MSU Foundation to manage state-backed $5.5M pre-seed fund

The Michigan Economic Development Corp. plans to put $3 million into a capital fund that will invest in early-stage technology companies. The Michigan State University Foundation will match the state money with $2.5 million of its own, for $5.5 million total, and manage the Pre-Seed Fund III, which will operate similarly to two prior capital funds formed by the state. As well, the MSU Foundation will provide coaching and mentorship in areas such as finance, marketing tactics and strategy to entrepreneurs behind the startups the fund backs.

Pre-Seed Fund III follows two prior funds that since 2011 have collectively provided $20.5 million in early-stage capital to 125 tech startups, which went on to leverage the investments to attract nearly $560 million in additional capital. Given the success of the earlier pre-seed funds, the MEDC decided to proceed with Fund III to try to address a persistent gap in the access to capital for young startups. That gap has widened over the years as angel and venture capital investors moved upstream to take on less risk with companies that have progressed beyond their earliest stages.

Filling the gap in the capital continuum is “elementally crucial to the ecosystem,” said Dale Grogan, a managing director at Grand Rapids-based Charter Capital Partners. He served on a committee that evaluated proposals to manage Pre-Seed Fund III. “It is absolutely the right thing to do and I wish there was more of it,” Grogan said. “I can’t stress how important this is for economic gardening and building the ecosystem.” Read more at MiBiz

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