The Michigan State University Foundation was named administrator of the Michigan Pre-Seed Fund III by the Michigan Economic Development Corporation, or MEDC.
The $3 million award, approved by the Michigan Strategic Fund, fits the non-profit mission of the MSU Foundation and will spur economic development by delivering capital to startup companies across the state.
Founded in 1973, the MSU Foundation's mission is to assist Michigan State University in fulfilling its land grant mission as it relates to economic development. In the past six years, the MSU Foundation has invested resources into programs that help commercialize new technologies. Its investments include accelerator programs via Spartan Innovations; a pre-seed and early-stage venture fund, Red Cedar Ventures; and facilities and incubators through its University Corporate Research Park organization.
"Our objective is to contribute to the State of Michigan's entrepreneurial ecosystem with the goal of creating jobs, attracting and retaining talent and creating value," said David Washburn MSU Foundation executive director. "Administering the Pre-Seed Fund III award will enhance our impact and help us extend our reach across the state."
The award, which was approved by the Michigan Strategic Fund on April 14, will further the Foundation's endeavors by working with pre-seed stage companies throughout Michigan, providing capital support, coaching, assistance with grant funding and access to entrepreneurship resources available across the state.
The Pre-Seed III dollars will be allocated to early-stage venture companies as either convertible notes, equity investments or SAFE agreements, and the size of the investments will vary depending on the opportunity.
"With this award from the MEDC, we'll work with statewide SmartZones, university tech transfer offices, business acceleration service providers, and incubators and accelerators," said Jeff Wesley, executive director of MSU Foundation subsidiary entity Red Cedar Ventures which will oversee Pre-Seed Fund III. "We want to leverage existing relationships to support these startups."
In some cases, the MSU Foundation, via Red Cedar Ventures, will co-invest alongside of the Pre-Seed Fund III and seek support from the angel and early stage investors across the state.
"We have built a strong network across the State of Michigan through our membership with the Michigan Venture Capital Association and have received commitments of support from several investor groups within the region," Wesley said. "By combining investment dollars from a number of sources, we can spread the risk while surrounding the new startups with a nurturing ecosystem of aligned partners."
Since 2014, Red Cedar Ventures has deployed $5 million of its own resources as early stage funding to over 70 new startup entities. Those companies have raised an additional $200 million from other funding sources.
"For the last six years, the MSU Foundation's venture creation apparatus has been under the radar, using their own financial resources to create a deep bench of individuals and service providers that have resulted in the formation of many promising, high-growth companies," said Fred Molnar, vice president of Entrepreneurship & Innovation at MEDC. "Their mission, track record and relationships across the state is a compelling story, and we're excited to work with a team so committed to this important work."
The Pre-Seed Fund III will be able to leverage many systems that have been established by the MSU Foundation through its Spartan Innovations group, such as its Entrepreneur-In-Residence and Mentor-In-Residence programs. Additionally, early stage companies can apply to Spartan Innovations program, Conquer Accelerator. Companies can take advantage of its expertise in leveraging non-dilutive federal grant programs such as SBIR and STTR programs.
The Pre-Seed Fund III is industry and sector agnostic but will have an emphasis on high growth opportunities that commit to staying in Michigan. Investments from the Pre-Seed Fund III are expected to commence in May 2020 upon completion of contractual negotiations between MEDC and MSU Foundation.