With a new investment fund at Michigan State University, students can gain experience on either side of the venture capital industry.
The Student Venture Capital Fund offers students with an idea for a business or an innovation “priceless” experience in seeking capital and pitching to prospective investors, said Jeff Wesley, the executive director of Red Cedar Ventures at MSU.
At the same time, students studying entrepreneurial finance have “a chance to understand venture capital in the real live world,” Wesley said. In offering that experience, the Student Venture Capital Fund could help to seed future talent to work in the venture capital industry.
“It has so many benefits,” Wesley said. “If we can be an accelerator to keep talent here and work in that regard in all facets of venture capital, I think that’s a positive.”
Red Cedar Ventures, the investment arm of the MSU Foundation with a portfolio of about 40 companies started by students or faculty, partnered on the Student Venture Capital Fund with the Center for Venture Capital, Private Equity and Entrepreneurial Finance at MSU’s Broad College of Business.
The Student Venture Capital Fund adds a “critical piece” to MSU’s academic programming for entrepreneurial training, said Zsuzsanna Fluck, an associate professor of finance and director of the Center for Venture Capital, Private Equity and Entrepreneurial Finance.
The program and the fund allow entrepreneurial finance students to “understand what the other side is thinking” and to put into practice the principles they learn in the classroom, Fluck said.
Entrepreneurial finance students involved in the Student Venture Capital Fund participate in analyses, valuations and due diligence on prospects, and make investment recommendations to Red Cedar Ventures.
Among the initiative’s objectives is to give students the critical thinking and analytical skills needed to become a venture capital professional, Fluck said.
“What this brings to the table is actual hands-on experiential learning,” she said. “They need hands-on experience and this fund creates that. If you have been on the VC analysis team, you can say that ‘I actually have the experience.’”
Likewise, students on an entrepreneurism career track “become much more knowledgeable” about venture capital in case they need to seek investors for their own startups in the future, Fluck said.
New leadership, strategic planning and growth in the pipeline of on-campus startups over the last few years “kind of put us here” and led the partnership to form the student-led venture capital fund, Wesley said. Those drivers combined with a greater entrepreneurial climate today in which more students “want to be their own boss and they want to work for themselves,” he said.
MSU Hatch, the university’s business incubator for student entrepreneurs, currently is working with more than 60 startups that are in their final launch stages.
“As you’re incubating these companies, their next thing is they need to be seeded,” Wesley said. “We’re kind of that early seeding fund to give that extra coaching and a little bit of extra resources to get them in the market. Hopefully, at the end of the day, (they will) expand jobs and opportunities, provide a learning experience, and if we get lucky, create some wonderful companies.”
Red Cedar Ventures, which invests in startups and technologies spun out of university labs, put up more than $60,000 this spring to support the Student Venture Capital Fund and invest in startups. More than $40,000 recently went to investments in five campus startups out of more than 20 companies that presented to the Student Venture Capital Fund.
Red Cedar Ventures intends to fund up to $50,000 annually for the Student Venture Capital Fund investments in startups led by students or faculty, or housed at MSU Hatch.