The Minnesota Department of Employment and Economic Development (DEED) and the University of Minnesota will work together to provide funding for more start-ups in the state.
DEED earmarked $34.5 million — of which $10 million is already in place — to be administered and distributed by the United States.
“We’re seeing more and more new businesses start up in a really disrupted economy, and the state needs to play a role in that,” said DEED Commissioner Steve Grove. “We need … to help accelerate growth and opportunity as these companies create the next jobs in Minnesota’s economy.”
The money will be pooled through two programs — one for direct investment in startups and one for venture capital firms investing in Minnesota or investing in Minnesota companies in the state.
Minnesota law prohibits state agencies from making direct equity investments or committing money to venture funds. The state government is using the university’s knowledge and network to distribute the funds as part of the state’s $97 million program to support small businesses through the National Small Business Credit Program.
University officials will spend weeks or even months reviewing applications submitted through the portal. Following a review process, each startup selected for funding can receive a check for $1 million or less. Checks to venture funds could be even bigger.
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 startups in the state, entrepreneurs told officials that in the early stages of operations, founders needed more money and that state-backed venture funds might is a solution, says Neela Mollgaard, executive director of Launch Minnesota.
“It’s exciting to see this become a reality,” Mollgaard said.
The partnership allows the early-stage companies to grow, officials said.
Minnesota companies raised $1.23 billion in venture capital through the first nine months of 2022, according to investment tracker PitchBook. The figure is slightly lower than the $1.24 billion raised by Minnesota companies in 2019, but only half of the record $2.6 billion raised in 2021.
While there were about 200 investment deals in venture-backed companies in Minnesota last year, most of that investment money went to companies that raised $25 million or more.
“These programs provide us with 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 finance and operations for the United States.
Startups and fund managers interested in receiving funding from the program can apply immediately using the website z.umn.edu/venture-capital.