Figuring out how to fund any startup is always difficult, but at the college level, securing funding for student entrepreneurs presents an even greater challenge. Traditional startup funding sources such as banks, angel investors or venture capitalists, tend to not provide funding for student entrepreneurs because they feel that the students lack the business skills or experience to make the startup successful.
While obviously there are many notable exceptions, particularly if you happen to be a student a top startup-producing university such as Stanford, it is generally very tough to find investors willing to provide funding for student entrepreneurs.
To support their students and encourage entrepreneurship, a growing number of universities are looking at creative ways to offer funding for student entrepreneurs. For example, some universities across the country have been offering startup investment funds to entice students and academicians to turn their business ideas into actual enterprises.
University startup investment funds support student-led startups in various industries, ranging from information and communications technology, to life sciences, clean energy, and health care, among many others. Much like a traditional investment fund, the university-led investment funds provide funding for student entrepreneurs, and in many cases, they also offer various degrees of mentorship and technical assistance to help the startups succeed.
When providing funding for student entrepreneurs, university startup investment funds tend to offer smaller investments than traditional investors. However, university investment funds also tend to offer more appealing terms than traditional investment sources.
There are basically two types of university startup investment funds: those that only offer funding for university-affiliated startups and those that also seek to invest in other types of startups in their home communities. With this approach, university startup investment funds can make strategic investment in startups that will contribute to the future growth of their community, region and state.
Below are some examples of university startup investment funds that offer funding for student entrepreneurs:
- The University of Chicago Startup Investment Program. This is a new initiative of the UChicago with an initial funding of $25 million. Startups built by students, faculty, alumni, or staff, or built on University-owned intellectual property are qualified under the program. UChicago plans to support three to four new companies every year under this program. Funding support will not exceed $500,000. The university says it will invest in university-affiliated startups in the next decade.
- University of California Innovation and Entrepreneurship Initiative. The University of California has announced that it will be investing $25 million for startups coming out of its labs, schools, medical centers, and campuses. The initiative will fund at least 70 percent of the capital needed by UC startups, with focus on angel and seed stage opportunities and generating an attractive return.
- Massachusetts Institute of Technology’s The Engine. The 155-year old institution based in Cambridge recently announced that it is raising $150 million for its venture capital fund called the Engine. MIT will be the lead investor in the fund with $25 million even as it seeks out additional investors in the Engine.
- Virginia Tech and Carilion Clinic Venture Capital Fund. Virginia Tech is joining hands with Carilion Clinic for a $15 million venture capital fund aimed at assisting start-ups in the city of Roanoke and town of Blacksburg. More than half of the investments are for startups in the life sciences industry.
- The University Venture Fund. The University Venture Fund at the University of Utah aims to provide funding for student entrepreneurs with a social impact. Most recently, a new impact investing fund was established. This one is known as UVF Impact Investing (UVF II). UVF II is able to invest in early- to later-stage equity deals as well as provide innovative financing (pay for success, revenue-based financings) to enterprises that seek to do good while doing well.
Even schools abroad are now offering investment funds to provide funding for student entrepreneurs in their respective areas.
Cambridge University Enterprise is one of the first institutions to provide funding for student entrepreneurs and researchers who want to develop their products from research. It offers up to £500,000 in funding assistance to qualified startups. Cambridge University Enterprise has invested in 62 companies since 1995, with a three-year survival rate of 80%. This is higher than the national average of 30%, according to the University. Its portfolio companies have raised more than £1 billion in further investment and grant funding. Companies supported by Cambridge University Enterprise now generate employment opportunities for more than a thousand people while providing solutions in many areas such as clean energy, information and communication technology, and health care.
University startup investment funds understand that student-led startups are considered to be even more risky than traditional startups because of the founders’ lack of business experience. However, for the university startup investment funds, losses can be offset when one or two startups hit the big time, so to speak. University startup investment funds could eventually find the next Facebook or Snapchat—two of the more widely successful businesses created by college students.
With many universities now providing funding for student entrepreneurs, more students, faculty members and staff members should be enticed to turn their research and business ideas into actual enterprises.
Interested in learning more about university startup investment funds or where to find funding for student entrepreneurs? Contact me today and let’s talk.