Tulane University’s Innovation Institute will launch a $10 million startup fund for women and minority entrepreneurs, targeting groups who have historically faced barriers in 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 move to bolster innovation in New Orleans.
Applications for funding are expected to open early in the new year. Up to $200,000 per applicant will be available in the seed round, invested over five years.
“We want to build a community that’s about innovation, and we need our women and our underrepresented populations to have access,” said Kimberly Gramm, the David and Marion Mussafer Chief Innovation and Entrepreneurship Officer 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 Startup Report.
The findings of the report reinforced the need for such a new fund: After a slight increase in equity financing from angel investment, convertible debt and venture capital for women and minority-founded firms, both in the New Orleans area and on a national scale last year, the 2022 survey reported a funding decline.
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 jump-starting small businesses.
SSBCI was first established in 2010 as a way for the federal government to help states support small businesses that were creditworthy but unable to access capital.
The $113 million was allocated to venture capital and seed money programs. Tulane received a $5 million share.
The Tulane Ventures fund, Gramm said, is meant to be self-sustaining, meaning returns from when companies are sold will go back into the fund to support more startups if treasury Department and Louisiana Economic Development guidelines permit.
Although planning is still taking place for what participation will entail, Gramm said the Innovation Institute expects to provide some programming and support for entrepreneurs. Portfolio companies will also receive consulting, mentoring and guidance from the Innovation Institute’s network of resources.
The ultimate hope, she said, is that entrepreneurs will stay in New Orleans and reinvest their money here.
According to the Startup Report, members of minority groups who want to start companies have unequal access to capital.
“The 2022 report shows a decrease in access to equity investment across the board for BIPOC (Black, indigenous and people of color)-founded firms, which reflects national data that show a funding decline for BIPOC entrepreneurs,” Rob Lalka, executive director of the Lapage Center, 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-minority founders. A similar decrease was seen in BIPOC-founded companies that reported use of angel investment and convertible debt.
“Nationally, those numbers are dismal, and yet they’re the majority of the population here in our community,” Gramm said.
The Startup Report also said companies founded by minorities still lag behind their non-BIPOC founded counterparts when it comes to traditional bank loans, although the gap has closed slightly since last year.
Tulane at the center of NOLA entrepreneurship
With the addition of the Innovation Institute, launched in 2022, Tulane is seeking to position itself as a key conveyer of entrepreneurship in the city of New Orleans.
As Tulane’s first fund for entrepreneurs, the Venture Fund is a “big win for our community,” Gramm said.
“It’s like having your first baby,” she said. “Other universities have done it before, but it’s out of the wheelhouse of expertise, typically, at a university.”
Gramm said Tulane leadership’s support of the fund underscores the university’s prioritization of innovation.
“They sort of put a flag in the ground to help not only the internal university community, but the broader community understanding that science and innovation go hand in hand to make an impact to help people, whether that is to cure cancer or whether that is to create generational wealth opportunities,” she said. “When our leaders say that they want to support and nurture an environment like that, it’s a big deal.”