The Minnesota Department of Employment and Economic Development (DEED) and the University of Minnesota will work together to fund more startups in the state.

DEED designated $34.5 million — $10 million of which is already on the ground — that will be managed and distributed by the U.

"We're seeing more and more new businesses get started in a really disrupted economy, and the state needs to play a role in that," DEED Commissioner Steve Grove said. "We need ... to help accelerate that growth and opportunity, because these companies are creating the next jobs for Minnesota's economy."

The money will be funneled through two programs — one for direct investment in startups and a second for investments in Minnesota-based venture capital firms or venture firms with a presence in the state that invest in Minnesota companies.

Minnesota law prohibits state agencies from making direct equity investments or commiting to giving money to venture funds. State administration is leveraging the knowledge and network of the university to distribute those funds, which is part of the state's $97 million initiative to support small businesses through the State Small Business Credit Initiative.

University officials will spend weeks, or even months, reviewing applications that come through the portal. Following the vetting process, each startup selected for funding can expect check sizes of $1 million or less. Checks to venture funds could be larger.

The investments will target early-stage companies focusing on life sciences, agriculture and food technology, climate technology, advanced manufacturing and software.

Three years ago when DEED created Launch Minnesota, an initiative dedicated to supporting the state's startup companies, entrepreneurs told officials more money was needed for founders in the early stages of operation and that a state-backed venture fund could be a solution, said Neela Mollgaard, executive director of Launch Minnesota.

"It's exciting to see that become a reality," Mollgaard said.

This partnership allows companies at the early-stage level to grow, officials said.

Companies in Minnesota raised $1.23 billion in venture capital through the first nine months of 2022, according to investment tracking firm PitchBook. That figure is just below the $1.24 billion Minnesota companies raised in 2019 but is only half the amount from a record-breaking $2.6 billion in 2021.

While there were about 200 investment deals in venture-backed companies in Minnesota last year, the majority of those investment dollars went to companies raising $25 million or more.

"These programs provide us with a once-in-a-lifetime opportunity to invest in our long-term future by supporting Minnesota startups and helping them grow," said Myron Frans, the U's senior vice president for finance and operations.

Startups and fund managers interested in receiving funding from the program can apply immediately using the website