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 are teaming up to fund more startups in the state.

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

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

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

University officials spend weeks, or even months, reviewing applications that come through the portal. After the vetting process, each startup selected for funding can expect check sizes of $1 million or less. Venture funds’ checks can be bigger.

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Investments will focus on early-stage companies focusing 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 startup companies in the state, entrepreneurs told officials that more money was needed for early-stage founders. operation and that a state-supported venture fund could be the solution, said Neela Mollgaard, executive director of Launch Minnesota.

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

This partnership allows early-stage growth companies, 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 figure is less than 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 with venture-backed companies in Minnesota last year, the majority of investment dollars went to companies that raised $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, senior vice president of US 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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