Tulane University’s Institute of Innovation will launch a $10 million seed fund for women and minority entrepreneurs, targeting groups that have historically faced barriers accessing capital to start businesses.
The Tulane Ventures fund — built from $5 million in federal funding that was matched by $5 million from Tulane — is the university’s latest initiative to bolster innovation in New Orleans.
Funding applications are expected to open early in the new year. Up to $200,000 per applicant will be available in the seed cycle, invested over five years.
“We want to build an innovation-driven community, and we need our women and underrepresented populations to have access to that,” said Kimberly Gramm, director of innovation and entrepreneurship at David and Marion Mussafer. at Tulane.
The fund was announced just before the Albert Lepage Center for Entrepreneurship and Innovation at Tulane’s AB Freeman School of Business released its annual Greater New Orleans Startups Report.
The report’s findings reinforced the need for such a new fund: after a slight increase in equity funding from angel investments, convertible debt and venture capital for women and minority-founded businesses, both in the New Orleans area than nationally in the year 2022 survey reported a decline in funding.
Federal grant money
In December, Louisiana received $113 million from the American Rescue Plan’s State Small Business Credit Initiative, or SSBCI, a federal program aimed at reviving small businesses.
The SSBCI was created in 2010 to enable the federal government to help states support small businesses that are creditworthy but unable to access capital.
The $113 million was allocated to venture capital and seed capital programs. Tulane received a share of $5 million.
The Tulane Ventures fund, Gramm said, is meant to be self-sustaining, meaning returns from the sale of businesses will flow back into the fund to support more startups if Louisiana Department of Treasury and Economic Development guidelines permit. .
While planning is still underway for what participation will entail, Gramm said the Innovation Institute expects to provide programs and support for entrepreneurs. Portfolio companies will also benefit from advice, mentorship and guidance from the Innovation Institute’s resource network.
The ultimate hope, she said, is that entrepreneurs stay in New Orleans and reinvest their money here.
Funding needed
According to the Startup Report, members of minority groups who want to start businesses have unequal access to capital.
“The 2022 report shows a decline in access to equity investment across all areas for BIPOC-founded businesses (Black, Indigenous and of color), mirroring national data that shows a decline in funding for entrepreneurs of BIPOC,” Rob Lalka, executive director of Center Lapage, wrote in the report.
For example, 6% fewer companies with BIPOC founders reported using venture capital funding than last year, while there was an 11% increase for those with non-BIPOC founders. a minority. A similar decrease was seen in BIPOC-founded companies that reported using angel investments and convertible debt.
“Nationally, these numbers are dismal, and yet they represent the majority of the population here in our community,” Gramm said.
The startups report also indicates that minority-founded businesses still lag their non-BIPOC-founded counterparts when it comes to traditional bank lending, although the gap has narrowed slightly since the start-ups report. last year.
Tulane at the NOLA Entrepreneurship Center
With the addition of the Innovation Institute, launching in 2022, Tulane seeks to position itself as a key enabler of entrepreneurship in the city of New Orleans.
As Tulane’s first fund for entrepreneurs, the Venture Fund is a “huge win for our community,” Gramm said.
“It’s like having your first baby,” she says. “Other universities have done it before, but that’s out of the wheelhouse of expertise, typically, at a university.”
Gramm said Tulane management’s support for the fund underscores the university’s focus on innovation.
“They kind of put a flag in the ground to help not just the internal academic community, but the wider community to understand that science and innovation go together to have an impact to help people, whether it’s either to cure cancer or whether it is to create opportunities for generational wealth,” she said. “When our leaders say they want to support and nurture an environment like that, it’s a big deal.”