External research funding provides the core support for a medical center's research enterprise, and is a major or sole criterion for comparing and ranking institutions. Most grant programs are sufficiently competitive that awards are not granted without the availability of preliminary data. Therefore, institutions may find it necessary to supplement external research funds, particularly as matching funds or as seed funds. The authors report their experience at the University of Minnesota Academic Health Center with two internal grant programs, a seed grant program and an interdisciplinary/intercollegiate Faculty Research Development (FRD) grant program. Seed grants are one-year, one-time $25,000 awards to investigators to initiate a new direction in research or to develop innovative projects allowing faculty to expand into new research areas. FRD grants are one-time $200,000 awards for a one- to three-year project that support innovative interdisciplinary and interscholastic research with a high potential for future grants. The authors based their analysis of program outcomes on investigators' self-reports of subsequent external grants and peer-reviewed publications stemming from the initial grants. Six annual cycles of the seed grant program (1998-2003) yielded a financial return on investment (ROI) of 560%. Five annual cycles of the FRD grant program (1998-2002) yielded an ROI of 237%. The authors conclude that the AHC grant program has been successful in generating external research funds (primarily National Institutes of Health) and publications; stimulating risk-taking; and developing interdisciplinary and intercollegiate collaboration. They plan to continue the AHC grant program and recommend similar programs to other institutions.