Status Quo: Coastal VC Hierarchy Is Key to Michigan Startup

The announcement that Our Next Energy just lined up $25 million in Series A financing had an unfortunate if familiar cast to it when the Michigan-based electric-vehicle technology outfit announced its latest venture funding a few weeks ago.

The company was grown in Flyover Country, in Novi, northwet of Detroit. It has demosntrated technologies that can double the range of EVs by focusing on lowering costs while adopting chemistries that don't pose a "thermal-runaway" risk. Our Next Energy’s eventual customers likely will include automakers and major suppliers from the heartland who seem to have determined that the Mid-South as well as the Midwest are where they want to significantly develop – and definitely build -- their EVs in the future.


Capital Heroes


Yet where was the capital going to come from for the new $25-million VC commitment? Assembly Ventures, a Detroit-grown outfit helmed by the high-energy and regionally minded duo of Chris Thomas and Jessica Robinson, is one of the investors in that round. “One World is moving in the absolute right direction,” Thomas told me.

But One World’s largest and marquee backers are none other than Bill Gates and Jeff Bezos -- coastal megabillionaires who have unmatched resources to swoop down into Flyover Country and snatch the most promising investments in technology or in any other endeavor. Other backers of the pair's Breakthrough Energy Fund are based even further away: British billionaire and space-veteran performance artist Richard Branson, and BMW Ventures, controlled by the German automaker.

“They’re an important backer that can give us long-term capital,” Our Next Energy CEO and Founder Mujeeb Ijaz told Automotive News about Breakthrough Energy Ventures..

And of course he’s right: The money, network and prestige provided by Gates et al., to a fledgling venture that wants to score it big in a business opportunity as huge as EVs, can’t even come close to being paralleled by anyone anchored in Flyover Country.

Sadly, this continued reality is reflected in an even bigger way by the latest statistics on VC financing supplied by the National Venture Capital Association, for the third quarter. The pattern that has taken shape over decades has remained intact and, based on association data, virtually unchanged in at least 10 years: The bulk of America’s VC assets, still about 85 percent, remain concentrated in three states: California, Massachusetts and New York.

This year has seen some marginal growth in Flyover states, especially Kansas, Kentucky and Wisconsin. But their percentage gains didn’t come close to rivaling the considerable year-over-year increases in assets under management in California (11%), Massachusetts (15%) and New York (13%), respectively. Talk about structural obstacles that aren’t budging.


Distant Goal?


Clearly, Flyover Country has a long way to go until we can ever bootstrap ourselves even by a little bit out of this imbalance. But lots of folks are trying.

And in the meantime, Thomas told me, some perspective is in order. “We can’t be so parochial that we say that everything needs to begin and end in our own borders,” he said. “But we need to ensure that it’s a virtuous relationship. Some of the best investors in the world are coming here.”

Assembly Ventures, for instance, is “uniquely focused on partnering with people, who move the world. This includes people in our backyard. We’re excited about” the partnership with Our Next Energy and its other backers, he said.

“We can’t be so closed-minded as to believe it’s only going to happen here, or it’s only going to happen somewhere else. Both approaches are limiting and somehow wrong. We need to advance to how do we best empower the people and places we care about.”

The company was grown in Flyover Country, in Novi, northwest of Detroit. It has demosntrated technologies that can double the range of EVs by focusing on lowering costs while adopting chemistries that don't pose a "thermal-runaway" risk. Our Next Energy’s eventual customers likely will include automakers and major suppliers from the heartland who seem to have determined that the Mid-South as well as the Midwest are where they want to significantly develop – and definitely build -- their EVs in the future.