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Do Student VCs Make Sound Bets?

Emma Toner takes a look at student VC funds at Oxford and whether they are successful or not.

Innovation and Invention. One look at the popular press will show you the powerful grip each has on the nation’s collective imagination and the UK economy. Modern media is filled with the stories of entrepreneurs that defy the odds to attain phenomenal success. The entrepreneur has become a modern-day cowboy, exploring new industrial frontiers much the same way that renegades once explored the Wild West. By their side sits the venture capitalist, who funds their vision and in exchange, they get a piece of the action. Venture capitalists (VCs) are private equity investors that provide capital to nascent, high-growth potential companies in exchange for an equity stake. Notable examples of VCs include Sir Michael Moritz KBE, the co-founder of the Moritz-Heynman Scholarship as well as Peter Thiel, a PayPal co-founder who was also Facebook’s first investor. 

Some funds are aware that the next “unicorn” (a startup company with at least a $1 billion dollar valuation)  may well be found on a university campus – Microsoft, Facebook, and Google are all examples of businesses that had their roots in such places. Increasingly, these funds are hiring students to scout for them.

One such fund at Oxford is Creator Fund. Founded by alum Jamie Macfarlane in 2019, it is now spread across 28 universities in the UK. In 2020, the fund raised £1.5 million from Founders Factory and Schmidt Futures. This enabled its student analysts and investment partners, consisting of undergraduates, MBAs and PhDs, to invest up to £150K in promising seed to pre-Series A student-run tech startups. In April 2021 Creator Fund led a £685 K seed investment round for Baseimmune, a Jenner Institute startup using machine learning algorithms to develop variant-prone vaccines.  

Another such fund at Oxford is REMUS Capital. Founded by Krishna Gupta in his MIT dorm room in 2008, it maintains a presence at universities in Boston, Silicon Valley, London, Cambridge, and Oxford. Its campus analysts seek to invest in seed to early Series B startups “with a special interest in vertical technology and research-driven companies at the intersection of humans and machines”, according to its London associate Marc Felske. REMUS has invested in a handful of successful Cambridge-based research-driven ventures such as Cambridge Cancer Genomics, which was acquired by Dante Labs in 2021. Last year, REMUS’ first ever portfolio investment, Presto, announced its intentions to go public via a $1 billion merger with the SPAC (special purpose acquisition company) Ventoux.

So why students? For the same reason that Nathan Rothschild made a fortune from the Battle of Waterloo: early information. Jack Chong, an Oxford campus scout for REMUS, suggests that the unique selling point is their ability to tap into the Gen-Z and student ecosystems. Students are far better connected within their university communities, more than any external scout or VC could dream of being. They have one-of-a-kind access to student start-up support, but also student societies, or friends and acquaintances who are on the prowl for investment. As Chong adds, ‘in VC, presence leads to deals. Deals lead to some limited success. Success begets success.’’

The second reason is demand for students; venture capital is perceived to be difficult to enter for university graduates without ample experience in the financial industry, discouraging people from joining. Student VC experiences offer a tangible edge for future career prospects. Marc Moesser, an investment partner of Creator Fund, elaborates on these benefits: “Our analysts and new investment partners get an in-depth training in every aspect of VC, from finance, business strategy to negotiation and investment term sheet legals. You already know investors from other VC funds. Many of our student alumni joined top VC funds straight out of undergrad or grad school, which is normally almost impossible.”

Like their more established counterparts, whether student-run VC firms make sound bets or not depends on their available capital, networks, and the extent by which the businesses they invest in generate returns. Taking chances on startups is risky, as more than 90% fail and 1 out of 5 of these within their first year. In another sense, VC schemes can be a sound bet because they offer participants unique skills and experience conducive for entering the investment profession or becoming entrepreneurs themselves. 

Image Credit: REMUS Capital (left); Creator Fund (right)

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