Opinion: Getting over the start-up hump
It’s difficult for a startup to secure an initial capital contribution, but it’s even harder for a startup to begin generating revenue after that first round of financing. Ninety percent of companies fail in the first three years of this stage in the startup process, aptly named “the valley of death” due to how the decline in cash flow appears in the various stages from concept to commercialization. But it doesn’t have to be this way.
When we support startups in their earliest stages, we can help them traverse the struggles and complications that occur and help them make it out alive with their businesses still intact. Here in Michigan, that’s exactly what we’re doing.
We recognize the challenges startups face are many. Getting off the ground means incurring operating costs from procuring staff, offices and materials; at the same time, additional financing is often not available to help reasonably manage these expenses, nor is mentorship on how to most efficiently use existing capital and resources.
Angel investors and venture capitalists prefer proven business models before they invest, which forces startups to rely on the initial funding they secured to support them until the moment they are bringing in sufficient revenue from customers. This funding gap means many innovative, potentially world-changing startups are stunted or fail.
With this potential reality in mind, business accelerators and support networks have formed in our state across both peninsulas. Some involve our local students, others involve famous athletes. All are delivering a crucial service to our state.
The Michigan Economic Development Corp.'’s (MEDC) Entrepreneurship & Innovation initiative has seen the hard work — and the difference made — by these groups and is proud to support many of them. Michigan business accelerators have supported the development of nontoxic bioinsecticides; the creation of a genomic search engine that helps geneticists make quicker, more accurate diagnoses; and the invention of software addressing food security and sustainability by simulating scenarios for crops in any environment around the world — among many others.
These ideas are monumental in potential impact, but they might not be here without the support of Michigan accelerators. Even great ideas from great entrepreneurs can fall victim to the entrepreneurial valley of death when they don’t have sustained funding.
Having these accelerators in place is crucial to Michigan business now and for the future. Accelerating startups can accelerate the growth and restoration of our cities, communities and families. Southeast Michigan has historically been the epicenter of Michigan business, and our large research universities have historically been hubs for supporting early-stage startups, but innovative entrepreneurial ideas can come from anywhere.
Entrepreneurs across our state need localized support and resources to make it through, and that has increasingly become a priority. The MEDC Entrepreneurship & Innovation initiative is helping organizations like the Michigan Translational Research and Commercialization Innovation Hub for AgBio increase its presence in areas underserved by business accelerators. Our goal is to ensure no promising idea fails because entrepreneurs could not find the resources needed to bring their startup to commercialization.
We can ensure promising startups have access to early-stage funding and resources, no matter where they live or what their background is. That’s good for our entire state. When we support Michigan startups, we develop our state as a hub for business and ideas, both now and for the future.
Denise Graves is university relations director at the Michigan Economic Development Corp.