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 partner to fund more startups in the state.

DEED has designated $34.5 million, $10 million of which is already in place, to be managed and distributed by the United States.

“We’re seeing more and more new businesses starting up in a really broken economy, and the state needs to be a part of that,” DEED Commissioner Steve Grove said. “We need to help accelerate that growth and opportunity as these businesses create the next jobs for Minnesota’s economy.”

The money will be channeled through two programs, one for direct investment in startups and one for investments in Minnesota venture capital firms or venture firms located in the state that invest in Minnesota businesses.

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Minnesota law prohibits state agencies from making direct equity investments or committing money to venture funds. The state board is using the university’s expertise and network to distribute these funds, which are part of the state’s $97 million initiative to support small businesses through the State Small Business Credit Initiative.

University officials will spend weeks or even months reviewing applications received through the portal. After a screening process, each startup selected for funding can expect check sizes of $1 million or less. Hedge fund checks could be bigger.

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

Three years ago, when DEED created Launch Minnesota, an initiative dedicated to supporting the state’s startups, entrepreneurs told officials that founders needed more early-stage money and that a state-backed venture fund could be the answer, Neela Mollgaard said. , CEO of Launch Minnesota.

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

The partnership allows the companies to grow at an early stage, officials said.

Minnesota companies have raised $1.23 billion in venture capital in the first nine months of 2022, according to investment tracking firm PitchBook. That number is slightly less than the $1.24 billion Minnesota companies attracted in 2019, but only half of the record $2.6 billion in 2021.

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

“These programs provide us with a once-in-a-lifetime opportunity to invest in our long-term future by supporting and helping Minnesota startups grow,” said Myron Fran, US Senior Vice President of Finance and Operations.

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

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