Sec. 27. (1) The Michigan early stage venture investment corporation shall publish and make available on the Internet an annual report not more than 3 months after the close of the Michigan early stage venture investment corporation’s fiscal year that includes all of the following:
- An enumeration of all investment and related activities for the fiscal year.In fiscal year 2015, ending on December 31, 2015, the Venture Michigan Fund, incorporating both the Venture Michigan Fund I and the Venture Michigan Fund II:
- There were no new commitment to underlying fund managers. The Venture Michigan Fund is fully committed.
- $22.1 million was drawn by underlying fund managers in the Venture Michigan Fund.
- $8.0 million was distributed by underlying fund managers in the Venture Michigan Fund.
- Documentation and analysis of the implementation and status of the Michigan early stage venture investment corporation’s investment plan and the economic impact of the plan on this state, including, but not limited to, the following:In March 2016, the Venture Michigan Fund undertook a survey from the underlying fund managers in both Venture Michigan I and Venture Michigan II to ascertain impacts to Michigan associated with their investments. This survey specifically asked each fund manager in the Venture Michigan Fund:
- Number of Michigan-based investments made
- Total dollars invested in these companies to date
- Total amount invested by all other investors in these Michigan companies since the date of the fund manager’s first investment in said companies
- Investment reserves, if any, associated with these Michigan company transactions
- Number of full time equivalent Michigan employees in these companies at the time of investment – as well as number currently employed (or employed at the time of exit)
- Number of professionals (investment or otherwise) employed by the underlying fund managers in Michigan
- For the Michigan investments and relating to expenses in the State: salary, payroll and other taxes, operating expense, capital expenditures, and legal/audit expenses
The following responses are the aggregate summing of the responses provided directly by the fund managers in the programs.
- The number of jobs represented by the investments made in qualified businesses in this state.As of March 1, 2016, 1,453 people are employed in Michigan associated with investments made by the Venture Michigan Fund underlying fund managers.
- Return on investment generated by investment, the types of activities in which investment was made, and the impact of that investment on the economic base of this state.
- Fund Managers in Venture Michigan Fund I (“VMF I”) and Venture Michigan Fund II (“VMF II”) have invested $187.3 million to 46 unique portfolio companies. Note there are several Michigan companies that have received investments from fund managers in VMF I as well as VMF II. Any potential overlap in metrics has been accounted for in the following data.
- The total amount invested in these portfolio companies from VMF managers and other investors in the syndicate was $1.2 billion, representing a 6.28x leveraging effect to Venture Michigan Fund Investments.
- Total jobs positively impacted across the 46 companies has been 1,453, up from 692 at entry, an increase of 109.8%
- The VMF fund managers directly employ 35.25 FTE employees in Michigan
- Approximately $185 million in cost of goods sold were appropriated in the State of Michigan
- The approximate payroll expense for the VMF I and VMF II underlying fund managers and the subsequent portfolio company employees was approximately $147.0 million for the prior 12 month period ending March 31, 2016.
- In total, the positive financial impact on the State of Michigan is approximately $332 million on an annual basis.
Venture Michigan Fund I
- Overall, $1.0 billion of equity has been invested into 31 portfolio Michigan-based companies.1 This represents a 7.58x leveraging of the VMF I’s underlying fund manager investment of $133.4 million.
- These portfolio companies have exposure across the following sectors: life sciences, manufacturing, healthcare, IT, application software and cleantech.
- Life sciences accounts for 55.5% of the investments on a dollar basis as of April 2016. Healthcare IT is second in size at 28.2%, and Application Software is third at 5.5%.
Venture Michigan II
- Overall, $414.4 million of equity has been invested into 22 Michigan-based portfolio companies.1 This represents a 3.72x leveraging of VMF II’s underlying fund manager investment of $111.3 million.
- These portfolio companies have exposure across the following sectors: life sciences, healthcare IT, application software, cleantech, advanced manufacturing and media.
- Healthcare IT being the largest sector on a dollar invested basis as of April 2016 at 38.6%. Application Software is second at 22.7%, and Life Sciences is third at 18.3%.
- Return through the fiscal year from investments made by each Michigan early stage venture investment fund in venture capital companies.2As of December 31, 2015, the underlying investment net multiple and internal rate of return of the Venture Michigan I investments were 1.04x and 0.93% on invested capital, respectively.
As of December 31, 2015, the underlying investment net multiple and internal rate of return of the Venture Michigan II investments were 2.05x and 37.45% on invested capital, respectively.
- The number of seed or early stage businesses that have been funded by venture capital companies.Venture Michigan Fund I (“VMF I”) and Venture Michigan Fund II (“VMF II”) have invested $187.3 million to 46 unique portfolio companies.
- The aggregate net distributions made to each fund by the venture capital companies that have entered into agreements with each Michigan early stage venture investment fund through the end of the fiscal year and since the inception of each Michigan early stage venture investment fund.VMF I distributions during calendar year 2015: $7.3 million
VMF I distributions since inception: $21.8 million
VMF II distributions during calendar year 2015: $0.8 million
VMF II distributions since inception: $6.6 million
- The total amount invested by each Michigan early stage venture investment fund in venture capital companies.3VMF I: $133.4 million equity has been invested into 31 portfolio Michigan-based companies.
VMF II: $111.3 million of equity has been invested into 22 Michigan-based portfolio companies.
- Any upcoming use of tax vouchers that is certain and the timing of that use.Venture Michigan Fund I: It is currently anticipated that during the State’s 2017 fiscal year there will be a need for $40 million of mandatory tax vouchers to be used, pursuant to the amended loan agreements.
- An estimate of the potential use of tax vouchers over the 5-year period following the end of the fiscal year.Venture Michigan Fund I: In addition to $40 million of tax vouchers to be used in the State’s 2017 fiscal year previously referenced, there is a possibility that there will be up to $20 million of tax vouchers used during fiscal year 2018 and up to $23.4 million during the State’s 2019 fiscal year depending on the timing of proceeds of VMF I.
Venture Michigan Fund II: Based on the latest forecasts, it is currently projected that the first year of tax voucher usage for VMF II will be the State’s 2020 fiscal year. Over the next five years (calendar year 2016 through calendar year 2020), total estimated tax voucher usage would be approximately $71 million (if sold at a 10% discount and total return on the portfolio was 1.0x), with $8.4 million in the fourth quarter of calendar year 2019 and $62.5 million in the first through third quarters of calendar year 2020.
1 This number includes the equity commitment of the VMF fund manager as well as other investors in the syndicate.
2 Past performance is not necessarily indicative of future results. Unless otherwise specifically indicated, returns do not take into account application of management fees, allocable expenses and carried interest, if applicable, at GCM Grosvenor Private Markets level. Returns would be lower if net-of-fee performance was presented.
3 VMF I and VMF II invest in some of the same portfolio companies.