Michigan's Hybrid Economy: Helping the Entrepreneurs ANN ARBOR, MI (Michigan Radio) - For many years, there was one major factor holding back entrepreneurship in Michigan.

"I always said my worst enemy was a good year in the auto market."

That's David Brophy, a professor at the University of Michigan. He's been working for more than 30 years to help grow small businesses in the state. But he says the big businesses have been getting in the way.

"I love the auto industry," Brophy says, "But it's like a big oak tree in my front yard and it sapped all the nourishment from the lawn. I never had much of a lawn. The wind blew it down one time, and now I got a nice lawn. It's the same phenomenon here."

And for this entrepreneurial lawn to grow, more people have to be willing to start their own companies.

"Our main competitors to be honest are automotive based technologies, they're going to be the big guys."

Kyle Schwulst is pitching his company to potential investors at the recent Michigan Growth Capital Symposium. Schwulst is a former Ford engineer, who set out six years ago to clean up small engines - engines for things like motorcycles, four wheelers and riding lawnmowers. It's a big problem. These small motors pump out a lot of pollution.


Schwulst says, "If you actually use a riding lawnmower for one hour, you'll emit the same mass of pollution as driving a car across the continental United States. So they're very polluting."

Schwulst has come up with a relatively cheap and effective way to cut 90 percent of the pollution from small engines. He's started a company called ElectroJet.

And he got a lot of help from the state and other agencies a total of 1.6 million dollars in grants and loans. Officials from Automation Alley in Oakland County also took him on a trip to China, which helped him land his first customers.

But to meet those customers' needs, ElectroJet needs new investment.

"Despite the economy right now, we are in a growth stage, and we need to find people that are interested in investing in companies like ours while the time is right,"
said Schwulst.

Specifically, Schwulst needs the help of a venture capitalist, or other private investor.

This is where things really get difficult in Michigan.

"The problem we have with the venture capitalists is that we don't have enough in this state."

Ed Clemente is a democratic state representative from Allen Park. He heads up the "New Economy and Quality of Life" committee in the state house.

He says most of the private investment money, venture capitalists, or even what are called "angel investors". They live in places like Silicon Valley or Boston.

And Michigan entrepreneurs can win investment from those places, but it's more likely they'd be forced to move.

So Clemente says Michigan needs to cultivate more of its own venture capitalists. And he can think of a good way to do that - give them tax breaks.

The problem is Michigan is cash-strapped, and state legislators already have trouble balancing the budget.

"So it's very hard to tell people like we want to give more incentives to lower the revenues we already have, so that there's more pressure on them," Clemente said.

That's one of the sad realities in Michigan right now. At a time when the state desperately needs to encourage entrepreneurs, there are fewer resources to do so.

The strategy at this point is to target incentives to particular industries, like film or electric car batteries.

That means some entrepreneurs will get less help than others.

The good news is hard work can still pay off, Kyle Schwulst of ElectroJet has found some potential investors, and talks are underway to finalize a deal.
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