The Michigan State University Foundation has made the first two investments from a new early-stage fund created by the Michigan Strategic Fund.
The Michigan Pre-Seed Fund III, which has got initial funding of $3 million from the state, will do business under the name Michigan Rise. Its executive director is Jeff Wesley, who is also executive director of Red Cedar Ventures, an investment arm of the MSU Foundation.
Unlike Red Cedar Ventures, which invests in early-stage companies with a connection to MSU, Michigan Rise will invest in companies throughout Michigan. Michigan Rise began operating in August. Wesley said the plan is for the state to also invest $3 million in each of the four subsequent years, with the MSU Foundation committing a total of $2.4 million.
Prem Bodagala is a director of Michigan Rise. He joined Red Cedar Ventures last October and spent the previous two years as a director at Detroit-based Invest Michigan, which was the fund manager for the $10.3 million Michigan Pre-Seed Fund II.
Wesley said companies will get initial investments from the fund of $50,000 to $150,000, with follow-on investments able to bring the total commitment to any one company of $250,000. Michigan Rise will work closely with the Michigan Economic Development Corp.'s Entrepreneurship and Innovation Initiative to provide mentorship and technical assistance in addition to funding in the MEDC's target investment areas of advanced mobility, advanced manufacturing and materials, alternative energy, agricultural technology, information technology, homeland security and defense and life sciences.
"As the entrepreneurial ecosystem rebounds from the ongoing pandemic, this funding will be vital in ensuring Michigan's early-stage startups have the tools necessary to scale and succeed," said Nataliya Stasiw, portfolio manager with the MEDC's Entrepreneurship and Innovation team, in a press release in August. "We are grateful to partner with Michigan State University Foundation to provide this support, and further demonstrate the innovation and resilience of Michigan's workforce and economy."
Though the fund didn't formally begin accepting applications atmichiganrise.com until Aug. 10, it had deals already in the pipeline by then and made its first two investments by mid-August, in Genomenon Inc., an Ann Arbor company that has developed several cloud-based software tools that automate the interpreting of genome sequencing, and East Lansing-based GreenMark Biomedical Inc., which is seeking approval for a rinse that helps with early detection of cavities, as well as working on related technology that can help restore tooth enamel.
Wesley declined to disclose the size of those investments.
Genomenon is a 2014 spinoff from the University of Michigan, and Wesley said that normally a preseed fund wouldn't invest in a company that is six years old, but the company was in the midst of raising a round of equity funding that got put on hold when the pandemic hit. "Genomenon we have known and worked with for a while. With COVID, their Series A was pushed back, and we were more than willing to step in and help with this bridge round," he said.
He said it helped, too, that Genomenon has a CEO, Mike Klein, who has grown and sold other successful tech companies. "Mike is great, and I have known him for a long time," he said.
The creation of Michigan Rise is another example of MSU's outreach in entrepreneurial support. It has just launched its second Conquer Accelerator program, this one in Grand Rapids. Patterned after the Conquer Accelerator program in East Lansing, five Grand Rapids startups offering high-tech products or services are getting 10 weeks of intensive mentoring and advice on fundraising, supply-chain management and marketing. They also get $20,000 in funding in exchange for 5 percent equity.
Originally scheduled to be held in MSU's Grand Rapids Research Center, Wesley said that because of COVID-19, this first accelerator program will be done virtually. It started on Sept. 14 and ends Nov. 20.
The accelerator program began in East Lansing in 2015 and has invested $500,000 in 25 companies.
Established in 1973 as an independent nonprofit, the MSU Foundation helps commercialize technologies invented by MSU faculty, staff and students. It also operates Spartan Innovations, which runs a variety of programs to encourage entrepreneurship, and the University Corporate Research Park.
A report last February said that since 2013, Red Cedar Ventures had invested nearly $5 million in 73 companies, which in turn leveraged $152 million in additional outside investment, including $99 million from out-of-state venture capitalists, and had created 424 jobs. Forty-five of those companies are still in Red Cedar's portfolio.
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