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 – of which $10 million is already in the ground – that will be managed and distributed by the U.

“We’re seeing more and more new businesses starting up in a truly disrupted 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 Minnesota’s economy.”

The money will be funneled through two programs – one for direct investment in startups and a second for investments in Minnesota-based venture capital firms or venture firms that invest in Minnesota companies.

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Minnesota law obligates state corporations to make direct equity investments or give money to venture funds. The state administration is using the university’s knowledge and network to distribute those 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 that come through the portal. Following the vetting process, each startup selected for funding can expect a check size of $1 million or less. Venture fund checks can be big.

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Investments will target 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 founders needed more money in the early stages of operations and that a state-backed venture fund could be a solution, said Neela Molgaard, Launch. Minnesota Executive Director.

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

The 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 Minnesota companies raised in 2019 but only half of the record-breaking $2.6 billion in 2021.

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Last year there were nearly 200 investment deals in venture-backed companies in Minnesota, with the majority of those investment dollars going 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 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 website.


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