The recent announcement that the University of Chicago will launch a new $25 million investment program to ignite the development of university-affiliated business startups sent another loud signal to national innovators and investors that the Midwest intends to continue to be a leader in the competition for startups and other new business ventures.
A few months earlier, the region’s commitment to enhancing its entrepreneurial ecosystem was reflected by the current Midwest Cities Rankings, presented by Chicago-based early-stage venture firm M25, which indicated that Midwestern startups, large and small, raised record amounts of venture capital in fiscal year 2022, approaching $20 billion. These investments have helped many Midwestern cities and towns weather the marketplace downturns and resets that have more adversely affected our country’s coastal areas.
With the announcement comes another leadership opportunity that our region would be smart to seize—serving as a model for how communities can more creatively, strategically and effectively engage higher education as a key engine for economic development. One proven way our communities can do that is by supporting and partnering with their top colleges and universities as those institutions invest in ideas and inventions developed by their entrepreneurial faculty, students and alumni.
Well over a decade ago, Indiana University unveiled a $10 million venture-capital fund to invest in commercially-focused research and technology. Funded solely by university and private donor sources, the Innovate Indiana Fund, which is now fully vested, has promoted the development of several thriving Midwestern-based businesses by providing them with the critical early-stage capital they needed to take the initial steps from transforming their business concepts into commercial products and services.
Today, the fund is one of four key investment programs managed by IU Ventures, a 501(c)(3) affiliate of the university that invests in and supports IU-affiliated early-stage companies. One of the most active venture-capital firms in the Great Lakes region, IU Ventures focuses its efforts on contributing important resources—including financial support, but also talent, expertise, mentorship and coaching, and industry connections—to push emerging businesses forward, build a pervasive entrepreneurial culture throughout the university ecosystem, and engage with other investment firms and industry partners.
The impacts of its investments in companies with university roots can be felt all across the Hoosier state. The aforementioned M25 report spotlights Indianapolis-based startup Encamp, co-founded in 2017 by IU graduates Luke Jacobs and Daniel Smedema. IU Ventures has invested more than $775,000 in Encamp, which recently closed on a $30 million Series C funding to help further develop a pioneering environmental compliance platform used by enterprises across the U.S.
IU Ventures’ investment “portfolio” now also includes nine promising Indiana- or Midwestern-based medical and health care startups with strong connections to the IU School of Medicine, the nation’s largest medical school.
The firm’s investment impacts can also be seen across the Windy City. Through its IU Angel Network program, IU Ventures recently invested $250,000 in Hot Mic, a fast-growing Chicago-based company founded by IU alumnus Sean Longworth offering a live interactive streaming platform aiming to meet the public’s increasing demand for watch parties, live shopping, e-sports and other virtual events.
Last year, the IU Angel Network also invested $300,000 in Sacred Serve, a fully organic, plant-based gelato company headquartered in Chicago and founded by IU alumna Kailey Donewald. Sacred Serve has attracted the attention of top chefs, food writers and athletes, such as former Chicago Bulls player Nikola Mirotic, who is an investor in the company.
IU Ventures’ investment portfolio also includes Lil Bucks, founded by Chicago native and IU business graduate Emily Griffith, who introduced the first dedicated sprouted buckwheat brand to the U.S. market. In 2021, Lil Bucks won the top $100,000 prize in the prestigious Naturally Chicago Pitch Slam event.
Premier research institutions like IU; the University of Chicago; Michigan State University, with its successful Red Cedar Ventures subsidiary; and the University of Notre Dame, which recently launched a new investment program to benefit eligible university startups in collaboration with Indianapolis-based High Alpha Innovation, share a commitment to bringing university ideas and innovations to market and strengthening a culture of entrepreneurship across their service regions and beyond. Many are equally determined to leverage the talent and resources of their campuses to address regional challenges.
For example, the Center for Urban & Regional Excellence at the IU Northwest campus in Gary, Ind., continues to engage members of the campus community in creating a number of high-impact programs and initiatives to address key challenges facing northwest Indiana, including adult education, child abuse and neglect, civic engagement, law enforcement training and reading development.
Clearly, the pathway to achieving regional prosperity and reinvigorating struggling communities will require more than these commitments alone. Working in collaboration with their colleges and universities, states must also continue to find new and creative ways to improve talent pools, quality of place, infrastructure and incentives to attract and retain successful businesses.
Indeed, the Midwest Cities Rankings indicated that leading startup communities have benefited from states that have aggressively added resources—including competitive tax credits—designed to help turn ideas and innovations into successful new companies.
But the signal has been sent. It’s our region’s time to thrive. We can do this by continuing our collective efforts to turn high-potential ideas with strong university roots into successful businesses that stimulate our states’ economies.
Tony Armstrong is an associate vice president at Indiana University and president and CEO of IU Ventures.