Copyright 2022 SPARK

4 Sources of Pre-Seed invesmtent explain criteria and procedures for applying

On January 3 Ann Arbor SPARK hosted an event that showcased 4 sources of capital available to Michigan start-ups who are nearly ready for their first round of equity investment. Automation Alley’s fund, Next Energy’s fund, the Frankel Fund and SPARK’s Michigan Pre-Seed Capital Fund presented their criteria for eligibility and the process for applying.  The link below will take you to the video of the program, which runs about 1 hr. and 40 minutes. You can fast forward through the parts you aren’t interested in.

Seed investors are those who like companies that are starting to generate revenue and have a product that is developed. They also like to see a management team mostly, if not entirely, filled out.  Pre-Seed funds are usually economic development funds that are willing to invest a little bit earlier and take the greater risk to help the company get to the stage where the private market will take over. In other words they will invest even if the product isn’t quite finished but has customers in a pipeline.  The management team is rarely complete at this stage but the needs are clearly identified.  However, these are not grants and because a return is desired a company still has to go through a due diligence process.  This is an excellent exercise for start-ups in preparation for the scrutiny the next type of investors will put them through.

The investment environment for entrepreneurs in Michigan is improving.  As a result we should see a lot more technology companies growing to maturity and profitability.