Six months ago, VentureWire revealed the bold fund-raising plans of several venture funds managed by university graduate students, who do nearly everything professional venture capitalists do - sourcing and selecting deals, negotiating terms, counseling portfolio companies - with minimal interference from college administrators and advisers.
These university firms currently manage small amounts of capital - typically just a few hundred thousand dollars - so the students hoped to raise larger vehicles that would enable them to make more investments and acquire larger ownership. But like their professional counterparts, these student firms have had to scale back fund-raising goals, curtail new investments and seek creative ways to bolster their diminishing resources
Frankel Commercialization Fund, managed by University of Michigan students, plans to slow its investment pace to give it “a little more cushion” for the coming year, according to Tom Porter, the pre-seed fund’s faculty director. It also has begun making “friend raising” calls in the hopes of at least doubling the size of its four-year-old $500,000 debut fund, Porter said.
Tom Kinnear, faculty director of Wolverine Venture Fund, which shares offices with the Frankel Fund, said that last summer he began soliciting colleagues for another $2 million for the student fund. But with the personal finances of many potential donors in turmoil, he said he decided to wait until the spring before making his full pitch.
“We’re going to give them time to get their portfolios in order,” he said. “I didn’t want to press them while we’re in this [economic] mess…‘You just lost a third of the value of your portfolio, how about [donating] a million dollars?’”
Roy Ashok, an outgoing student manager of Big Red Ventures, said that he and other Cornell University students cut back their plans to add about $10 million to the $1.5 million fund from which they’ve been investing since 2001.
“It’s no point in pursuing people at this point when you know they’re in no position to give,” Ashok said.
None of today’s student-managed funds provide returns to investors, but students overseeing two other funds hope a different approach will set them apart.
The University of North Dakota’s Dakota Venture Group is running behind schedule on its plans to raise a $5 million for-profit angel-style fund, but student managers said that’s because they’re doing all the preparatory legal legwork in-house, not because of the economy.
Elsewhere, Tony Warren, faculty advisor for the Garber Venture Capital Fund, said that next week he will formally announce plans to raise a $5 million side-by-side angel fund through Penn State University alumni. The fund, which will receive the advice of the Garber Fund students but will make independent investment decisions, will act as a “backstop” to the student-run fund, Warren said.
Despite the troubles encountered on the fund-raising trail by some peers, Warren said he hopes to wrap the fund by the start of the fall semester.
“I don’t see any reason why this can’t be closed quickly,” he said.