More than 40 early-stage companies seeking venture capital and hundreds of representatives of VC firms played the business Dating Game this week at the 30th annual Michigan Growth Capital Symposium.
The companies broke down into four categories — clean tech, information technology, life sciences and medical technology.
The event began Tuesday afternoon with the first of 41 company presentations, and concluded Wednesday with keynotes, panel discussions and more company presentations.
The morning keynote came from Reidar Langmo, founding partner and CEO of Novus Energy Partners, a cleantech venture firm with offices in Oslo, Norway and Washington, D.C.
He also led Renewable Energy Corp., the world’s most successful solar energy stock offering and its dominant player, with an $8 billion market capitalization.
He said that despite a global glut of solar energy capacity, REC remains successful, thanks to a 16-fold increase in productivity since its production began in 1997. It opened the world’s largest solar panel wafer plant last year in Singapore. Recent well-publicized problems with older forms of energy — the BP oil spill in the Gulf of Mexico and the Fukushima nuclear plant disaster in Japan — have also helped boost solar power.
“Solar markets are huge, global, and while they are still driven by political incentives, self-sustainability is getting closer every day,” Langmo said. “The key drivers are cost, cost and cost, and capital to improve productivity is the key.”
He also said China is gaining speed as the dominant player in the industry.
Later Wednesday, a panel discussion on VC opportunities in pharmaceuticals and medical devices said many U.S. startups are now simply targeting European regulatory approval, because it is comparatively easier to obtain than clearance from the U.S. Food and Drug Administration.
Rebecca Robertson, managing director of Versant Ventures, said she was a “huge long-term optimist” about investing in health care — but that for the time being, the average sale price of venture-backed startups was stuck at $100 million to $150 million, while the average venture investment has risen from $10 million in the early 1990s to $42 million today, and the average time to sale has grown from seven to 10 years, meaning overall rates of return are down.
Michael Wasserman, partner at H.I.G. BioVentures, also expressed long-term optimism, saying he believes the current era of life sciences investing will be looked back on as the most profitable ever.
Austin F. Noll III, CEO of Simpirica Spine, a spinal implant firm in California, said he’s now in the midst of raising a third round of venture money, and his investors are seeking “clarity from the FDA” as to the marketability of the device in the U.S. He’s close to marketing it in Europe.
Robertson also said her firm today is looking at medical devices with “meaningful clinical results” that don’t require full-blown FDA review, and “small ball” investments in which single products, rather than entire companies, are developed.
Panelists said health care reform would mean more attention to cost benefits in new medical devices and pharmaceuticals.
David Brophy, University of Michigan finance professor and the original creator of the symposium, told a luncheon crowd of how both the Silicon Valley area and Boston developed tech clusters.
In postwar California, officials at Stanford University got sick of a postwar “brain drain” to the Midwest, and looked at the property they had been given by Leland Stanford. “They couldn’t sell it, but they could lease it, and they could lease it for nothing,” Brophysaid. And so they started leasing it to their recent engineering graduates to start new companies — the most famous of which were named Hewlett and Packard.
In postwar Boston, southern states’ right-to-work laws quickly emptied Massachusetts of manufacturers, and Boston’s bankers and universities took similar steps to foster the creation of the Route 128 corridor.
“In the Midwest we had no time for that stuff, we were fat and happy cranking out cars,” Brophy said.
Well, until the 1970s gas shocks, when customers turned en masse to small, high-quality Japanese cars, and Detroit would take decades to catch up.
Brophy’s studies of the struggling Michigan economy in the late 1970s found a dominant industry that kept its technological innovation to itself, universities that had no motivation to foster the birth of young companies, and an underdeveloped banking system. So he decided to host a symposium on venture capital — which was then a foreign concept in Michigan. The first event was held March 27, 1980.
The afternoon keynote from Jay Hoag, UM MBA grad and founding general partner of Technology Crossover Ventures, presented a review of the venture capital world in the decade 2000-2010, which he called “a pretty crazy decade, and not in a good way.”
He presented graphs showing 163 technology IPOs in 2000, which plunged to only a handful in 2001 and recovered to no more than a quarter of its peak the rest of the decade.
But he said tech startups remain a huge deal — just ask the 700 million people on Facebook, the 600 mllion on Skype, the 400 million on YouTube or the 100 million on Twitter.
He said that as the tech universe has evolved from PCs to the Internet to the mobile Internet, with each innovation, the opportunities get bigger.
And he said VCs hit enough home runs to make up for their many strikeouts. Of the 1,700 tech IPOs since 1980, Hoag said, 34 percent are trading above their IPO value. The rest are either trading below their IPO price or don’t exist any more. But the top 50 of those 1,700 startups, Hoag said, created more than a trillion dollars in market value.
“So to me it’s the law of big small numbers, which is what the venture business is about,” Hoag said.