Tech Transfer eNews Blog

New philanthropic venture fund at U Michigan snags Amazon investment

By Jesse Schwartz
Published: September 9th, 2020

A detailed article on the Accelerate Blue Fund and its successful pitch to Amazon appears in the August issue of Technology Transfer Tactics. To subscribe and access the full article, click here.

When a new university venture fund lands Amazon as one of its early investors, it must be doing something right — and, according to its director, such a vote of confidence is especially important given the challenges this fund is taking on. It also illustrates for other universities seeking participants in start-up funds that big corporates could be fertile ground for prospecting.

“Michigan and the Midwest in general have a lot of challenges when it comes to start-ups securing very early-stage and pre-seed funding,” says Michael Psarouthakis, director of the UM Tech Transfer Venture Center and managing director of the Accelerate Blue Fund. It was the Accelerate Blue Fund, out of the University of Michigan, which recently announced that Amazon is contributing $200,000 — the first corporate gift received by the fund, which seeks to help develop and commercialize promising U-M technologies.

“Data from PitchBook shows that companies based in Michigan take four and one-half years to raise $500,000 to $1 million; on the West Coast it takes two and one-half years on average,” Psarouthakis continues. “That puts our companies at a very significant disadvantage. It’s hard to attract talent, and companies leave the state to chase small-bucket funding.”

This new fund, approved by the Regents of the University of Michigan in October 2019, will only focus on companies coming out of Michigan technology, and generally faculty-led research. It plans to make initial investments of between $25,000 and $250,000 in start-ups in areas like cybersecurity, legal tech, mobility, artificial intelligence, mobility and sports, and climate technology.

Psarouthakis says his team drew from several for profit and non-profit models to design the fund. “We’re not the first place in which a central office like the TTO has run a fund like this,” he observes.

How does the team make its pitch to corporations, and what are the keys to grabbing their interest? The team, Psarouthakis shares, includes himself and two associate directors — one on the life science side and the other on the physical science side. The manager of the university’s venture accelerator also helps attract talent for the start-ups. In addition, the TTO boasts 11 mentors in residence, made possible through the support of the Michigan Economic Development Corporation and the Tech Transfer Talent Network.

“We’ll ask [the mentors] if they’re working with current partners, and whether they can reach out to others,” Psarouthakis says. “We also work very closely with two departments — the Office of University Development and the Business Engagement Center — who help us.”

How do they get in the door? “It’s a team approach between our network and the Business Engagement Center’s relationships,” says Psarouthakis. “We’re able to talk with people at companies and see if they’ve heard about the fund. We’ve also had a lot of outreach from the venture industry and corporations since we announced the fund and since the Amazon announcement.”

The discussions with Amazon included a face-to-face meeting, where the discussion focused in part on the university’s ongoing commercialization activity. “When we first meet them, many people are surprised to know we are the largest public university in the U.S., that we start 20 to 30 companies a year (a record 28 were started in 2020), and that they come from all 19 schools and the Dearborn and Flint campuses,” says Psarouthakis. “The number of start-ups a year puts us in an elite group; and there were over 500 disclosures in the last two years. Only MIT and Stanford have that volume. “

Beyond those benefits, the Amazon pitch — and all corporate pitches for the fund — includes the challenges start-ups face in the Midwest, “and the real opportunity to have an impact and create commercially viable new companies based on world-class research and accelerate a process that will benefit their mission — and society’s, and ours,” Psarouthakis says. “Universities do financially benefit, but our passion is to get discoveries to market. For example, Lasik eye surgery came from here.”

What’s in it for the corporate investors? Is there any actual payback monetarily, or in the form of an equity stake? “It’s a 100% percent donation,” says Psarouthakis. “No rights come with investing alongside us. Certainly, it will give them a curated and close experience, and hopefully they will benefit from that relationship in learning what to look for — and we make sure they are aware of the activity at the university that may be of interest to them.” He says he also hopes to make introductions to people at Amazon for mentor opportunities. “They’re very interested in coming to campus and meeting the teams,” he notes.

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