U-M To Invest $25 Million In University-Grown Startups

ANN ARBOR – The University of Michigan plans to invest up to $25 million from its $7.8 billion endowment in university-grown startups, U-M President Mary Sue Coleman said Wednesday.

Coleman said startups would be eligible to receive up to $500,000 each from the university after they?ve secured venture capital from a separate private source, Ann Arbor.Com reported.

In her annual address outlining goals for the university, Coleman described the initiative as a smart fiscal move ? not a philanthropic endeavor. She said the university?s endowment studied the financial performance of U-M spinoff companies over the past 30 years.

?Their analysis shows that if we had, in fact, invested in these startups, the returns would have been healthy, the returns would have been competitive with our VC portfolio,? she said. ?Simply put, University of Michigan startups are a good financial opportunity.?

U-M’s endowment was worth $7.8 billion at the end of the 2010-11 fiscal year. That?s up 18.2 percent from $6.6 billion on June 30, 2010.

The investment program, which the university is calling Michigan Investment in New Technology Startups (MINTS), will launch immediately.

U-M Executive Vice President and Chief Financial Officer Timothy Slottow described the initiative as a “passive investment program” ? meaning the university will automatically invest up to $500,000 in its startup companies after they’ve reached the milestone of securing outside VC dollars.

Slottow said the university’s endowment managers are not positioned to evaluate individual investments ? which is why U-M startups must secure outside investment before U-M’s automatic dollars are delivered.

Startups created by the university have typically licensed intellectual property from the university, which often gets an equity stake or royalty deals in return. U-M’s Technology Transfer Office reaps revenues when U-M startups are sold, but the university’s equity stake is typically diluted over time as outside investors step in and take on more risk in the startup’s development.

With the venture capital investment program revealed today, U-M will help create jobs in Michigan, Coleman said, because most U-M startups are based in the state.

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