LANSING – The Michigan Strategic Fund Board could begin approving investments in venture capital funds in the coming months after approving Wednesday the strategy for making up to $109 million investments ? a fund that would operate separately from the $120 million Venture Michigan Fund.

Michigan Economic Development Corporation staff are planning a gathering of venture funds for September 21 to provide information on how these firms could invest primarily in promising Michigan technology, security and life sciences start ups.

The MEDC staff also is expected to release a second RFP in September for the Venture Michigan Fund, which also will invest in Michigan Venture Capital companies that in turn will invest in the state?s hottest tech companies. See earlier story MITechNews.Com

The board did not accede to a request by the Detroit Microenterprise Fund to set aside money for those funds assisting one- and two-person businesses, but it did ask that investments be made not only on the expected return, but also on the propensity of a fund to invest in the state’s most economically depressed areas.

“I would hate to see us look back four to five years from now and see no improvement in some of the areas hardest hit by unemployment,” said board member George Jackson.

Essentially, the 21st Century Jobs Fund is itself investing in other funds that loan to or buy stock in start-up businesses, the goal being to provide more money for such businesses.

MEDC officials expected to have a request for proposals issued and a web site to provide additional information in the next couple of weeks.

The board also set a subcommittee to review any investment proposals, which the law requires to be approved by the full board.

EQUITY: The board also directed the MEDC to develop a process to convert Technology Tri-Corridor loans into equity positions. The board did approve an agreement that would convert the current loan to Sonetics Ultrasound Incorporated into equity in 2008, but members grumbled that the move was made under duress.

The company needed a guaranteed equity investor by the end of 2008 to qualify for a $500,000 grant from the National Science Foundation, and officials said that grant would be lost if the board did not approve the change Wednesday.

But board members argued they should have been provided sufficient information to determine whether the change was a good investment. The change did not require any additional funds from the state, but board members were particularly concerned that they would not face collections actions from secured creditors should the company fail.

Expecting future requests from the 44 companies with outstanding Life Sciences Corridor loans to convert those to equity, board members asked for a template from the agency to ensure they have the information needed to judge the wisdom of the change.

Board members also indicated the need to either hire additional portfolio managers or to contract with an outside manager to review those 44 companies. MEDC officials said currently that role is covered by one person, and board members argued that was not enough staff to adequately track those companies.

Jeff Mason with the MEDC said there is also some new revenue coming into that program for the board to again loan or invest. Of $38 million in loans, $5 million has already been repaid and another $30 million is expected to come back in the next eight years, Mason said.

E85: The board also approved Wednesday a memorandum of understanding with the Department of Labor and Economic Growth that would allow $200,000 I federal funds in that department to be used for grants to fuel stations wanting to install E85 or biodiesel pumps. Legislation put the grant program into the MEDC, but the federal grant, only part of the $500,000 maximum under state program, went to the department.

AUTOMOTIVE TECHNOLOGY: The board also approved release of a request for proposals for an automotive technology business accelerator under the 21st Century Jobs Fund. MEDC officials estimate $6 million will be awarded for the accelerator.

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