Tulane University’s Institute for Innovation will launch a $10 million startup fund for women and minority entrepreneurs, targeting groups that have historically faced barriers to accessing capital to start businesses.
The Tulane Ventures Fund — made up of $5 million in federal funding that was matched by $5 million from Tulane — is the university’s latest effort to boost innovation in New Orleans.
Applications for funding are expected to open early in the new year. Up to $200,000 will be available per applicant at the seed stage, invested over five years.
“We want to build a community that’s about innovation, and we need women and our underrepresented populations to have access to that,” said Kimberly Gramm, the David and Marion Musafer Senior Director of Innovation and Entrepreneurship at Tulane.
The fund was announced just before the release of the annual Greater New Orleans Startup Report by the Albert Lippage Center for Entrepreneurship and Innovation at Tulane’s AB Freeman School of Business.
The report’s findings reinforced the need for such a new fund: After a slight increase in angel financing, convertible debt and venture capital for women and minority-owned companies ended, both in the New Orleans area and nationally. The year, the 2022 survey reported budget cuts.
Federal grant money
In December, Louisiana received $113 million in State Small Business Credit from the American Savings Plan, or SSBCI, a federal program aimed at starting small businesses.
SSBCI was first established in 2010 as a way for the federal government to help states support small businesses that had credit but were unable to access capital.
113 million dollars were allocated to venture capital programs and initial capital. Tolan received a $5 million share.
According to Gramm, the Tulane Ventures fund should be self-sustaining, meaning that if the Treasury Department and Louisiana economic development guidelines allow, returns from when the companies are sold will go back into the fund to support more startups.
Although the partnership is still being planned, Gram said the innovation institute expects to provide programming and support to entrepreneurs. The portfolio companies will also receive advice, guidance and mentoring through the Innovation Institute’s resource network.
The ultimate hope, he said, is for entrepreneurs to stay in New Orleans and reinvest their money here.
Funding is required
According to Startup Report, members of minority groups who want to start companies have unequal access to capital.
Rob Lalka, CEO of the BIPOC (Black, Indigenous and People of Color) 2022 report shows declining access to equity investment worldwide, reflecting national data that points to shrinking funding for BIPOC entrepreneurs. The Lapage Center wrote in the report.
For example, companies with BIPOC founders used 6% less venture capital than last year, compared to an 11% increase for companies with non-minority founders. A similar decline was observed in BIPOC-founded companies that reported the use of angel investment and convertible debt.
“Nationally, these numbers are disappointing, and yet they are the majority of the population here in our community,” Gramm said.
The startup report also says minority-founded companies still lag behind their BIPOC-founded counterparts when it comes to traditional bank loans, though the gap has narrowed slightly since last year.
Tulane at the NOLA Entrepreneurship Center
With the addition of the Innovation Institute launching in 2022, Tulane is looking to position itself as a key transmitter of entrepreneurship in the city of New Orleans.
As Tulane’s first fund for entrepreneurs, the venture capital fund is a “huge win for our community,” Gramm said.
“It’s like giving birth to your first child,” she said. “Other universities have already done this, but it’s usually outside the specialization cycle at one university.”
Tulane leadership’s support of the fund underscores the university’s prioritization of innovation, Gramm said.
They’re kind of putting a flag in the ground to help not only the internal campus community, but the larger community and understand that science and innovation go hand-in-hand to make an impact on helping people, whether it’s to cure cancer Whether or not to create generational wealth opportunities,” he said. “When our leaders say they want to support and nurture such an environment, it’s a big deal.”