The University of Minnesota has abandoned plans for a $20 million venture capital fund and will instead launch a seed-capital program for university-born startups.
The new Discovery Capital Investment Program offers up to $350,000 in equity financing to startups commercializing university research. To participate, companies must land matching funds from outside investors and meet other requirements. The program’s board of advisers also must approve the deal.
The university expects to fund an average of two startups per year, said Jay Schrankler, executive director of the university’s Office for Technology Commercialization. It will target six sectors, including the medical-device, software and energy industries.
The university initially planned to launch a formal venture capital fund, but dropped that effort partly because fund-management costs were too high. The new approach also will allow the school to better partner with private-sector investors, Schrankler said.
“What’s really key to this program is outside engagement,” he said. “Requiring local investors or other investors to pony up an equal or greater amount than we do is another big validation of our investment.”
The university spun out a record 15 startups during its 2014 fiscal year.