Schools Offer Real Venture Capital Lessons

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Schools Offer Real Venture Capital Lessons [The Associated Press by Justin Pope] Venture capital is agony and ecstasy, bust and boom, the stress of gambling and the thrill of a front-row view on the latest technologies. And when real money is involved, it’s also one of the hottest classes on business school campuses.

In an effort to elevate their teaching beyond

student start-ups.

Michigan’s $3.5-million Wolverine Venture Fund recently saw one of its portfolio com-

the usual case studies and guest speakers, a handful of schools are raising significant

But the schools say having students really

panies go public; Faley says profits from the

amounts of money to turn over with a few

get their hands dirty in the VC world hear-

stock sale mean the fund is earning a slight

strings to students who invest in real start-

ing pitches, identifying prospects, and then

positive return for the university’s endow-

ups. The hope is to better train both aspiring

helping companies get off the ground is a

ment.

venture capitalists and aspiring entrepre-

challenge of a different order.

neurs, who will need to know what it takes to

In some cases, like Michigan’s, the fund is “Unless they’re really putting hard dollars

supported by donations and is essentially

into it, they say, ‘Oh, it’s probably OK,’” said

a sliver of the university’s endowment that

And while it hasn’t happened yet, if a student

Timothy Faley, managing director of the

is farmed off to the students to manage.

venture fund happens to back the next

Samuel Zell & Robert H. Lurie Institute for

At Maryland, the university is one of many

Google and fills its university’s coffers, so

Entrepreneurial Studies, which oversees

investors.

much the better.

Michigan’s fund. “The difference between,

catch an investor’s eye.

“I went around to different VC firms in the

‘It’s probably OK’ and them staking their

At Utah, the money comes entirely from

name on this deal is pretty significant.”

outsiders, including individuals and large investment firms.

(Salt Lake) valley and said I’d sweep their floors for them if they wanted. Then I saw

Faley says the arrangement is also good

this opportunity,” said Mark Campbell, a

for the companies. If they get turned down

For students, the programs demand long

University of Utah student involved with the

for funding, as most are, they get better

hours outside of class and typically little

University Venture Fund there. “It just kills,

feedback than many professionals would

course credit, but they are very popular: 60

what the classroom has to offer.”

bother to offer. And if they do get money, the

to 100 students apply for eight slots each

businesses might also get continued help

year at Michigan, while Utah selects five to

Utah is one of at least three business schools

from students who advise them and who may

10 from 100 applicants. In some cases, en-

where students essentially run venture

even come aboard for internships or full-

gineers, lawyers, and biologists participate,

capital funds, along with the University of

time jobs.

contributing their expertise. Utah accepts

Michigan and Cornell University. Others,

some undergraduates and students from

including the University of Maryland, sponsor

Most grants run five or six digits and are a

venture funds that involve students to varying

small part of a funding package with other

degrees in evaluating investment prospects.

VC firms.

Several considering starting student-run

other colleges.

The popularity stems in part from the desirability of jobs in venture capital, a tough field

funds plan to attend a conference in Utah

Utah’s fund, which was founded in 2001 and

next month.

plans to announce next month it has raised

to break into.

$5 million, has backed one company with a

“Apprenticeship is still the career path of

It’s nothing new for students to play with

$100,000 investment and plans to announce

venture capital,” said Michael Grenier, a

real money. Dozens of schools let students

another deal soon. Cornell’s BR (Big Red)

second-year Maryland MBA student from Co-

advise and manage equity funds to learn

Ventures Fund, which has raised $500,000,

lumbia Falls, MT. “I passed up going to some

about stock picking, and many run business

has backed four businesses.

of the other top schools to have a chance to

plan competitions or “incubators” that fund

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come here and participate in this program.”

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But the programs also show students who want to start companies how to view their businesses through the eyes of a venture capitalist. About two-thirds in Michigan’s program are “entrepreneur wannabes” rather than “VC wannabes,” Faley said.

Some academics are skeptical of the programs’ value. Michael Morris, a professor at Syracuse University’s Whitman School of Management, says his school has avoided a true student-run fund, partly because it would demand fulltime professional guidance and partly because of potential conflicts.

“If it’s a campus-based venture fund, you’ve got other objectives, other than the pure financial objectives,” he said.

“You’ve got learning objectives.”

But Maryland Professor Mark Grovic, who advises the $20-million New Markets Growth Fund (which also tries to spur community development), says learning and earning go together.

“The more successful we are from a financial or community development perspective, the better it’s going to be for the experience of the students,” he said.

Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or distributed.

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