MSU Foundation Invests $5M in Red Cedar Ventures Fund
Michigan State University faculty and students working to get their startups to market have a new tool in their arsenal: Red Cedar Ventures, a $5 million fund created by the MSU Foundation.
Dave Washburn, executive director of the MSU Foundation, says Red Cedar Ventures will deploy money to university entrepreneurs or those commercializing university inventions in two buckets: a pre-seed fund for ventures at the earliest stage of development, and an opportunity fund for follow-on investments.
“We’ve quietly deployed close to $2 million in three years in a number of companies,” Wasburn explains, describing the MSU Foundation’s previous forays into investing. “Some are starting to make waves and some are starting to raise more money. We’ve got some momentum going.”
The Red Cedar Ventures pre-seed fund will invest $750,000 per year in up to 10 startups. Then, if those startups succeed, they’ll be eligible for additional funding through the opportunity fund. To qualify for follow-on funding, a company must have a viable prototype or concept with a legitimate customer base and compelling value proposition, Washburn says. He expects each follow-on investment to be worth up to $500,000 per company.
Although Red Cedar Ventures doesn’t limit itself to specific sectors, Washburn says the startups that score funding tend to be in industries where MSU has research expertise, such as agtech, engineering, and life sciences. He also clarifies that the MSU Foundation is not the fundraising arm of the university; rather, it’s a nonprofit foundation supporting university research, inventions, and entrepreneurship as a component of economic development. It also operates the Michigan Biotechnology Institute and Spartan Innovations.
“We started this to push faculty and staff to be entrepeneurs,” Washburn says. “We started getting a little traction, and we’ve spent the past three or four years putting the pieces in place to do well.”
Washburn pointed to two companies as examples of thriving startups in the Red Cedar Ventures portfolio: TheraB is a startup that has developed a device to treat infant jaundice called the SnugLit that is portable and allows the baby to bond normally with its mother; MTBIsense is composed of two faculty members working on a headband that records the severity and location of head injuries for use in athletics. Both companies are in the prototype-testing phase.
“We’re looking for current students, faculty, and staff engaged in commercializing new technologies,” Washburn says. “We’re not set up to take business plans from outside the MSU family.”
Washburn hopes the success of Red Cedar-supported startups leads to increased entrepreneurial activity across mid-Michigan. “In many respects, we’re doing this for the financial return, but there are other complementary reasons like local economic development, job creation, attracting outside money, and more office space rented,” he adds. “We’re trying to develop the ecosystem as well.”