Tulane, University Of Chicago Allocate Millions To Support New Start-Ups

The University of Chicago and Tulane University have both recently announced they are establishing new funding mechanisms to provide investment capital that will support business start-ups. The announcements come as the federal government and research universities across the country ramp up their efforts to spur innovation and commercialization of research discoveries.

University of Chicago

The University of Chicago is setting aside $25 million from its endowment to invest in business startups led by faculty, students, staff and alumni. The $25 million is intended for companies that are raising Series A funding.

The university’s Office of Investments, which oversees the institution’s multi-billion dollar portfolio including its endowment, will oversee the UChicago Startup Investment Program as part of its private equity and venture capital portfolio.

The University said it expects to invest in three or four new companies a year through the new program, which is scheduled to run for a decade. The maximum initial investment in each venture will be the lesser of $500,000 or 20% of the investment round.

As a condition of its investment, the university will require that an established venture capital firm lead the investment round and have a seat on the startup’s board.

“The University is continuing to expand its commitment to support our students and faculty across the institution who are engaged in entrepreneurship,” said President Robert J. Zimmer. “By co-investing in new companies that have independent investments by established firms, we will enhance University-wide support for startups while encouraging venture partners to explore investment opportunities coming out of the University.”

To qualify for the new funding, a startup must have a “significant affiliation with the University,” meaning that it must either derive from university-owned intellectual property, or that faculty, alumni, students or staff are on the founding team.

Tulane University

At Tulane University, the focus of the new start-up fund is not restricted to university faculty or staff. Instead, its Innovation Institute, founded last year, will dedicate a $10 million startup fund for New Orleans-area women and minority entrepreneurs, two groups that have historically had to overcome obstacles to their ability to attract the new capital necessary to start businesses.

The new Tulane Ventures fund is comprised of $5 million in recent federal funding, which has been matched by $5 million from Tulane. Amounts up to $200,000 per applicant will be available in the seed round; that funding will be invested over five years.

“We want to build a community that’s about innovation, and we need our women and our underrepresented populations to have access,” said Kimberly Gramm, the David and Marion Mussafer Chief Innovation and Entrepreneurship Officer at Tulane.

The Tulane Ventures fund is being structured to be self-sustaining. When the companies it helps launch are sold, the returns will be plowed back into the fund to support more startups, assuming that various guidelines are met.

In addition to the seed funding, Tulane expects to provide other support for entrepreneurs, including consulting, mentoring and guidance from its Innovation Institute.

The push for universities to lead business development efforts will find new support at the federal level, where agencies such as the Department of Defense (DoD) and the National Science Foundation continue to develop funding opportunities for startups based on scientific discoveries and new technologies.

For example, the DoD Office of Strategic Capital provides funding to help innovative companies advance beyond the prototype stage. It’s a strategy aimed at preventing new ideas from languishing in a “valley of death” between innovation and a full-fledged business operation.

The CHIPS and Science Act of 2022 is another source of new federal investment in university-driven innovation and business development, particularly in areas of nanotechnology, clean energy, quantum computing, and artificial intelligence.