Venture capital is one of the hottest classes in business
school, especially when real money is used.
In an effort to branch out from the typical classroom "case study
and guest speaker" scenario, a handful of American business
schools are creating programs where students receive a true
venture capital
and entrepreneurial experience by running their own private
equity fund. The goal is to take aspiring venture capitalists
and entrepreneurs
off of the monopoly board and into the bank for a challenging
lesson in Investment 101.
While student-run public stock funds and business-plan competitions
are standard fare in business schools, these new private
equity funds are an aggressive, “real-world” business
education on the bust and boom cycle of venture capital
and entrepreneurship.
The funds are a collaborative effort between students, universities
and the professional investment community. The University
of Utah's David Eccles School of Business and the University
of Michigan are two schools that offer student-run private
equity funds with millions of dollars
under management. How successful are they? In 2004, Utah’s
University Venture Fund (UVF) closed its first fund for five million
dollars
and the University of Michigan's $3.5 million Wolverine Venture
Fund (WVF)
recently saw one of its portfolio companies go public.
"
Entrepreneurship is difficult to teach in a classroom, so a
venture capital fund like UVF is an exceptional forum to help bridge
the gap between classroom and real-life business," says Jack
Brittain, dean of the David Eccles School of Business.
UVF is the largest of its kind among a handful of student-run
funds that invest in private equities rather than in
public stocks. In it, students research actual venture capital
projects,
make investment
choices and raise all the capital. The money comes entirely
from outsiders, including individuals and large investment
firms.
"This is the best business training any university
can provide," says Geoff Woolley, founder of Dominion
Ventures and European Venture Partners.
Like UVF, Michigan’s Wolverine Venture Fund (WVF) is
run by business students, faculty and an advisory board composed
of professional venture capitalists and entrepreneurs. The
program encourages students to take risks as they screen
and negotiate investments in early stage, emerging growth
companies.
The schools say having students really get their hands in the
venture capital world - hearing pitches, identifying prospects
and then helping companies get off the ground - is a challenge
that can't be learned in the classroom. The use of real money
makes a huge difference between a student thinking something
is just a good idea as opposed to actually investing in it.
Many universities are catching on to the buzz surrounding
potential new student-run venture capital funds and exploring
this idea as a result.
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