While the venture capital and private equity industries are distinctly separate, Michigan Growth Capital Symposium (MGCS) Founder David J. Brophy, Director and Professor of Finance at the University of Michigan Ross School of Business said the lines between the two are becoming more blurred. "There are lots of links," he said. "It might have been argued five, ten years ago that the venture market and the private equity market were oil and water. But they're melding together, and they do for each other."
While large strategic buyers such as Johnson & Johnson, Merck and Medtronic look for proven companies, smaller PE shops are often willing to take a growing company through the later stages of fundraising and manage it toward a sale or IPO. "They've got a two-pronged approach," said Brophy. "They'll provide growth capital, and/or they'll do buyouts. If you want money they'll feed your company, and if you want to sell it, they'll buy it from you. They'll take it the next five miles, and then they'll sell it to a big company or take it public. So that's the link to venture capital, and that link is getting extremely tight."
Brophy notes that while the VC sector is still tepid due to a sluggish economy, the PE industry is booming – especially in the middle market. Debt has loosened up and today's deals still require a lot of equity capital, but the merger and acquisition market is solid. "It's really good that the private equity market is strong as it is," said Brophy. "The venture market has flattened out quite a bit. There are better deals to be had, but the sheer number of funds is down."
The MGCS is a great resource for the PE community, as in recent years the Symposium has had more presenting companies seeking a B or C round of funding. " Our companies down the road will be acquisition candidates for private equity," said Brophy. "Anybody in the private equity buyout space who wants to take a look at companies that are coming along would do well to come to the Symposium."
"When the private equity guys are investing growth capital in young companies, they're edging even closer to the venture capital market. So the MGCS could be of great value to private equity shops around the country."
For more information on the Michigan Growth Capital Symposium, visit www.michigangcs.com.