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Venture Capital Firms Pour Investment Into MBA's Start-Up Ventures

Entrepreneurs from top universities have raised more than $25 billion in combined venture capital funding, as MBA's start-up companies come of age.

Mon Feb 16 2015

Business schools are producing higher numbers of entrepreneurs and are becoming incubators for start-up companies. Now, venture capital funds are pouring cash into businesses produced at top schools such as Stanford GSB and MIT Sloan.

Between 2009 and 2014, entrepreneurs from the ten universities that received the largest amounts of venture funding have raised more than $25 billion in combined investment.

The data were compiled by PitchBook, a private equity and venture capital research firm, and published in a report last year that collates data from VC firms.

For business schools, Harvard start-ups raised the most venture funding. Over the five-year period, 352 Harvard MBA graduates raised more than $4.2 billion for their 312 companies.

Harvard successes include Kolltan Pharmaceuticals, an early-stage biotechnology company led by alumnus Michael Schmertzler, which recently pulled a planned $86 million IPO.

Linio, a Rocket Internet-incubated e-commerce group based in Latin America, which raised $50 million in 2013 from investors including JP Morgan Asset Management, was also co-founded by a Harvard MBA, Jane Fang, who is the firm’s managing director.

MBA alumni from the business school of Stanford University raised just over $2.9 billion in venture capital for 201 ventures, which were founded by 226 graduates.

Notable Stanford companies include Funding Circle, the UK-based peer-to-peer lender, which has raised at least $123 million in total funding since its launch in 2009.

Wharton at the University of Pennsylvania was the third-highest in the venture capital table. Nearly 200 Wharton MBA graduates have raised more than $2.1 billion for 169 start-ups.

Venture capital groups typically invest at a later stage, when start-ups are larger and need to raise multimillion-dollar investments, suggesting that more MBA students’ companies are beginning to evolve from fledgling firms and into established players.

But the findings compound the view that Europe’s start-ups have access to less capital than companies in the US, which benefit from big Silicon Valley funds such as Sequoia Capital and Andreessen Horowitz, an early backer of Facebook.

INSEAD, a global business school with campuses in Singapore, France and Abu Dubai, was the only representative of Europe in the top-10 PitchBook list. Just under 100 INSEAD MBAs raised a combined $1.2 billion for 92 start-up companies.

But MBA alumni of Israel’s Tel Aviv University raised $833 million for 56 start-ups, ahead of leading US business schools including those at Yale, Cornell and Duke Universities.

In India, 44 MBA graduates from the Indian Institutes of Management raised $407 million between them for 44 start-up ventures, according to PitchBook data.

For the UK, 50 MBA alumni from the University of London, which includes high-ranking London Business School, raised $241 million in venture capital for 42 companies.

This includes the investment raised by FlatClub, an online flat-sharing platform similar to Airbnb, whose chief executive and co-founder, Nitzan Yudan, is an LBS MBA graduate.

FlatClub has raised $1.5 million in funding from investors including venture capital groups MLC50 and InterCapital.

“The support of faculty, students, and alumni has been critical in building the business, leveraging resources and fundraising,” said Nitzan. He added that two of his investors are on LBS’ faculty.

Venture capital is flowing into London’s start-up scene in particular, with total funding raised since 2010 topping $2 billion, according to data from VentureSource, an investment database, and other public sources.

Prominent VC funds operating in the UK capital include Connect Ventures and Hoxton Ventures.

Transferwise, a fast-growing money transfer company that was co-founded by an INSEAD MBA, recently raised $58 million in venture funding from Andreessen Horowitz.

The London-based start-up company is now reportedly valued at close to $1 billion.

Elsewhere in Europe, 30 IESE Business School MBA alumni have raised $116 million in venture capital funding for 26 start-ups businesses, according to PitchBook data.