Business Finance

Harvard’s venture capital fund not a “cookie cutter incubator”

venture capital

Harvard has a creative venture capital fund set up, called the “Experiment Fund” which could show other universities how to operate this type of fund without being attached to the actual school.

venture capital

Harvard’s venture capital fund for students

For many young entrepreneurs, it would be a dream to shove aside their college textbooks in order to take their idea and grow it into a business, right then and there. Business owners are generally known to have had enough life experience to prepare them for such a role, but today, they’re starting out relatively young in age. And a certain Ivy League alma mater is providing them with the resources necessary to get things rolling.

Harvard’s “Experiment Fund” is a venture capital fund created to invest in Harvard alumni-created start-ups, as well as others located along the East Coast. Student entrepreneurs can receive mentorship and training through the program, and once they’ve graduated, receive venture capital to start their business. The fund operates out of an office located on the Harvard campus and focuses on start-ups particularly in information, healthcare and energy technologies.

Not funded by the actual university

Organizers note that this is not a “cookie cutter incubator” and awards funding only to the strongest candidates, rather than equal amounts to several start-ups. Launched in 2012, the fund does not receive funding from the university itself, but leverages the innovative ideas that come from the Cambridge network of past and current students.

“Cambridge has always seeded and cultivated brilliant minds and entrepreneurs, and now they’ll have another reason to stay rooted in and draw strength from these fertile soils,” says Chung, who is co-head of New Enterprise Associates (NEA) consumer and seed-stage investing practices. The Experiment Fund is backed by NEA, which generally provides maximum investments of $500,000.

Could this become a trend?

There does appear to be a start-up accelerator trend across many industries as well as venture capital firms providing funding if businesses are located in certain cities, so other universities may want to follow suit and invest in homegrown talent on the ground floor.

However, CNBC recently reported a decrease in universities’ net tuition revenues; with stricter budgets and tuition revenue expected to decline or grow at a rate lower than inflation, this could prevent some colleges from starting their own seed funds. A fund would need to do something similar to the Experiment Fund and operate independently from the university, receiving backing from angel investors and other lenders instead.

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