First Step Fund invests in 4 TechTown firms

Thursday, May 27, 2010 | Source: metromode

Firms with a connection to Detroit's TechTown small business incubator took the lion's share of the first round of financing from the First Step Fund.

Four of the seven firms that received five-figure loans are either housed in or are utilizing programs in the Detroit-based business accelerator. Those firms include Clean Emission Fluids, NextCat, Ann Williams Group, and Air Movement Systems. The other three start-ups came from or are connected to the Ann Arbor SPARK incubator.

Air Movement Systems plans to use part of its $50,000 loan to help it conduct an independent test of its air-circulation and purification technology at a chicken farm at the University of Georgia. The price tag to proving this technology comes to $25,000, to start. The rest of the money will go toward upgrading the firm's equipment.

"Nothing is free," says Dennis Danville, president of Air Movement Systems, which is utilizing TechTown's SmartStart program.

Invest Detroit and Ann Arbor SPARK, which runs the Michigan Micro Loan Fund, created the First Step Fund. The idea is to create a funding source for local start-ups starving for seed capital. The current credit crisis has resulted in traditional lending institutions cutting back on investment capital.

Each loan averages about $50,000 and is either short-term or in the form of a convertible note. Proceeds are usually used to push forward product development or expand inventory.

The First Step Fund expects to make 40 loans this year. The recipients are picked by a board independent of TechTown. The next round of financing is not far away.

"The next investment will be in mid-June," says Mahendra Ramsinghani, managing director of the First Step Fund and the husband of a co-founder of Metromode's parent company, Issue Media Group.

Source: Mahendra Ramsinghani, managing director of the First Step Fund, and Dennis Danville, president of Air Movement Systems.
Writer: Jon Zemke