Minnesota

University of Minnesota to manage $34.5M in state funds for startup investments

The Minnesota Department of Employment and Economic Development and the University of Minnesota will work together to fund more startups in the state.

DEED designated $34.5 million — $10 million already in place — to be managed and distributed by the U.

“We are seeing more and more new companies being created in a truly disrupted economy and the state has a role to play in this,” said DEED Commissioner Steve Grove. “We have a role to play in accelerating that growth and opportunity because these companies are creating the next jobs for the Minnesota economy.”

The money will be channeled through two programs — one for direct investment in startups and a second for investment in Minnesota-based venture capital firms or venture capital firms with a state presence that invest in Minnesota-based companies.

Minnesota law prohibits government agencies from making direct equity investments or committing to donate money to venture funds. The state administration uses the university’s knowledge and network to distribute these funds, which is part of the state’s $97 million small business support initiative through the State Small Business Credit Initiative.

University officials spend weeks or even months reviewing applications received through the portal. After the vetting process, each startup selected for funding can expect check sizes of approximately $1 million or less. Checks to venture funds could be larger.

Investments target early stage companies focused on life sciences, agri-food technology, climate technology, advanced manufacturing and software.

When DEED created Launch Minnesota, an initiative to support the state’s startups, three years ago, entrepreneurs told officials more money was needed for founders in the early stages of operations and a state-backed venture fund could be a solution. said Neela Mollgaard. Managing Director of Launch Minnesota.

“It’s exciting to see this coming to fruition,” said Mollgaard.

This partnership allows early-stage companies to grow, officials said.

Minnesota companies raised $1.23 billion in venture capital in the first nine months of 2022, according to investment tracking firm PitchBook. That number is just under the $1.24 billion raised by Minnesota businesses in 2019, but half the record-breaking $2.6 billion raised in 2021.

While there were about 200 investment deals in venture-backed companies in Minnesota last year, the majority of those investment dollars went to companies raising $25 million or more.

“These programs present us with a unique opportunity to invest in our long-term future by supporting and helping Minnesota startups grow,” said Myron Frans, the university’s senior vice president of finance and operations.

Startups and fund managers who are interested in funding from the program can now apply via the website z.umn.edu/venture-capital.

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