Colleges and Universities and Indiana University and Banking & Finance and Investing and Education & Workforce Development and Venture Capital

Indiana University launches $10M seed fund

December 4, 2009

Indiana University has formed a new $10 million venture capital fund intended to help companies in their earliest stages of development get off the ground.

The Innovate Indiana Fund was underwritten by the university and private donors. Over the next five years, IU President Michael McRobbie intends for it to make $5 million in equity or convertible debt investments, each ranging from $50,000 to $150,000, to spur initial commercialization of technologies developed in IU laboratories.

The fund’s other $5 million will go toward slightly later-stage investments of between $150,000 and $350,000 to help established IU-affiliated startups bring their products and services to market.

With several potential investments already in its pipeline, the Innovate Indiana Fund immediately became one of the largest sources of early-stage capital for entrepreneurs in the state. BioCrossroads’ Indiana Seed Fund, formed in 2005, has $6 million in capital under management. IU aims to ink four or five early-stage deals annually, with a similar number of later-stage deals.

“We wanted it to be significant enough that it would be impactful and to make a statement that Indiana University is very serious about supporting technology commercialization, said IU Vice President for Engagement Bill Stephan. “We feel an obligation to do everything we can to contribute to the state’s economic vitality.”

Stephan said IU already this year made several changes to encourage faculty entrepreneurship, such as increasing the proportion of gains that research professors and their departments earn when their discoveries lead to license fees or royalties. IU has also dedicated its new Bloomington high-tech IU Innovation Center facility, a sister to the IU Emerging Technologies Center business incubator in downtown Indianapolis on the Central Canal.

In its history, IU’s Research and Technology Corp. has licensed IU technologies to a total of 38 startup companies. In fiscal 2009, which ended June 30, IU applied for 186 patents, disclosed 131 inventions and licensed 34 technologies. During the period, five of IU’s previous patent applications were granted.

IU hopes to make the Innovate Indiana Fund “evergreen,” and at least partially self-sustaining. The university has set a target of reinvesting a compounded annualized return of 15 percent into the fund in its fifth year. It also expects a quarter of its early-stage investments will simultaneously attract outside venture capital. The university aims for half its later-stage seed investments to leverage outside venture money.

The university has established a high-caliber investment committee to approve the Innovate Indiana Fund’s deals. Members include IU School of Medicine Dean Dr. Craig Brater, Baker & Daniels partner Chuck Schalliol, IU chemistry professor Ted Widlanski, TL Ventures Managing Director Emeritus Dr. Gary Anderson, former Angel Learning CEO Christopher Clapp, and IU Research and Technology Corp. President Tony Armstrong.
 

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