In August of this year, the Michigan Department of Labor & Economic Opportunity released its recommendations for investing the state’s American Rescue Plan money. One of the recommendations was to fund the “Startup Resiliency Initiative” that would inject $200 million in the state’s “early-stage tech ecosystem.”
The proposal cites a large decrease in venture capital investment from 2019 to 2020 as justification for the investment. Of the $200 million, $140 million would go towards direct capital investment, with more than half of that $140 million going directly to venture capital and angel investor firms. With this proposal likely to be considered by the state Legislature in early 2022, I believe it is imperative that Michiganders push back against the public funding of private venture capital firms. Instead, we should demand opportunities for everyday workers and business owners to invest in their own technological capacity.
The $200 million investment is predicated on the supposed loss of venture capital available for “new investments” over the past five years in Michigan, especially from 2019-2020 due to COVID-19. Though these numbers, provided by the Michigan Venture Capital Association, paint a very different picture than other press releases covering the same time period from both the MVCA and Michigan Economic Development Corporation.
In fact, according to research by Crunchbase, no state has seen as dramatic an increase in venture capital funding as Michigan in the past five years. According to Crunchbase, venture capital increased 886 percent from 2016 to 2020, from approximately $200 million to $3.1 billion. The same research shows a slight decline from 2019 to 2020 (from $3.3 billion to $3.1 billion), but nothing that is in line with the claims being made by MVCA. Further, this same data from Crunchbase is used in press releases by both the MVCA and MEDC.
Why the discrepancy? MVCA and MEDC tell there’s so much and so little venture capital to go around. We live during a time where venture capital is at its wealthiest and most successful. According to the National Venture Capital Association, 2020 was a record year for venture capital investment. Why should American Rescue Plan funds, which could greatly benefit the technological needs of small business owners and workers in other ways, be used to fund venture capitalists, whose investments benefit only a handful of tech startups?
I’m a professor at Michigan State University who has been studying the high-tech economy of Michigan since 2017. What I see on the ground in the state’s most low-resource communities is not the need for more tech startups, but rather a foundational need for technological capacity building in small- and medium-sized businesses, and digital literacy for everyday workers.
In the Village of Benzonia, unpaid volunteers at the local library do tech support for seniors and students. In the Keweenaw Peninsula, owners of small shops struggle with the basics of online marketing in a digital environment controlled and dictated by big tech corporations. In Detroit, job seekers struggle to navigate predatory online job boards while seeking a living wage.
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We don’t need to invest $140 million of public money into private tech startups, which have promised to revolutionize our day-to-day lives but have mostly just revolutionized the pocketbooks of venture capitalists. Instead, we need to think about what technological development looks like democratically, beyond basic broadband infrastructure, for people throughout the state of Michigan.
How many digital literacy classes could be funded for job seekers across Michigan with $140 million? What kinds of technological capacity building could $140 million provide in rural and urban communities for business owners that need equitable access to digital tools for everyday business? What would it look like to take that $140 million and create a core group of young people interested in advancing technology in low-income communities throughout Michigan?
Michigan needs technology investment. But it needs to go to every day people, not venture capitalists.
Jean Hardy is an assistant professor of media and information and director of the Rural Computing Research Consortium at Michigan State University.
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