provide more investments at a lower cost than the peer review process currently used by the strategic board.

“This is a way to get the VC community working with startups,” said Greg Main, CEO of the MEDC. “Otherwise they don’t have the capacity.”

More details on the plan, including a name for the proposal, are expected at a future Strategic Fund Board meeting, Staebler said.

But he said the goal of the program is to invest in as many as 25 companies with the hopes that up to 10 of them will be successful and provide a return on investment. Allowing venture capital funds to hire new staff could also provide the state with as many as 10 new venture funds as those people eventually strike out on their own, he said.

Staebler said the change could be allowed as part of changes the MEDC needs in the 21st Century Jobs Fund statute. The statute requires $25 million be funneled through the SEIC Board this fiscal year, but the budget for the total program is only $28 million. When the other line items are considered, there is not enough in the budget to meet the funding required for commercialization competitions.

Staebler said the MEDC is hoping to put the majority of the money into the Centers of Energy Excellence program, which aids development of alternative energy companies that have developed partnerships with state universities.

BUSINESS SUCCESS/FAILURE: The board also dealt with a success and a failure Wednesday in modifying two loans it had made earlier.

The board agreed to write off at least $100,000 of a loan to Phios, a Livonia-based contract research company that had been provided funds under a program designed to keep former Pfizer Company scientists in the state.

The company has essentially failed and MEDC officials said they were not able to find a buyer for the company or any of the technology it had developed, leaving it in default on the $150,000 loan. So officials had confiscated equipment purchased with $50,000 of that loan (the remainder was used to cover initial wages for two former Pfizer employees) and hope to recover some of the funds through sale of those assets.

On the other end of the scale, the board agreed Wednesday to subordinate some of its interests in Accuri Cytometers Incorporated of Ann Arbor to allow the company to obtain additional financing from Silicon Valley Bank and continue growth.

Accuri, which sells flow cytrometry devises for medical research and diagnostics, has a $2 million loan through the 21st Century Jobs Fund.

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