By Christopher Zinsli
The Wall Street Journal
SEPTEMBER 21, 2010
Georgetown vs. Syracuse. Indiana vs. Purdue. Harvard vs. Yale…Michigan vs. Utah?
Get ready for the newest college rivalry, pitting two giants of student-run venture capital funds against each other for bragging rights as the undisputed leader in social-impact investing!
We’re admittedly dramatic here, but only because we’re matching the enthusiasm of two universities which lay claim on very the same day—through competing press-release services, no less—to launching the first student-managed venture fund focused on the double bottom line of earning a profit while making the world a better place.
There aren’t very many venture capital funds under the control of university students, so it’s a sign of the times to see the exact same announcement from two of them at once.
Social-impact investing has been bandied about as the future of venture capital for some time, but actual practitioners remain hard to come by. Leave it to idealistic, young college students to blaze the trail.
“The next generation of investors recognizes there should be more to business life than maximizing profits,” said Lewis Hower, director of the University of Utah’s new University Impact Fund. “They recognize the opportunity available today to apply the rigor of traditional venture capital to solving some of the world’s toughest social and environmental problems.”
The University Impact Fund and the University of Michigan’s new Social Venture Fund both plan to invest in early-stage companies offering products and services that improve people’s lives. Target industries include education, environment, health, microfinance and urban revitalization.
“This generation of students is very interested in the social-environmental impact of business,” said Timothy Faley, managing director of the University of Michigan’s Zell Lurie Institute for Entrepreneurial Studies. “They do not want to distinguish between being profitable and having a positive societal impact. They want both.”
The rivalry between Utah and Michigan didn’t start today. For years, both schools have referred to themselves as having the oldest student venture capital program in the country. Regardless of who came first, both programs give MBA students the chance to invest real money in actual companies, though in both cases the student fund managers must convince an advisory board to accept their recommendations.
The Social Venture Fund was quietly launched late last year and expects to make its first investment next spring. It’s the University of Michigan’s third student-led fund, joining the early-stage Wolverine Venture Fund and the pre-seed Frankel Commercialization Fund. The new fund has raised less than $500,000 so far and hopes to reach $10 million, Faley said.
The University Impact Fund, meanwhile, has begun selling the concept to entrepreneurs and investors, and will start raising money sometime next year. However, the fund’s director, said the goal is to raise between $10 million and $15 million, a bit less than the $18 million University Venture Fund with which it’s affiliated.
One crucial difference between the two new funds is that the Michigan fund is evergreen, recycling any proceeds back into new investments, while the Utah fund will provide returns to its investors.
Which approach will yield better financial—and social—results? Stay tuned, sports fans.