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

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

DEED designated $34.5 million — $10 million of which is already on the ground — to be administered and distributed by the U.

“We’re seeing more and more new businesses start up in a really disrupted economy, and the state needs to play a role in that,” said DEED Commissioner Steve Grove. “We need to help accelerate that growth and opportunity, because these companies are creating the next jobs for Minnesota’s economy.”

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

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Minnesota law prohibits state agencies from committing to directly make equity investments or finance venture funds. The state administration is leveraging the university’s knowledge and network to distribute that funding, which is part of the state’s $97 million initiative to support small businesses through the state’s Small Business Credit Initiative.

University officials will spend weeks or even months reviewing applications that come through the portal. Following a vetting process, each startup selected for funding can expect a check size of $1 million or less. Venture fund checks can be large.

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

Nila Molgaard said three years ago when DEED created Launch Minnesota, an initiative dedicated to supporting the state’s startup companies, entrepreneurs told officials they needed more money for early-stage founders and that a state-backed venture fund could be a solution. Yes, Neela Molgaard said. , executive director of Launch Minnesota.

“It’s exciting to see it become a reality,” Molgaard said.

The partnership allows companies to grow at the early stage level, 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 figure is below the $1.24 billion Minnesota companies raised in 2019 but only half of the record-breaking $2.6 billion in 2021.

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

“These programs provide us with the opportunity of a lifetime to invest in our long-term future by supporting Minnesota startups and helping them grow,” said Myron France, the U’s senior vice president for finance and operations.

Startups and fund managers interested in receiving funding from the program can apply immediately using the z.umn.edu/venture-capital website.

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