The University of Minnesota said Tuesday that it's scrapping plans for two venture capital funds worth $70 million and instead adopting a smaller program aimed at providing seed financing to start-up technology companies born on the university campus.

The U's new Discovery Capital Investment Program will provide early-stage funding to help transfer university-created technologies to the commercial market.

Under the new plan, the school will invest up to $350,000 in equity financing in new technology companies working on a promising product or service. So far this year, the U helped launch 15 new companies. Officials want to keep the momentum going and have instituted new rules and a less expensive program to administer that will fund qualified new businesses.

University officials said they expect to receive fund applications from school researchers and students working to create new companies in six key areas: medical devices, pharmaceuticals, software, engineering, energy/ environment and food/ agriculture.

To qualify, applicants must be from the university, have a viable business plan and demonstrate that the business has a qualified management team. They also must secure matching grants from a non-university source. The business plan will be reviewed by a Discovery Capital board of advisers.

Jay Schrankler, the U's executive director of the Office of Technology Commercialization, said in a phone interview Tuesday that he expects the board to approve funds for roughly two businesses a year.

The Discovery Capital Program grew out of an earlier plan university officials proposed in December 2012. At that time, the U's Office of Technology Commercialization proposed creating two multimillion-dollar venture-capital funds over 10 years.

One $20 million fund would have provided seed capital to school-based start ups. A second $50 million fund would have given venture capital funding to new companies nationwide. Those proposals, however, first needed approval from the university's Board of Regents. After much review, university officials decided against both plans.

"Recent economic downturns and the sizable costs associated with managing a venture capital fund … have required university technology officials to rethink and restructure the initial plans," officials said in a statement Tuesday.

Andrea Wuebker, spokeswoman for the university's Research Office explained, "It's more expensive to manage a formal venture capital fund. But the new plan will help us be a bit more nimble and will get that outside investment match."

The Discovery Capital Investment Program will also work with the university's expanded technology licensing services and pair entrepreneurial students and researchers with commercial experts.

Schrankler said that the new plan does not limit how long the Discovery program should last. "Let's just see how the next few years go. We have more than enough money to do two investments a year for the next few years. If it's successful, there will definitely be enough to continue on," he said.

The Discovery Capital program will be funded by royalty fees the university has amassed from past technologies and products, he said.

Dee DePass • 612-673-7725