University of Minnesota's startup pipeline helps drive state's innovation economy

There's a common trait among metro areas regarded as the nation's top technology and innovations hubs: A university that specializes in cutting-edge research is usually at the center.

In Silicon Valley, there are Stanford University and the University of California, Berkeley. In Austin, the University of Texas. Boston benefits from the Massachusetts Institute of Technology, Harvard University and Boston University, and New York gets its new generation of entrepreneurs from institutions such as Columbia University, Cornell University and New York University.

The Twin Cities, revered as one of those tech hubs, has the University of Minnesota.

The university's success resume has attracted investors, chief executives and talent to the Twin Cities over the years. These professionals will be among those gathering during the next week for in-person and virtual events as part of Twin Cities Startup Week, an annual, weeklong series of seminars, discussions, demonstrations and networking events tailored to continue growing the area's startup ecosystem.

"I'd like to think there's as much cause as there is effect, and I think the university has played a key role in that," said Rick Huebsch, executive director of the University's Technology Commercialization office.

Since 2006, 216 companies have been created based on software, therapies, machines and devices created by researchers, faculty, staff members and sometimes graduate students at the university.

Half of those companies were formed in the past five years.

Steve Grove, commissioner of the Minnesota Employment and Economic Development Department, in a statement said the University of Minnesota "is a key part of our state and regional startup ecosystem."

"We're blessed to have such a strong research university in Minnesota that understands technology commercialization so well," Grove said.

Minnesota's public university system, which has five campuses across the state, in 2020 ranked 15th in the U.S. in startup formations among all universities and sixth among public universities, according to the Association of University Technology Managers.

The majority of companies started from the university since 2006 are companies focused on biosciences and pharmaceuticals, software and information technology and medical device.

The potential of those companies has attracted nearly $2 billion in investment capital while creating hundreds of jobs.

"The high-tech (startups) are the ones that are going to raise larger venture capital," Huebsch said. "Attracting investors, CEOs and having people move back to the region, that's an economic driver."

Success stories include Eden Prairie-based Miromatrix Medical, a medical tech company using technology invented at the university to develop a way to bioengineer fully transplantable human organs that could eliminate wait lists for organ recipients. Micromatrix raised $43 million from new shareholders after going public on the Nasdaq last year.

There's also Niron Magnetics, a Minneapolis startup company spun out of a University of Minnesota research lab that raised $21.3 million last year to build a magnet-producing factory. The company is funding the construction of a 25,000-square-foot pilot plant next to its research facility in northeast Minneapolis. When completed, it will make magnets for use in electric vehicles, among other things.

More than 71% of the companies created from the university are headquartered in Minnesota and have collectively created 1,100 jobs.

Minnesota's entire startup ecosystem benefits as a result, said Russ Straate, who leads the U's Technology Commercialization Venture Center.

"We're bringing into the ecosystem some heavy-tech startups that also have the benefit of requiring heavy-tech people (with) high salaries," Straate said.

It especially impacts the amount of venture capital dollars flowing into the state, Straate added.

"When (investors) are here, they're not going to see not just ours but other companies as well," he said.

And because most startups outsource most of their service needs to keep payroll costs at a minimum, local companies benefit from being hired on as subcontractors, Straate said.

"All of the boats are floating higher," he said.

Of the almost $2 billion in investments raised by the 216 companies, $675 million comes from initial public offerings and acquisitions. What's more, 10 university companies have been acquired or gone public since 2017, and the companies created since 2006 have a survival rate of 77%, according to the university.

The companies created from the university generated $16.1 million in licensing revenue for fiscal year 2022, down from $17.4 million in 2021. The revenue is distributed through in a shared system, Huebsch said, with the returns going back to research community, the department and faculty and the university overall.

MPact 2025, the systemwide strategic plan for the University of Minnesota, calls for 25 startup companies created each year by 2025. In fiscal year 2022, the university launched 22 companies.

The growth of business formations at the university has also led to increases in researchers interested in entrepreneurialism.

"In the past, we had to pull startups out of them," Straate said. "Now they're coming to us, raising their hand, saying, 'I have a technology I think can be a new company formation.' "

Twin Cities Startup Week, a weeklong series of events designed to educate entrepreneurs on how to grow their business while connecting them to investors, academics and corporate leaders, begins Friday. Started in 2014, nearly 17,000 people registered for last year's events. More than 200 events are scheduled throughout the metro for this year's series, which starts at 6 p.m. Friday with an opening party.

Here's a look at some of the top events:

Go to twincitiesstartupweek.com for more information.