The First Step Fund represents a partnership of the Invest Detroit Foundation, TechTown and Ann Arbor SPARK intended to support a revolving investment pool to provide financing to emerging and newly-formed small businesses in southeast Michigan that have successfully completed a training program through a qualified regional business incubator / accelerator.
The First Step Fund is sponsored by the New Economy Initiative for Southeast Michigan created by ten national, regional and local foundations to accelerate the transition of metropolitan Detroit to an innovation-based economy that expands opportunity for all.
The fund provides emerging companies with access to capital, focused mentoring in areas consistent with growing the business, and a network that will work to foster demand and create opportunities. The First Step Fund support is designed to address the deficit of financing in the marketplace and to promote economic development by identifying, nurturing and fostering demand for early stage, commercially viable businesses resulting in job creation and increased tax revenue for the region.
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The First Step Fund assists entrepreneurs in the start-up or scale-up of their businesses for the purpose of advancing their business concept to customers. It is assumed that applicants have incorporated a company and are past the concept development and analysis phase, and have very specific needs to achieve commercialization milestones to close initial sales.
While we will fund businesses on a broad range of trajectories, our ideal applicant will be able to clearly show a path to revenue generation and positive cash flow within the two-year term of the investment. Companies with existing revenues or spin-offs from larger companies may be considered on a case-by-case basis.
We do not have an industry focus; however at this time we unfortunately are unable to fund real estate, retail, restaurants or casinos.
The proceeds of the investments can be used for, but are not limited to developing prototypes, scaling product manufacturing or testing, and marketing and sales.
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All applications must first have the support and sponsorship of one of our partner organizations: Ann Arbor Spark, TechTown, Automation Alley, Bizdom U or SBTDC/MEDC. These organizations play a crucial role in supporting businesses at very early stages and help to ensure the consistency and quality of applications to the First Step Fund. Please first contact these organizations directly if you want to apply to the First Step Fund and they can guide you through the process.
In addition to the support/sponsorship of a partner organization, the First Step Fund requires the following:
Please note that we must receive all completed materials (a sponsor, First Step Fund Form, financial documents, and on-line application) before we can review your application. Incomplete applications will not be reviewed and will not receive further communication.
Applicants are strongly encouraged to also provide additional materials to help the First Step Fund to evaluate your business. You will have the opportunity to upload a business plan, an executive summary, an investor presentation, and a video to support your application.
A background check will be performed on founders and key executives with significant investment in the company. A search will be conducted for felony convictions and bankruptcy. Key employees with a poor record will not be considered.
First Step Fund loans are between $10,000 and $50,000. Tranched investments will be made when appropriate.
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The First Step Fund typically offers convertible debt with the following terms:
While we strive to make adjustments where appropriate to meet the needs of the entrepreneur, we unfortunately have little room for negotiation, so all applicants are strongly encouraged to consider these terms before applying.
Brief descriptions of qualified sponsors’ training programs that are a pre-requisite for this type of financing follow:
TechTown’s SmartStart program clients work closely with TechTown staff, and an array of business consultants and service providers to create and execute a detailed strategy for growth.
TechTown’s FastTrac Program, in partnership with the Kauffman Foundation, provides services for entrepreneurs that range from business conception to growth and acceleration.
SPARK’s Entrepreneur Boot Camp Program is two intensive days of learning that compresses the usual three-month learning curve to move a business to the next level.
TechTown and SPARK’S Business Accelerators speed up the development of start-ups in the region with a variety of valuable services designed to shorten the time required to attract capital, customers, or other resources.
TechTown and SPARK both have Regional Incubator Networks which are one of the many vital components in the business acceleration process. Both incubators provide physical space, essential services and business development guidance – at lease rates that are affordable for start-up companies.
TechTown and SPARK’s Wet Lab Incubators boast state-of-the-art life science and biotech research space in a collaborative entrepreneurial environment with established tenant interaction and support.
Bizdom U offers an intensive four month business development program with training and mentorship for individuals that want to start a Detroit-based business.
Automation Alley brings together businesses, educators and government to help entrepreneurs accelerate the commercialization of new technologies and services. With their support and resources, ideas are turned into usable, marketable technology solutions.
To express interest in the First Step Fund, please contact a qualified business incubator / accelerator in the region or e-mail us at: firststepinfo@investdetroit.com
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A number of programs exist in the region including Ann Arbor SPARK Micro Loans & Automation Alley. The most significant differences between these loan pools are the stage of the company and its location. These funds are intended for companies near commercialization, which means they are within a year of closing their first or second customer sale, or raising private equity that will provide significant funding to help the company be successful. The state fund loan can be used for companies that are pre-commercialization (pre-revenue and not yet raised private equity) but have a business plan and at least an early prototype. Another differentiator is that the state fund is only available to companies in the four technology sectors identified as state priorities in the 21st Century Jobs Fund legislation. The local loan pools are for any innovative, high-growth potential company. Applicants who have received funding from any of these sources are not restricted from applying to the First Step Fund.
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We take applications on a rolling basis and have a 3-step process to review them.
Step 1: We will initially screen applications based on the quality of the submitted written materials with the strongest applications moving into Step 2: Due diligence. During due diligence, we will reach out to you for more information that may include a meeting to better understand your plan. The most promising applications will be submitted to Step 3: Investment Committee, where a group of experienced professionals will review, discuss, and vote on whether or not to invest. Our Investment Committee meets on a monthly basis. For a more in-depth overview of our process, please click here.
We aim to provide an initial screening decision within 30 days of receiving a completed application. The remainder of the process can take between 6 to 8 weeks. After investment committee approval, it can take 1-3 weeks to close on funding.
In some cases, we will postpone the application until further progress is made, in which case the total time to receive a decision can take longer. Also, please remember that we cannot begin to review your application until we have all of the materials and requirements met. » Return to Top
If you are turned down, you may reapply at any time however you are strongly encouraged to address any concerns indicated in your initial application. In your reapplication you should provide the following documents to be reviewed.
The First Step Fund Investment Committee reviews all applications and recommends funding. They may recommend an amount different than the request and may provide constructive feedback for all proposals as an added value. The review criteria include key elements such as management team, markets and financials. The Committee will assess the Company’s potential to become a viable, robust, high-growth business that will ultimately have the ability to repay the loan. Funded companies will continue to work with partners for mentoring and business acceleration services. Just as traditional seed investors must provide their portfolio companies with hands-on help, direct involvement by partners will ensure that the deal is actively managed to agreed-upon milestones and thereby enhance the chance for success of each new venture funded.
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We require monthly financials and on a quarterly basis on financial, sales/revenues, number of employees, additional funding, and organizational milestones. This information not only puts us in a better position to support companies in our portfolio but it also plays an important accountability and reporting role to the foundations and stakeholders who support the fund.
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