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 earmarked $34.5 million — $10 million of which is already on the ground — to be managed and distributed by the U.

“We’re seeing more and more new businesses start up in a really troubled economy, and the state has 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 the Minnesota economy.”

The money will be released through two programs — one for direct investment in startups and a second for investments 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 making direct equity investments or committing to giving money to venture funds. The state administration is using the university’s knowledge and network to distribute those funds, which are part of a $97 million state initiative to support small businesses through the State Small Business Credit Initiative.

University officials will spend weeks, or even months, reviewing applications that arrive on the portal. Following the review process, each startup selected for funding can expect check sizes of $1 million or less. Checks to venture funds can be bigger.

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The investments will target 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 startup companies, entrepreneurs told officials more money was needed for early-stage founders. and that a state-backed venture fund could be the solution, said Neela Mollgaard , executive director of Launch Minnesota.

“It’s great to see that become a reality,” Mollgaard said.

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 figure is just below the $1.24 billion the Minnesota company raised in 2019 but only half the amount from a record-breaking $2.6 billion in 2021.

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

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

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

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