There are a number of funders in the venture capital space. And while they each look a little different, they’re basically all the same — dealing with the same kind of contract with the same terms, but goes by different names. There is corporate venture capital, institutional venture capital, and direct venture capital by high-net-worth individuals.

There are also small business investment companies that are funded and chartered by the government. There are also small funds, some of which have specific categorical targets, such as tech, and large “spray-and-pray” funds that back companies from many different categories. And the ecosystem continues to evolve.

“More and more, new kinds of people and new kinds of organizations are finding that venture capital investment is not the spooky business that we always thought it was — that you had to come down out of the heavens or something to know how to do venture capital,” says David Brophy, Professor of Finance, Ross School of Business, University of Michigan. “More and more, people are finding out how to do it.”

Organizations, he says, tend to self-regulate — if they’re not doing well in it, they don't do very much of it. But still, while many in the venture capital world are looking to use their early-stage investments to do something good for the for economy, local or national, Brophy says there is a problem that’s been identified in the ecosystem he’s working to address: communication among all the VC entities.

“There is a sort of a built-in unwillingness to do that, probably because many of them are self-supporting — they have to get business on their own and I'm not going to give you the piece of business I have, that kind of attitude,” Brophy says. “But if we could pull them together, I think we would find that there's a lot of common ground and there's a lot of opportunity for everybody to share in the upside of doing this kind of work.”

In Michigan, for instance, Brophy says the early-stage funding ecosystem has come a long way, but still has a ways to go.

“We have big institutions. Our endowment at Michigan is number two among endowments. And so we've got a lot of local capital. The State of Michigan is a big player in this. But as I said before, they tend to be thematic and they tend to go where the deals are. We can't rely on local institutional pools to turn their funding inward until and unless we earn it. If we want to get more and better venture capital in Michigan, we just got to come up with better companies because if you look at the companies that have raised money, they have done a sterling job. So it can be done, and it is being done, it's just not being done in large enough numbers yet. It'll come. But it's a bit down the road.”

Brophy spoke on the Smart Business Dealmakers Podcast about the venture capital ecosystem and what its continued growth means for Michigan, the Detroit region, and the scale-up community that’s looking for growth capital.