Many universities are very proud of their researchers, but not many are willing to back them up like the University of Michigan is currently doing. The school’s president, Mary Sue Coleman, announced on Wednesday that the school was starting an initiative that would help fund start-up companies that were developed through university research.
In the past, many higher education leaders have seen these types of investments as a good way to guarantee a company’s success, but they have only endorsed companies on a limited basis. Now, Michigan is starting to shake up this traditional view.
“Simply put, University of Michigan start-ups are a good financial opportunity,” Coleman said. “And the historical data have convinced us now to invest a small portion of the endowment in start-ups from all three campuses.”
Coleman bases her claim on a study that the school commissioned that study the success of various start-up companies that originated at the University of Michigan. The study showed that the school would have earned returns from investing in previous start-ups that were comparable to the returns it earned from its venture capital portfolio during the past 20 years.
So how much will the university be investing in the start-up projects created by their researchers? It could be as much as $500,000 in one company through successive rounds of financing. In total, the school could be investing up to $25 million in its new venture capital funding program.
This isn’t the first time that the University of Michigan has helped a student’s idea make it to the market. Two years ago, the school purchased an old Pfizer plant and began renting the space out to various start-ups. Last year, the school launched 11 new companies and has had, on average, 10 companies launch every year for the past decade.
Of course, not every company that launches from the school will actually be successful. Keeping this in mind, one has to wonder why the school is taking such a risk by financially backing these companies?
“We live in a different world,” said Robin Rasor, director of licensing at the school and president of the board of the Association of University Technology Managers. “It is a lot harder to get venture funding nowadays. Any avenues that the university can use to help support tech start-ups are going to be to the betterment of the public.”