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Educating Entrepreneurs: Business Programs Bridge Students With Venture Capital

Top business schools are providing access to seed and venture capital – essential for many student entrepreneurs to launch and scale their start-up ventures.

Tue May 5 2015

As entrepreneurs warm to business school education top universities are helping to provide access to venture capital so that start-ups can scale.

Educators are investing heavily in in-house solutions to ease company creation and some are willing to compete with the likes of Khosla Ventures and Andreesen Horowitz, the Silicon Valley venture capital group, to provide funding. Last year, University of Cambridge poured £2.7 million into early stage technology start-ups.

“The business school is at the heart of the entrepreneurial ecosystem,” says Joanna Mills, deputy director for Cambridge Judge Business School’s Centre for Entrepreneurial Learning.

She says ventures are often spun-out of Cambridge – including gene sequencing company Solexa, which was eventually sold to Illumina for $600 million in 2007.

The £50 million Cambridge Innovation Capital fund, for example, invested in Horizon Discovery, a biotech group that raised £68 million after listing in London last year. 

PitchBook, a venture capital and private equity research firm, estimates that start-ups from the world’s top-10 universities have raised more than $25 billion of funding over the past five years, including Cornell and Duke Universities.

“Rock star entrepreneurs – the Zuckerbergs – have made it cool and sexy to be entrepreneurs,” says Stewart Thornhill, executive director of the Institute for Entrepreneurial Studies at US-based Michigan Ross School of Business.

With the relative riskiness of launching a company falling, there is close to the “perfect storm” of factors pushing business students to launch start-ups, he says.

Ross will open an accelerator this year which will invest stakes of up to $25,000 in students’ companies to get them off the ground, according to Stewart. It has a funding pot of about $2.5 million, he says.

Ross already offers grants as start-up funding and hosts three student and alumni-run investment funds – including the $7 million Wolverine Venture Fund.

The Wolverine fund’s successful exits include exiting Intralase, an optical laser company that raised about $86 million when it floated its shares on Nasdaq in 2004. In 2007 Intralase was acquired by Advanced Medial Optics for $808 million.

Imperial College recently added a venture capital and growth finance course to its MSc in Innovation, Entrepreneurship and Management, which will help entrepreneurs understand the success factors of high-growth ventures before and after IPOs.

“The barriers to starting a business are lower than they used to be,” says Diane Morgan, associate dean at Imperial College Business School in London.

Imperial College also has a venture capital club, says Diane, allowing students to meet and network with potential investors and other entrepreneurs.

The venture capital scene is warming up in the UK, according to Dr Shailendra Vyakarnam, director of the Bettany Centre for Entrepreneurship at Cranfield School of Management.

“Increasingly there are programs both local and national that provide increasing amounts of support,” she says. Routes to access finance include hackathons, pitch competitions and even the nascent crowdfunding industry, she adds.

Goldman Sachs, the US investment bank, works with Aston Business School, Leeds University Business School, Manchester Metropolitan University, Saïd Business School and UCL to help create opportunities for entrepreneurs to access finance. The 10,000 Small Businesses program has helped nearly 1,000 companies since its launch in 2010.

Aston MBA Gaurav Singhal received funding from the BSEEN program, a collaborative initiative that supports start-up businesses, for his manufacturing start-up Door Ironmongery Ltd. “It works as the foundation for my business,” he says of the funding.

Italy’s SDA Bocconi School of Management in July will launch a course on equity and venture capital financing at its new summer school in Milan.

Students will visit Borsa Italiana, the Milan stock exchange, Private Equity Partners and UniCredit, the global Italian bank, according to finance professor Stefano Caselli, who will teach the program.

“There are multitudes of sources of capital out there,” says Jeff Skinner, executive director for the Deloitte Institute of Innovation at London Business School.

One example is the growing collection of venture capital competitions hosted by top business schools.

Bungalow Insurance, a start-up founded by Wharton MBA Tom Austin that uses big data to sell insurance to millennials, won $30,000 in Wharton’s annual business plan competition this month.

At Stern School of Business in New York, students received a combined $200,000 in seed funding at a yearly competition for entrepreneurs, held by Stern’s Berkley Center for Entrepreneurship & Innovation.

RecoverLINK, a mobile healthcare technology designed for heart failure patients launched by two Stern MBAs, among others, took home $75,000 in funding. “Entrepreneurship is a true team sport,” says Frank Rimalovski, managing director of the NYU Innovation Venture Fund.

But investors say Europe doesn’t do enough to encourage entrepreneurialism. Start-ups and technology companies in particular also lament the lack of venture capital funding compared with the funds available in the more mature US market.

Bethany Coates, Stanford GSB’s director of global innovation programs, says: “Of course the Silicon Valley financing environment is very mature at this point and not all markets are as mature.”

Students of the leading US business school’s Ignite program, designed for entrepreneurs, pitch business plans at two separate points in the course, Bethany says, in an essentially “risk-free environment”.

But she says that Stanford will never formally broker any relationship between a student and an investor. “We view that as inappropriate,” she adds.

This is a sentiment echoed by Jeff at LBS. The UK business school has its own business angel group which many students pitch to, but the business school itself has a policy of never taking equity in a student’s company, he says. “It would be unhealthy.”