In a rare move for a university, the University of Michigan will for the first time directly invest in its own startup businesses.
Through the Michigan Investment in New Technology Startups initiative, the university could inject up to $25 million during the next decade into select venture-funded U-M startups—new companies built around inventions born in faculty members’ labs.
“We believe in the work of our researchers,” President Mary Sue Coleman said, “and we believe in delivering strong returns on our endowment.”
Coleman noted that this is not a new expense on the part of the university. The university is diversifying its assets—money that is continually invested—and investing directly in technologies and ideas developed by U-M researchers.
Eligible startups are primarily those that have licensed technologies that originated in faculty labs. Once a startup has secured an initial round of funding from a qualifying independent venture capital firm, it will be eligible under MINTS for up to $500,000 of university financing.
To examine whether this investment strategy makes financial sense, U-M worked with an outside firm to take a close look at how the university’s startups have fared during the past two decades.
“Their analysis shows that if we had, in fact, invested in these startups, the returns would have been healthy,” Coleman said. “Returns would have been competitive with the returns on our venture capital portfolio.
“An added bonus is that because so many startups are based in Michigan, the university is helping to accelerate businesses that contribute to the state’s economy.”
U-M Tech Transfer has helped to launch close to 100 startups during the past decade. In the last few years, five startups have had lucrative exits, including medical device firm HandyLab, which was acquired by New Jersey-based firm BD for $275 million in 2009. Under MINTS, the university would reap the benefits of its initial investment when a company either is acquired, as HandyLab was, or goes public.