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Date Created: 12/21/15
MARKET WATCH 1.800.973.1177 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 the usual case studies and guest speakers, Fund recently saw one of its portfolio com- 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 m ent. 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 catch an investor’s eye. “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, ‘It’s probably OK’ and them staking their At Utah, the money comes entirely from “I went around to different VC firms in the name on this deal is pretty significant.” outsiders, including individuals and large (Salt Lake) valley and said I’d sweep their investment firms. 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 bother to offer. And if they do get money, the what the classroom has to offer.” 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 other colleges. venture funds that involve students to varying small part of a funding package with other degrees in evaluating investment prospects. VC firms. The popularity stems in part from the desir- Several considering starting student-run ability 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 to break into. next month. plans to announce next month it has raised $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 come here and participate in this program.” PAGE 1 continued on back 1.800.973.1177 MARKET WATCH 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 pro - fessor at Syracuse University’s Whitman School of Management, says his school has avoided a true student-run fund, partly because it would demand full- time 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. PAGE 2
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