CEO Podcast: Skip Simms, Michigan Angel Fund Manager

Paul Krutko: Welcome to Ann Arbor SPARK’s CEO podcast, conversations on economic opportunity. My name is Paul Krutko and I’m the president and CEO of Ann Arbor SPARK. And I want to welcome you to a series of conversations with key leaders from those sectors. 

We have a really unique opportunity today. Joining me is Skip Simms, who recently retired from his role as Ann Arbor SPARK’s vice president and Michigan Angel fund managing member after nearly two decades supporting the Ann Arbor region’s entrepreneurs. 

It’s great to see you, Skip. So what I always find interesting when we have these conversations, and I know this, but I don’t know how much our audience knows, so why don’t we just start started at the beginning? Before you were so engaged with venture capital, angel funds, early-stage funding for tech companies, you were VP and general manager of WEVV in Evansville, Indiana, and I think I’ve seen some YouTube, some video of you actually doing the weather. I don’t know if that’s true or not. But hey, tell us about that experience and how you got into what would really be the early days of television, I would imagine. 

Skip Simms: Yeah, I was in television, local television for 29 years. And the station in Evansville, Indiana was the last one that I was running. Anne and I have moved around the country and managed multiple TV stations in various parts of the country. And the weather thing, I started out in news and on-air doing news and doing weather, and those were in the development age of television as it was maturing. So I had a great ride at a great time in the TV business. And most of the years were actually managing local stations. And it was fun, enjoyed it. But in 1999, it was a good time to get out. The reason was valuations of radio and television stations escalated in the late 90s. And it was a good time to sell. And so we took advantage of that. The industry had largely matured, cable was coming on strong, the Internet was starting to get traction, so it was a good time to get out. 

And that station was owned by Ralph Wilson. It was the second TV station that I was managing for him. The first one was in Cadillac, Michigan, and that’s where Anne and I first got exposed to the beautiful state of Michigan and actually fell in love with it and said, Look, this state’s ideal, this is what we’re looking for: four seasons, we can ski in the winter, we can golf and bike in the summer, lots of fresh water and clean air and trees and all of that. So when we left, we decided okay, Michigan is kind of where we want to settle down. And Mr. Wilson decided, look, maybe now that we’re getting out of the broadcast business, but what do we want to do next? And we discussed the possibility, well, maybe we should consider venture capital, which was hot at the time. 

And so I like to tell people we sold high, but then we turned around, we bought high. And you know, two years later was the .com bubble burst. And we learned the hard way about venture capital, we learned a lot. And that’s actually how I got connected with Governor Rick Snyder, who at the time, was a VC in the state of Michigan and was raising another venture fund and we invested in that fund. And then that led to SPARK.

Paul: Yeah. So let me just share a little bit with the audience. Some, you know, may now have a reference point to Ralph Wilson, because of his legacy in terms of creating a foundation and putting significant resources into it to support two communities that he was very active in – one is Southeast Michigan, the other is Buffalo. And you know, I know this, but many others listening may not – he was the owner of the Buffalo Bills. 

So tell us a little bit more about your time with Ralph and how he was able to, as an entrepreneur himself, create this legacy now that both of those two regions are benefiting from.

Skip: Yeah, it was exciting, and I was thrilled to work for him. He was a great boss. You know, the only thing he was a stickler about was honesty and integrity. And as long as you were sharing with him what was going on — the bad as well as the good — he was fine with that. Of course, he was very diversified. He was the original owner of the Buffalo Bills, one of the original owners of the AFL in 1960, and he was key to the merger of the AFL with the NFL in 1971. And he owned, started with an insurance company that his father had started, he owned trucking companies, he owned oil drilling companies, tool and dye companies, broadcast stations. He was very diversified, and he loved to own, and he owned everything. So he was not really an investor. He saw an opportunity in the TV business back in 1968, it was his first TV station that he bought. And he built, you know, a very robust, diverse portfolio of companies that he personally owned. But he reminded all the managers of all of his other companies at one point that the football team would be the last to go: ‘All of you are vulnerable, but the Bills are not.’ And, of course, that was successful. And just as an aside, he bought the franchise for the Buffalo Bills for $25,000.

Paul: Yeah, you know, I knew a lot about professional sports in my career over the years, and what some of the entry points were at a certain time. And in that same era, I think Art Modell, now a little more expensive, but Art Modell bought the Browns, I think, for $1.2 million, but that was an NFL franchise. And that was in 1962. And that was the era where the players actually had to have jobs on the side. And you’ll remember this, and I’m really dating myself, but one kicker for the Browns back in those days, Lou Groza, had an insurance company just like Ralph did. And you could go to see Lou in the off-season and buy insurance from him. But that’s not the way it is today. 

But let’s talk a little bit about you then coming into SPARK. I mean, one of the things that I’ve always talked about is that you were, I think, the longest-tenured person in the organization. I think we often say you were the second employee — Mike Finney was the first. And then for the audience, you know, sometimes we have to remind them that we’ve been around for a while offering these programs. So that was back in the 2004-2005 days. So talk to us a little bit about that. I mean, you mentioned already that, you know, you got acquainted with Rick Snyder, for the audience to know, in the initial part of SPARK’s set up, Mary Sue Coleman, who was the president of the University of Michigan, thought this was a good thing, we needed to have this kind of organization. She reached out to Rick Snyder, this is history that people have shared with me. And they collaborated with the private sector leaders, public sector leaders, and the academic side, to form SPARK. So you were there at the beginning. So tell us a little bit more about that.

Skip: Well, I think there’s a third person that we ought to mention, that’s Ken Nesbitt, who was running the tech transfer office for the University at the time, and Rick was on his advisory committee, advisory board. And the two of them had been talking about doing something like SPARK for several years. And when Mary Sue and Rick had the conversation, and Mary Sue was all in, then, you know, Ken worked with Rick to actually create the organization officially in 2005. And then they reached back out to Mike Finney who was at the MEDC, years earlier, and had gone to Rochester, New York, and they enticed him to come back to start up SPARK and the Washtenaw Development Council. 

And that’s what people, I don’t think, really appreciate about what happened was, Mike was the president of two separate organizations. SPARK was a startup, and then the Washtenaw Development Council did traditional economic development. And the goal was— and the community leaders across the board were supportive — let’s merge the two. And that created an extremely unique economic development organization that literally served companies — high-growth companies, you refer to them as GDP companies, from conception to having an idea and a new product, to Toyota and large companies, and every size company in between, and attracting them and helping them grow, etc. So my goal was to actually take what Bill Wood had been engaged in, as well as Kurt Rieger, to kind of create a game plan, if you will, a business plan for SPARK. And so I had that to draw on when Mike hired me to start in 2006 to develop the processes that we still have, in many ways today, for helping educate and bring along entrepreneurs, particularly first-time entrepreneurs, and get them to understand that it’s more than just a product. It’s not a matter of ‘build it and they will come,’ you’ve actually got to create a business. What does that mean? And that’s what we’ve been doing ever since. 

Paul: Well, I think part of the genius of back in the beginning, because, you know I arrived in 2011, so a lot of what you’re talking about are the foundational steps that created SPARK. So one of the things that I’ve always appreciated, in contrast to other similar entrepreneurial support organizations elsewhere, is the depth of support we give the companies and the degree of patience we have. I think some of our private entities like us have very short frames when they work with companies. And I know you’re nodding your head and even smiling because there are some companies we stayed with for a long time. But it’s paid off well, after years, because sometimes some of these things, the genesis of them, is more long-term than short-term. 

But I guess the question that we posed in preparing for this, and it’s really a big question to ask is how has the system changed, in your view, in Ann Arbor and in the State at large since then? I guess, teeing that up, I would say that I think that was a period of time where the State began, through MEDC, maybe through the governor’s administration, recognized that growing early-stage companies was something that the State of Michigan should be focused on. But talk a little bit about, you know, since from that time to now, what are some of the main things that you have seen, that you’re particularly proud of? Or saw that occurred over time?

Skip: Well, to follow up on one of your comments, let’s give the State credit. Somebody was pretty darn smart when they created SmartZones. 

Paul: Yes. Do you know who that is? I’m gonna interrupt you, I could just say this must have been a really smart person. I say this all the time. I don’t know who actually came up with it. 

Skip:  I don’t either, but I’m glad they did. And then there were also smart people in Ann Arbor who identified the proper district to get funded at the Local Development Finance Authority, the LDFA, which then gave us the capital. But it took several years to get there. I remember we had a pretty lean budget in 2006 when we started. But, you know, it’s grown, which was the expectation, and has given us the capital to do a lot of what we do. And has since, you know, probably 2007, or 2008, 2009, when it really got meaningful. 

But what we found was, and we always knew that venture capital in the Midwest, not just in Michigan, was lacking, that we needed a lot more of it to support our entrepreneurs and get them on their feet. But the State stepped up and helped that as well. And the venture industry got a big boost in 2006 and up to 2010. And we’ve got a pretty healthy venture industry right now in the State to help with the diversification of our industries that are here. But then as a result of our getting and managing the State’s pre-seed fund for early-stage companies, originally on behalf of the SmartZone companies that were coming out of SmartZones, we discovered that the missing link really were angel investors, because VCs had gone downstream, they were waiting for companies to be much more mature than they were back in 1999. And so who’s going to pick up those pre-seed kinds of investments? Those early, early dollars that entrepreneurs need, and it turns out, and this is national, this is not unique to us, it was angels that had to start stepping up — individuals — to make those investments. And that became the missing link. And about the time Mike went to the MEDC and you came on and you saw the need and the vision that this was something that needed to be addressed. This was the missing link, if you will, to really accelerating the growth of our entrepreneurs and our startups in the State. And so you gave me support and encouragement to pursue doing whatever we could to get Angel activity in the State of Michigan more robust. 

Paul: Thank you for indicating I was supportive of that. I think, for the audience to understand, my history I came from, my prior job was in Silicon Valley. Angel investment is an easy concept out there. You’re at the restaurant in Palo Alto or you’re in Woodside and you are having lunch and you see people writing checks. I mean, that sounds silly, but you do see that. And so the idea was, and I think maybe for the general audience listening, that we step back and really define what we mean by an angel investor. Maybe take a moment and talk about that. And the second thing is that because there wasn’t that history of Angel investment, we were essentially not only trying to encourage the investment, we had to educate about the opportunity. So talk a little bit about who these angels are and what we needed, what we did, and what we’re still doing to try to get more of that to happen.

Skip: Angel investors are identified by the federal government as high net-worth households that have well over a million dollars of liquid cash to invest, who take a piece of their assets and put it into alternative investments. And that could include real estate, as well as venture capital and other things. Angel investing falls into that category, which is high risk. So you have to have a risk appetite. But there are individuals who are writing checks out of their individual checking accounts and giving it to an entrepreneur, to help them get to their next milestone as they build their business and their company. So that’s who an angel investor is. 

And Michigan is a pretty wealthy state. We’ve got some counties in the state of Michigan with a lot of high-net-worth households in them. But there are high-net-worth people throughout the State. All states have a certain number of high-net-worth households. And those are all potential angels if they have the risk tolerance, because it’s not for the faint of heart. 50% of all startup companies, whether they’re a tech company or a restaurant, they’re not going to see a fifth anniversary. And so you’re gonna lose some money along the way, which is why you need to be diversified. But the winners can give investors huge returns. And you got to go into it with that mentality. It’s long term, you know, you talked about economic development goals being long term. You know, back in the early days, we would tell people, look at the Golden Triangle in the Carolinas, you know, at the time SPARK was created, we would sometimes refer to that as kind of a benchmark as a goal. And we would have to remind people, it took 30 to 50 years for that triangle to get to where it is. And so you need to have that 30-year horizon. Well, angel investments, you don’t need to have a 30-year horizon, but you’ve got to have multi-year.

Paul: Yeah, I tell people the same thing about Silicon Valley. There’s a notion that, you know, it just arose at a particular point in time. Well, no, there was early radio, early sort of radar investment in the 30s. Then there began to be some folks at Stanford that were working on things, and then you know, you’ve lived through the same time I did, through the Cold War, then it became a real defense center. And that was the history but everybody, in their minds, it’s the .com period, that’s Silicon Valley, or the beginning of Apple, as an example. But it was the genesis of it. You know, we’re probably talking 80 years in terms of Silicon Valley to get to where it is today. 

So another notion, I think it’s important for folks to understand is, what we did is we created the opportunity to maybe minimize a bit of the initial risk tolerance, or fear, let’s say it that way, of investors, because we were presenting them the opportunity to be a part of a fund, as opposed to just a single company. So talk a little about the fund, and then the fact that that educational process has caused them to go ahead and invest more money in these projects. 

Skip: Well, the whole idea behind the fund was to make it easy for people who had never made these kinds of investments in the past to, you know, tip-to-toe in the water and learn what this was really all about without putting a whole lot of money at risk. And by being in the fund, they would be in 10 companies, which addresses the diversification issue that all Angels should focus on and apply. And they could then be passive or active. Meaning that if that’s all the money you want to put to work, fine, you’re in the fund, you’re going to be invested. And along the way, desire through meeting as angel groups, you will also learn the processes, what you need to do, how you find deals, how you vet deals, the diligence process, how do you structure deals, what the expectation is post-investment, etc. So it was an educational tool. Also, you could be active though, in that as we bring deals to the group, you as a member, if you wanted to make an additional investment specifically into that company, we encouraged you to do that. In fact, over time what we’ve done is leveraged the size of the fund two to one. So the direct investments by members in the fund are putting in twice as much money as the fund is putting in, which now we’re talking real money. That was another challenge. A lot of the angels that didn’t exist in the groups that existed before 2010, they were putting in small amounts. And it really wasn’t helping the entrepreneur move the needle, they needed some more significant dollars. And we were able to do that as well.

Paul: So we had one last general question. In thinking about that, what’s some advice, because I know you have done these types of investments personally, what kind of advice do you offer to prospective investors as they think about being in this particular area of investment?

Skip: Patience. And understanding that it is a multi-year return, these are not liquid investments, either. It’s not like I can buy a stock this morning and sell it this afternoon. Once that check is written, it’s in the company’s bank account and they are now deploying it. You may not see a penny of that back for several years. So you need to understand it’s patience, long term, and be diversified. Don’t be afraid to invest in companies that are in industries that maybe you don’t understand. Understand it enough to be comfortable, to be able to explain to your spouse what that company does, and what the potential is for that product or service. But it could be 5-10 years before you get your money back. And by then hopefully it’s a whole lot more than you would ever get over that same period of time in the stock market.

Paul: Okay, so we’re gonna close out. So what’s up for you next? What are you? What are you focusing on now as you retire from SPARK?

Skip: Yeah, first and foremost, I think the other thing about angel investing is it’s fun. And I am not leaving that world. I will stay engaged and encourage people to consider getting engaged, joining an angel group of some kind, in the state, and, you know, enjoy it as much as I have, because I learned something new every day. That’s what’s really enjoyable. But beyond that, I plan on playing a little more golf, doing a little more skiing. And I may travel a bit more. I took my first piano lesson a couple of weeks ago, so I’m learning to play the piano. And I’m going to write a book for my grandkids — kind of an autobiography, for when they do the family tree, give them a little more context, what their grandfather did.

Paul: That’s a good idea. Same thing, one of the things that I treasure, just going off on a tangent here, is my great uncle wrote a story about their immigration experience. And what’s unique about it is my family has this story that the elders immigrated once. And after World War I, they went back. But their children were born in America, so they were educated American kids they took back. That’s my great uncle. So he wrote in English his experience of being taken back. So I think that’s a real legacy to leave to children and grandchildren, because they experienced living with you, and all those years and all that kind of stuff, but they don’t know everything about you that you might want to share. So that’s a great idea. 

Well, Skip, I really do want to really thank you for being a part of SPARK all these years. I think you are one of the key architects that helped build the ecosystem that we have in Ann Arbor that is supporting technology companies. That we are living on the legacy of now in terms of the quality of the companies and the size of our portfolio. And you’ve helped the State in that way, as well, not only just the Ann Arbor region, I do want to thank you for that.

And really our best wishes from everybody who’s worked with you to you and Anne. 

And so I want to take a chance to thank our audience for listening and learning more about those leaders and organizations working hard to create the Ann Arbors region’s economic future. These conversations are brought to you by Ann Arbor SPARK. For more information about Ann Arbor SPARK, you can find us on the web at AnnArborUsa.org and also on Facebook, Twitter, and LinkedIn. You also can learn more about the Michigan Angel Fund, which we are the administrators of and proud to do so, at MIAngelFund.com. 

Take care, Skip, thanks.

Skip: Thank you, Paul. Appreciate it.

Paul: And I want to thank our audience for listening and learning more about those leaders and organizations working hard to create the Ann Arbor region’s economic future. These conversations are brought to you by Ann Arbor SPARK. For more information about Ann Arbor SPARK, you can find us on the web at Ann ArborUSA.org, and also on Facebook, Twitter, Instagram, and LinkedIn.