CU Denver Pairs Students with VC Pros
The problem with student-run investment funds is that they’re run by, well, students.
And that can lead to poor performance and, more importantly, less-than-optimal learning experiences for students. That’s why University of Colorado Denver is bringing investment professionals into the mix.
The theory is that allowing students to evaluate, invest in and, sometimes, advise startup companies will teach them what investors look for, knowledge that will serve them if they someday seek investor funding for their own companies. It’s understood that education and experience, not profits, are the primary goals of these funds.
That’s a good thing because student-run funds face a number of obstacles to achieving ROI, including a lack of professional management, shifting foci, lack of board representation, restrictions on investments and high turnover among student leaders.
In fact, the Rutt Bridges Venture Capital Fund at CU Denver’s Jake Jabs Center for Entrepreneurship has never returned a profit in its 13 years of operation, said Madhavan Parthasarathy, director of the entrepreneurship program.
However, that is likely to change under the fund’s new partnership with Iron Gate Capital, a Denver private equity firm. Iron Gate Managing Partner Ryan Pollock said the university fund will become another investor in its hedge fund.
Graduate students will research the companies seeking investment, offer opinions and attend the monthly meetings at which startups make their pitches to the Iron Gate angel investors. “The students get all the learning experience, but we manage the deals,” Pollock said.
The partnership was the idea of Stephanie McCoy, COO of Wazee Street Capital and an instructor at the business school. She has no patience with the education-over-returns model of most student venture funds.
“If you’re not generating returns, you’re not teaching students,” she said. “I just don’t think universities know how to run funds. They have to accomplish too many things and wind up accomplishing nothing. Most student deals aren’t good deals.”
While he is confident a number of long-term investments made in the past five years will pay off, Parthasarathy said partnering with professionals will overcome the usual shortcomings of student funds and is likely to produce more returns without sacrificing student learning.
Jonathan Musser, a former CU Denver graduate student who ran the $500,000 fund for the past three years, said the partnership sounds like a good idea. “We were never really in it for purely profit. There was definitely a philanthropic aspect to it,” he said.
An emphasis on experience
The student venture fund is only part of CU Denver’s emphasis on experience in teaching entrepreneurship.
Grad students also operate a strategy and management consulting firm that takes on four to five projects a year for local businesses.
Like many schools, it hosts an annual business plan competition. CU Denver’s is open to startups in Wyoming and Montana, as well as Colorado.
UrgentRx won second place and a $50,000 prize in the 2010 contest. Since then, the fast-growing company, which manufactures generic, single-dose powdered medications, has raised millions, but founder Jordan Eisenberg said the award was crucial to accelerating the company’s growth.
Eligible competitors in the business plan contest can go on to join the Jake Jabs startup incubator.
While the school offers a specialty in entrepreneurship, one of its most popular programs is a Certificate in Entrepreneurship that is open to anyone in the community with an undergraduate degree who takes three graduate courses.
University of Colorado Denver
Jake Jabs Center for Entrepreneurship/Business School — 175 students
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