Universities announce investment funds for local startups

While many universities maintain startup investment funds targeted at growing university-affiliated startups, several universities are looking beyond their walls for investment opportunities that will create a return on investment (ROI), but also support economic prosperity. Through these investment funds, universities are able to make strategic investment in startups that will contribute to the future growth of their community, region and state. Massachusetts provides a recent example where MIT will invest $25 million in local startups.  Virginia Tech has also said it will invest $15 million in startups willing to locate in Blacksburg and Roanoke’s innovation corridor.

In late 2016, MIT announced a $25 million startup investment fund as part of its broad entrepreneurship initiative, dubbed The Engine. Beyond MIT-affiliated startups, the potential $150 million Engine fund will be open to Cambridge startups in biotech, robotics, advanced manufacturing, medical devices, and energy. In addition to the startup capital, MIT resources would be available through a 26,000-square-foot startup space on the edge of its campus.

To ensure no bias in the selection process, MIT will set up The Engine Fund as a separate entity with a professional fund manager who has no connection with the university. MIT will serve as a limited partner in the fund with the remaining $125 in proposed capital coming from outside sources.

To bolster economic growth in the Blacksburg-Roanoke region of Virginia, Virginia Tech, in partnership with Carilion Clinic, launched a $15 million startup fund designed to attract and/or grow startups mainly in the life sciences industry. The fund is open to any Virginia-based startup willing to move to the region as well as out-of-state startups with connections to the university or Carilion.

Housed at RAMP, a Roanoke business accelerator, the VTC Innovation Fund will focus on both economic growth in the region as well as a ROI for both Virginia Tech and Carilion Clinic. Fund managers intend to make between seven and 10 deals over the next four years with nearly 60 percent of the deals focused in areas such as pharmaceutical companies, medical device manufacturers and biotech startups. However, the fund is open to “disruptive technology” startups in areas such as engineering and advanced materials.

These efforts by Virginia Tech and MIT highlight the important role that universities can play in a region’s innovation ecosystems. Beyond providing access to facilities and expertise, institutions of higher education can play a vital role in providing “patient” startup capital that allows companies to grow at a sustainable rate that could potentially lead to create regional jobs, economic growth, and create an ROI for the instituion.