eLab Venture Capital Managing Director Doug Neal poses in front of the A2 Startup Garage on Liberty, where he meets with colleagues from Ann Arbor and Silicon Valley about investing in new tech ventures in AI, security, big data, and the Internet of Things.

Doug Neal has seen a lot change in the Ann Arbor and Midwest tech scene in the last few years. He is a managing director at eLab, a VC fund based in both Ann Arbor and Palo Alto in Silicon Valley that focuses on early stage AI and machine learning companies, the Internet of Things, big data and cloud computing, and security. Neal is from Michigan, so after 15 years in California in a variety of leadership positions at Hewlett Packard and Symantec, he co-founded Mobile Automation, a mobile software security company which was venture backed by Greylock and acquired by iPass in 2005, and came back to Ann Arbor to raise a family and support the growth of the Ann Arbor tech industry.

The day we met him, Neal took 15 minutes out of a meeting with his partners from Ann Arbor and Palo Alto at the A2 Startup Garage incubator offices on Liberty to talk to us about trends he's seeing in the venture capital space in Michigan in particular. He's understated, obviously busy, and like a good VC is friendly and looks you in the eye to answer questions without any spin.

Doug Neal is Managing Partner at eLab Ventures based in the Ann Arbor office of a Midwest-Silicon Valley partnership.

"There's an amazing amount of research here," Neal says of the Ann Arbor tech ecosystem and the University of Michigan in particular. "I started a venture fund with these gentlemen to start a fund bridge to the Valley." eLab does early seed stage capital. They started with one fund, and now have grown a second. When asked where he sees the most growth, Neal says, "We're seeing growth in high-quality startups, actually."

Funding trends in Neal's space are in AI and robotics, since that's the focus of his fund. But there's a reason for their focus in this area of technology. "It's the most disruptive tech the world has seen," he emphasizes. "Breakthroughs in machine learning 5 years ago are enabling innovation in so many industries, such as natural language processing, genomics, and agriculture. That said, there will continue to be innovations. The challenge is to be truly innovative."

"[AI is] the most disruptive tech the world has seen. Breakthroughs in machine learning 5 years ago are enabling innovation in so many industries, such as natural language processing, genomics, and agriculture."

"There is also tremendous investment at the University of Michigan in cyber security, as well," Neal goes on. "eLab writes large investments for teams trying to solve large problems," he says. Why come back here and build that bridge to bring investment into a smaller ecosystem when VCs are so often interested in big investments and companies with the potential to scale? "We actually advise against building a company in Silicon Valley now," Neal says. It's because of the cost of living and building a company there now can cash strap new ventures. Also, it's not the only place to find talent concentrated in one space. "We're getting more people here with real experience to build companies," Neal says of the growing entrepreneurial culture in the Great Lakes area.

eLab also invests in autonomous and connected mobility tech and is well positioned to partner with companies in the automotive and tech space with offices in Ann Arbor, Palo Alto, and San Mateo.

"We actually advise against building a company in Silicon Valley now."

We ask Neal what the most common blunder is that he sees and advises against in new startups. "They don't talk to the customers enough," he says quickly. "It's important to... verify the problems your tech will solve."

eLab is starting to see talent attracted to this area in the Midwest, Neal says, which is a new development after years of the region struggling to hold on to the talent it developed in the university spaces. In terms of general industries, they're seeing a lot of growth in both software and hardware. "Southeast Michigan is really good at that stuff," he says. "There is a race to provide innovation, and Southeast Michigan has a chance to compete."

When he came back to Ann Arbor, Neal led the University of Michigan Center for Entrepreneurship, created the student venture accelerator TechArb, and helped develop a process for teaching entrepreneurial programs to engineering and non-engineering students. In his work with eLab since then, he says the most important thing he now looks for is talent and building a great team. They're not all students coming out of the University of Michigan either. Neal is seeing people move back from San Francisco. "We're seeing people from Seattle," he tells us.

"Ann Arbor is in a good spot right now, but there is disparity in income and education. We want to use the [Ann Arbor Area Community] foundation to give [everyone] a chance for equality."

Entrepreneurs and other community members are encouraged to give back with time and other resources to help support the growth of the Ann Arbor community outside of the narrow tech ecosystem to create lasting stability and equal opportunity for more people.

Best resources for startups looking to get connected in Ann Arbor? Neal recommends the ubiquitous a2newtech meetup at the Law School where new founders get feedback on pitches, says you can learn more about eLab through their portfolio, and he's busy helping Duo founder Dug Song launch the Ann Arbor Entrepreneurs Fund and Ann Arbor Area Community Foundation that connects founders to give back and create a more equitable opportunity for the community so tech isn't the only industry taking off around here--a classic tech problem of succeeding so well it pushes other industries off the map and creates affordable housing crises Ann Arbor is already getting a taste of.

"Ann Arbor is in a good spot right now," Neal says, "but there is disparity in income and education. We want to use the foundation to give [everyone] a chance for equality."