The students have faced a three-year journey to raise money for the planned $1m venture fund.
The University of Florida is well known for churning out businesses that have turned into commercial successes. The most famous is sports drink Gatorade, invented in 1965 by researchers at the US university who were looking for a drink to replenish athletes suffering from heat-related illnesses.
The wildly successful beverage was bought by the Quaker Oats Company in 1983, which, in turn, was bought by PepsiCo in 2000. At the time, the University of Florida did not take equity in Gatorade and so missed out on revenues it could have made when the sports drink was acquired.
Nearly 60 years on, the University of Florida, ranked one of the top five public research universities in the US, still does not have an affiliated venture fund that invests in its own spinouts.
This could soon change if a group of students is successful in raising money for a venture fund. Despite months of hard work and facing several obstacles, the students hope to launch a fund of around $500,000 to $1m, consistent with other student-led funds in the US. They hope to have the fund launched by the end of the spring semester next year.
Apart from a University of Florida professor who teaches a course on venture capital and who has helped the students form a business idea for the fund, it was not initially easy to find support from the university in setting up the investment vehicle.
“It’s been a very long-winded process. There’s been a lot of ups and downs, a lot of ‘nos’ initially. It has not been straightforward in terms of support internally,” says Vinay Krishnadas, a University of Florida senior, who is leading the fundraising efforts.
“However, in the last six months, as we have filled in more logistics and taken in more feedback from the university and professionals, we believe the university is ready to support this initiative, to help us and work together with us.”
University venture funds have proven to be critically important in helping to increase their spinout rates by filling a gap in pre-seed and seed investment. Yet they are relatively rare in the US. Global University Venturing research shows only a third of US research-led universities have an investment fund.
This is gradually changing as more universities see the benefits of having a venture fund as they push students and faculty to be more entrepreneurial.
But barriers still exist, as the University of Florida students are finding.
The University of Florida has an active student-led advisory service for entrepreneurial students through Warrington Ventures, a student organisation that partners with the university’s commercialisation arm, UF Innovate, to teach founders the fundamentals of venture capital.
Krishnadas and his team at Warrington Ventures were inspired to try to set up a venture fund after speaking to students who lead Hillside Ventures, a student-led, early-stage venture fund that invests in spinouts from the University of Connecticut.
“Just speaking to those students and listening to the way they spoke about venture capital and investing, there was a clear difference, just on the conversational level, in terms of the investment acumen that these students had,” says Krishnadas.
The University of Florida students set a goal of raising an evergreen fund that would invest in pre-seed and seed stage spinouts from the university as well as startups in the US southeast.
The students first approached the University of Florida’s $2.4bn endowment for support but it was not initially clear if the endowment would be able to provide any funding.
A University of Florida spokeswoman said that as a student organisation, Warrington Ventures is not able to fundraise or receive money on the university’s behalf. “In a very few cases, student organisations can alternatively be sponsored and funded by colleges, but Warrington Ventures is not such an organisation,” said the spokeswoman in an email.
Despite the setback, the students persevered, and have had expressions of interest from four local venture funds in Florida: Florida Funders, DeepWork Capital, PS27 Ventures and Tampa Bay Ventures. They hope these venture funds will also participate in financing and due diligence of their early-stage investments.
They also hope to raise money from university alumni, which together with university contributions, personal networks and corporate sponsors could come to $1m.
Although the bulk of the student-run fund’s investments will be in spinouts, they also want to back startups from the region. The students aim to invest in between three and five companies a year over a fund lifecycle of between eight and 10 years.
“We want to be very scrutinous with the UF [University of Florida] startups we chose to invest in. We don’t necessarily want to spread our capital too thin across UF. We want to diversify our portfolio, too,” says Krishnadas.
It is good timing for a fund given the likely increase in AI and machine learning startups emerging from the university. In 2020, the university received a $50m investment from Nvidia and Nvidia founder Chris Malachowsky, who is a University of Florida alum, for the building of an AI supercomputer called the HiPerGator, which is used by faculty and other Florida universities for teaching and research.
“We believe that’s going to be a catalyst for new startups, new company generation,” says Krishnadas.
He hopes the formation of the student-led fund will put an end to the exodus of spinout founders, who leave Gainesville, where the university is based, because of the lack of local financial support.
“The climate for wanting to invest in early-stage companies is now probably the highest momentum we’ve ever had with the investment from Nvidia.”
