Fusion IP, the university intellectual property commercialisation company, said one of its firms had raised 2.5m pounds to develop motors for the hybrid and electric vehicle market.
The company said Magnomatics, which was spun out of the University of Sheffield in 2006, had raised the money to fund the development of its magnetically geared motors.
The system is designed to offer motor vehicle manufacturers a lighter, quieter, more efficient direct drive motor.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
IP Group and Finance Yorkshire will both invest £1.06m, while Fusion IP will invest £366k.
The first tranche of funds, totalling £2.25m, has been invested and the second tranche of £246k is dependent on certain milestones.
When the full amount is invested, Fusion's shareholding will be 31%.
Fusion's Chief Executive David Barnes said Magnomatics, which is based in Sheffield, had made major technological advances over the last two years and had an impressive list of development contracts with many of the world's leading manufacturers.
Who is the richest person in the world?
The top five richest people in the world have a combined net worth of $825 billion. Who takes the crown for the richest person in the world?
By Vaishali Varu Published
Top 10 stocks with highest growth over past decade - from Nvidia, Microsoft to Netflix, which companies made you the most money?
We reveal the 10 global companies with the biggest returns since 2013. One firm has posted an astonishing 9,870% return, meaning a £1,000 investment would now be worth almost £82,000.
By Ruth Emery Published