Detroit: The new model for entrepreneurship?

$55 million VC fund in Cincy cloned on the success here

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Chris Rizik, president of Renaissance Venture Capital Fund

For at least one city, Detroit has become a model of entrepreneurial development.

Dismayed by a study that showed the Cincinnati region ranked behind its metropolitan peers in venture capital attraction and investment, executives at the consumer products giant Procter & Gamble wanted to figure out a way they and other corporate citizens in southern Ohio could help young companies get formed and grow.

For advice, they engaged the consulting firm ofMcKinsey & Co., which said, in effect, don't reinvent the wheel, do what Detroit is doing with its Renaissance Venture Capital Fund.

Members of the organization then known asDetroit Renaissance had decided in 2007 to raise a fund of funds that would invest in venture capital companies that would, in turn, invest in tech start-ups in southeast Michigan.

It would soon prove a lousy time to begin raising money, and if they had any idea the worst recession in 70 years was about to hit, the Renaissance folks probably would have put things on hold. But they managed to raise $45 million, anyway, with corporate investors including the Kellogg Foundation,Huntington Bank, Blue Cross Blue Shield of Michigan, AAA and DTE Energy Co.

It was the first effort of its kind in the nation — large companies raising a fund to invest in start-ups. While there was a sense of community good in doing it, there was a lot more to it than charity.

One, if things worked out, the companies would get a nice return on their investments. Two, they would be able to vet new technologies and better help young companies meet the needs of the marketplace. Three, the big companies would have first dibs on the products and services they had invested in.

Based on the success of investments made from the first fund, fund manager and President Chris Rizik was able to close on a second fund of $60 million in April, broadening his reach to add the Dow Foundation, the McGregor Fund, and three companies from western Michigan, including Meijer Inc.

Success? How about these numbers? The fund invested in three state VC firms and six outside the state. Two of those outside Michigan subsequently opened offices here: Florida-based Arsenal Venture Partners and Illinois-based MK Capital LLC.

 Read the rest of the story at Detroit Make it Here