Biotech is a bust in Michigan, because there's no capital to fund new ventures. At least that's the story coming out of the latest "Biotech Connect" forum that the Van Andel Institute hosts every quarter. Of course, anyone following the capital markets knows that that there is a glut of cash looking for good -- hell, even bad -- investments to put it to work and gin up returns as lousy as 10-11%. There are private equity firms, hedge funds, and venture capitalists with pockets full of cash just around every corner -- except apparently in Michigan. So is the lack of capital to invest in biotech, the latest darling of the money men, really the problem?
It is true that Michigan doesn't have as deep a pool of investment capital as there are on the East and West Coasts. It is also true that investors have general preference for putting money into ventures nearer to home. That's one of specific beefs voiced by "Biotech Connect" attendees. As Jack Luderer, executive director of Western Michigan University's Bioscience Research & Commercialization Center, put it (according to Grand Rapids Press reporter Julia Bauer): "The rule in the venture capital world is, the partners want to be home for dinner." Well, who doesn't? But that doesn't stop VC's, the PE guys, or the khaki-slacked hedge fund masters of the universe from pumping their cash into businesses half a continent away. In fact, it is only angel investors, the fellows that focus on the raw start-ups to make micro-investments, who really stick close to home as a matter of principle.
The fact is geography is not a serious barrier to raising capital for biotech ventures in Michigan. The real problem is that investors don't like what they see. That doesn't necessarily mean there are no good biotech ideas coming out of Michigan, but there may well be a dearth of managerial talent that investors want to see behind those ideas. Now that's where geography often plays an important role. Industries tend to cluster in a region, and Michigan is not a biotech cluster. So biotech business managers are elsewhere. But even that can be overcome with the right price, but who will pay that price?
Well, certainly a true believer in Michigan's promise as a biotech mecca who has a $3 billion family fortune backing him. And if that person happened to be running a large medical research institute, he would seem to be particularly well-placed to fix the problem of putting together the cash that would attract the biotech managerial talent who would in turn give far-away investors (you know, the money men in exotic locales like Chicago, Cleveland, and Pittsburgh) the confidence to back Michigan biotech companies. Fortunately, folks, there is just such a person right here in our own backyard: David Van Andel, chairman of the Van Andel Institute and scion of the Amway fortune.
So when Van Andel tells his fellow "Biotech Connect" attendees that all West Michigan needs to reach a "critical mass" of biotech talent to attract investors, I say that's simple enough: "Show me the money, Dave!" (Unless, of course, it's not there.)