1. 2.3.

Ann Arbor Spark

Access to Funding

Are you looking for help launching a new product or service? Ann Arbor SPARK can guide you through refining your idea and launching a business. The entrepreneurial services team has multiple programs and resources to help you get started, as well as affordable office space. Complete this form to get started.

Ann Arbor SPARK can help you find the funding you need to grow your company in Michigan.

The company lifecycle graphic is an easy way to find the type of capital that’s appropriate for your stage. Whether you’re a high-tech startup seeking investment from angel or venture capital investors, or a later stage company seeking private equity or bank financing, SPARK can help you navigate the funding ecosystem in Michigan. 

Company Lifecycle and Funding Sources

Please Note: The company lifecycle graphic is a simplification of capital markets and may not apply perfectly to each company or industry. For example, most angel and venture investors only invest in technology companies, not traditional businesses like restaurants, retail, or real estate.

Idea Stage

Founders at this stage spend time and money to formulate their concept, conduct market research, identify target customers, and begin to develop their products or services. There won’t be many — if any — outside investors willing to bet on your new company at this point, so you’ll need to bootstrap, primarily with your own capital (i.e. savings, credit cards, personal loans, etc.). If you’re lucky, you might have some high-net-worth friends and family that are also willing to invest or loan you money. The good news is that if you’re able to successfully bootstrap through the idea stage, an increasing number of capital sources become available later.

Technology companies may have access to various grant funds, usually from public or nonprofit entities with technology commercialization missions, after you’ve made headway on your idea and developed an initial product. Here are some potential grant sources to consider:

  • Business Accelerator Fund: Up to $50,000 that can be used for startup services including legal, accounting, marketing, and business development. 
  • SBIR / STTR GrantsPhased federal grants used to fund research and development (R&D) with the potential for product commercialization, with available funding potentially exceeding $1 million for companies that reach Phase III. 
  • Michigan Emerging Technologies Fund: State grants that match SBIR/STTR federal grants, up to $25,000 for Phase I and $125,000 for Phase II.

Non-tech companies are unlikely to find grant funds and will need to rely on bootstrapping and producing revenue as soon as possible.

Read more about funding resources for idea stage companies.

Startup Stage

You’ve done extensive product R&D, validated your business concept through customer discovery, and developed a prototype — ideally a Minimum Viable Product (MVP). The challenges of the startup stage are to commercialize the product or service, achieve Product Market Fit, and get traction with customers. 

Technology companies in Michigan have access to multiple sources of capital at the startup stage:

  • Business Accelerator Fund: Up to $50,000 that can be used for startup services including legal, accounting, marketing, and business development. 
  • SBIR / STTR GrantsPhased federal grants used to fund research and development (R&D) with the potential for product commercialization, with available funding potentially exceeding $1 million for companies that reach Phase III. 
  • Michigan Emerging Technologies Fund: State grant program that matches SBIR/STTR federal grants, up to $25,000 for Phase I and $125,000 for Phase II.
  • Michigan First Capital Fund: Statewide investment fund, managed by ID Ventures on behalf of the state, which invests $50,000 – $150,000. 
  • Michigan Pre-Seed Fund: Statewide co-investment fund, managed by Red Cedar Ventures on behalf of the state, which invests $100,000 – $250,000. 
  • SPARK Capital: Statewide co-investment fund managed by Ann Arbor SPARK which invests up to $250,000. 
  • Angel Investors: High-net-worth-individuals that invest in startups, often in groups like the Michigan Angel Fund. Michigan has more than a dozen angel groups and thousands of current or potential angels. 
  • Early Stage VCs: Venture funds that invest at the pre-seed and seed stages.

Non-tech companies do not qualify for these funding sources which focus on high-growth tech companies. Many small businesses will need to bootstrap through the startup stage, but some lending sources may open up depending on the company’s cash flow and collateral position, including:

  • MicroloansSmall business loans, usually under $50,000, sometimes government-backed (SBA and CDFI microloans), and sometimes through non-profit lenders like Kiva.
  • Michigan Capital Access Programs: If you’ve reached profitability you might be eligible for support from the Michigan Economic Development Corporation’s (MEDC) loan enhancement programs, making it possible to get traditional bank financing.
  • SBA Loans: profitable small businesses can pursue a loan backed by the U.S. Small Business Administration, which works with banking institutions to provide financing that might otherwise be unavailable. 

Read more about funding resources for startup stage companies.

Growth Stage

You’ve achieved product-market fit, have lots of demand, and you need funding to scale the business. The growth stage is where most venture capitalists invest in tech companies. Venture funds might invest tens of millions in a business, usually in increments (Series A, B, C, etc.) as a company meet milestones and overcomes risks.

The venture capital industry has grown significantly in Michigan over the past 20 years, and startup success stories over that period have attracted more out-of-state VCs to invest in Michigan companies.

Technology companies at the growth stage will find many potential investors:

  • Angel Investors: High-net-worth individuals that invest in startups, often in groups like the Michigan Angel Fund. Michigan has more than a dozen angel groups and thousands of current or potential angels. 
  • Venture Capital: Investment funds that invest in market-disrupting, high-growth technology companies with the potential to provide a 10-times or more return on investment in five to seven years. Most companies will not be a fit for venture capital funds, which typically only invest in 1-2% of deals they see.
  • Technology Lenders: Organizations with expertise in tech companies that often provide financing through innovative structures like venture debt and revenue-based funding. 

Non-tech companies will have more access to funding during this stage, particularly after they’re profitable:

  • MicroloansSmall business loans, usually under $50,000, sometimes government-backed (SBA and CDFI microloans), and sometimes through non-profit lenders like Kiva. 
  • Michigan Capital Access Programs: If you’ve reached profitability you might be eligible for support from the Michigan Economic Development Corporation’s (MEDC) loan enhancement programs, making it possible to get traditional bank financing. 
  • SBA Loans: Profitable small businesses might pursue a loan backed by the U.S. Small Business Administration, which works with banking institutions to provide financing that might otherwise be unavailable.
  • Asset-Based Loans: Loans backed by hard assets often provided by non-bank lenders that will accept higher risk. 
  • Mezzanine Loans: Unsecured (meaning no collateral) loans used for growth, based exclusively on cash flow, with interest rates in the 12-20 percent range and often with warrants. While more expensive than traditional bank loans, it is cheaper than equity and less dilutive to business owners. 
  • Bank Loans: Available to profitable companies, banks lend on the basis of a company’s cash flow and collateral position.

Read more about funding resources for growth stage companies.

Mature Stage 

Mature companies have gone through a growth stage and may be leveling off in terms of revenue and market share. Companies in this stage are often in mature industries and are now competing for market share with many other established firms. Mature companies still need capital for operations and in many cases to continue to grow in new ways. 

  • Bank Loans: Available to profitable companies, banks lend on the basis of a company’s cash flow and collateral position.
  • Private Equity: Investment funds that aim to achieve higher returns than the public equity markets through a buy-out, restructuring, and growth investments into larger, more mature companies, typically with at least $3 – 5 million in EBITDA.
  • Public Markets: Listing your company on a public market, like the Nasdaq or NYSE, allows you to raise money through a stock (equity) or bond (debt) offering, with the ability to raise significant capital and provide liquidity to investors. Most companies that list on the exchanges are larger, more mature companies, but there are smaller and mid-sized companies as well, and even startups, particularly in the life sciences, that are sometimes able to raise money through a public offering.

Read more about funding resources for mature stage companies.