Michigan's "gap capital" problem — the divide between well-funded early-stage startups and established, profitable businesses — is the target of a new investment fund created by the U.S. government, the state of Michigan and Dow Chemical Co.

The fund, which will have access to up to $130 million, will be managed by two private equity firms, officials said today in a conference call with reporters.

Dow Chemical CEO Andrew Liveris, seen here in a file photo, told reporters today that other U.S. corporate executives should consider investing in funds that would turn around and invest in mid-stage companies.

Photo courtesy of Dow Chemical

Called the InvestMichigan! Mezzanine Fund, the fund will seek investments in Michigan companies that are cash-flow positive with annual sales of at least $20 million. Recipients have to be based in Michigan, must maintain a "significant presence" here or must be planning an expansion in the state.

The U.S. Small Business Administration is effectively providing a loan of up to $80 million to the fund, which will be managed by global investment firms Credit Suisse and Beringea. Those firms, which already manage several other investment funds targeted at Michigan companies, will seek investments that would create jobs, diversify the state's economy and generate a profitable return.

Dow Chemical is investing $15 million in the fund. Michigan Growth Capital Partners, an investment partnership controlled by the state's pension portfolio and including the Department of Natural Resources' trust funds, is contributing $35 million.

As in a typical private equity or venture capital fund, profits will be redistributed to investors — with the fund managers earning management fees.

SBA administrator Karen Mills said the new fund — officially licensed as a Small Business Investment Co. (SBIC) — was the first of several similar efforts through a new program called Impact Investment Fund.

She said the program "operates at no cost to taxpayers" because the funds will be returned to the SBA at an interest rate of about 4 percent, since the SBA can't hold equity.

Michigan Gov. Rick Snyder, a former Ann Arbor venture capitalist, described the InvestMichigan! Mezzanine Fund as a "critically important" way to provide access to capital where it's often not available through traditional sources.

"We want to be a pioneer on an opportunity like this because we have that entrepreneurial economy, that innovative economy ready to emerge and grow quickly," Snyder told reporters. "I can appreciate the need for capital investment, and this plays a critical role in the food chain to grow your business. I’m excited to see the great companies that are going to get financing and succeed because of this."

Dow CEO Andrew Liveris encouraged other major corporations throughout the nation to invest in future SBIC initiaitives to help grow the economy. He also said that a healthy base of mid-size product suppliers was critical to the long-term health of global companies like Dow.

"We’re very proud to call the United States our home and Michigan our home. We know where our home is, we know where our roots are and we're very eager to use this opportunity to invest more and create more jobs in Michigan," Liveris said. "I call upon my corporate colleagues to step up and be a partner in invest in America. I think it’s very imporatnt that we show action, not just talk."

Liveris said the investment fund could serve as a "new national model" for pooling capital to create jobs.

"We’re starting something in Michigan that’s a national initiative," he said.

Andy Dillon, Michigan's treasurer and a former private equity investor, said the fund would maintain a dual focus of boosting the economy and "looking for a legitimate return."

"There’s a great deal of opportunity in the state," he said. "We have a great chance to reassert ourselves as the entrepreneurial leaders of the country."

Kelly Williams, managing director and head of Credit Suisse’s Customized Fund Investment Group, said the fund would target all sectors of the economy.

"It will diversify the state’s economic base," she said.

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.