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State approves additional $5M for MSU-backed Michigan Rise pre-seed fund 

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October 18-20, 2023 / Tucson, AZ
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The Story

An early-stage investment fund the Michigan State University Research Foundation administers received another $5 million in state capital that will go to support high-tech startup companies. 

The funding that the Michigan Strategic Fund board approved this morning adds to past allocations for the Michigan Rise Pre-Seed Fund III LLC, which initially received $6.5 million two years ago from the Jobs for Michigan investment fund and another $8 million in October 2021. 

Since the original allocation, the Michigan Rise Pre-Seed Fund has invested nearly $12.8 million in 61 promising high-tech startup companies, building a “diverse and high-quality portfolio,” according to a Michigan Economic Development Corp. staff memo to Strategic Fund board members. About 30% of the portfolio companies the fund backed were spun out of universities in the state, and about 70% are led by diverse and underserved founders. 

Startup companies the fund invested in went on to collectively attract more than $341 million in follow-on capital and create 571 new jobs, according to the MEDC.

“We need to make sure that companies feel as if they can achieve their success and have either a public or a strategic exit growing here in Michigan, and these pre-seed funds are vitally important to make sure that research goes from the lab bench to the marketplace,” said MEDC CEO Quentin Messer Jr. “The Michigan Rise team has done very solid work in their investments.” 

The Michigan Rise Pre-Seed Fund also provided $1.35 million in loans to five companies, two of which paid off the debt, and has another 13 startups in the pipeline for debt financing that totals $3 million. 

“Based on the Pre-Seed Fund’s performance to date, the reinvestment and repayment terms, and (MSU Research Foundation’s) strong track record for successful early-stage investments, MEDC staff believes the (Michigan Strategic Fund) will realize a return on its investment into the Pre-Seed Fund,” Fred Molnar, senior vice president for entrepreneurship and innovation at the MEDC, wrote in the staff memo to the Strategic Fund board. 

Michigan Rise Pre-Seed Fund offers up to $250,000 in equity investments to startups that are in the early stages of commercializing technologies in the advanced automotive, manufacturing, materials, information technology, agricultural processing technology, alternative energy, homeland security and defense technology, and life sciences industries. Investments go to companies that can demonstrate a strong market potential, have been in business for seven years or less, and have key founders and the majority of their full‐time employees based in Michigan. 

The fund also provides up to $500,000 in loan financing for companies to fulfill purchase orders before payments are received from clients. 

Companies that receive an equity investment or loan can also access additional support from the MSU Research Foundation, which “maintains active engagement with portfolio companies, including mentorship, access to an extensive professional network through (the foundation), assistance with additional grant funding, and investment syndication,” according to the MEDC memo. 

Full story: State approves additional $5M for MSU-backed Michigan Rise pre-seed fund | Crain’s Grand Rapids Business

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