As an alumnus of a top university, you might be invited to return to campus for Homecoming Weekend, donate money to a scholarship fund, or interview prospective students for the admissions department.
And now, you might also be asked to put $50,000 or $100,000 into a venture capital fund that will invest in companies founded by fellow alums. Alumni Ventures Group, a Manchester, N.H. company founded in 2014, runs more than a dozen funds with names like The Yard Ventures (Harvard), Green D Ventures (Dartmouth), and Castor Ventures (MIT).
Yes, the connection to the schools is sometimes squishy; Alumni Ventures Group isn’t an official partner and can’t use any of the universities’ branding. But founder Michael Collins says that he is making venture capital investing — with its high risks, but potential for high returns — more accessible to individual investors, and helping those investors support companies started by their fellow alums. Since its creation five years ago, Alumni Ventures Group has grown to 84 employees, and has 20 funds under management.
Here’s how Alumni Ventures works. If you are what is known as an “accredited investor” — which the Securities and Exchange Commission defines as someone with a net worth of at least $1 million, not including a house — you can put money into an Alumni Ventures fund that focuses on your alma mater. The minimum ante is $50,000. The fund will make between 20 and 30 investments in startups founded or run by your fellow alums. That, Collins says, gives people a “smart, simple portfolio” of startup investments, which usually take years to either produce a return — or fizzle out.
Entrepreneurs, not surprisingly, mostly like having an additional investor who is willing to jump into a funding transaction with a few hundred grand.
“They’ve been great,” said Josh Kanner, an MIT alumnus who is founder of the Cambridge startup Smartvid.io; it uses cameras and software to document what happens on construction sites. Although Castor Ventures, the MIT-focused fund that Alumni Ventures runs, didn’t invest enough in Kanner’s company to get a seat on the board, Kanner said the firm has been helpful in helping connect them with people in its network “who might provide specific insights or introductions to potential customers.”
Some entrepreneurs don’t even know that Alumni Ventures owns a piece of their company. One of the first deals that Collins mentions when asked about Alumni Ventures’ “liquidity events” — public offerings or acquisitions of startups that return capital to the investors — is SimpliSafe, a Boston company that sells home security devices that you can install yourself. It was acquired last summer in a $1 billion deal.
“They never put in money directly and I haven’t had direct involvement with them,” said founder and CEO Chad Laurans. Alumni Ventures wasn’t on the board or “actively involved,” he added. Might Alumni Ventures have bought shares in SimpliSafe from an employee, or maybe another firm that had invested in the company — what’s called a “secondary market transaction”? “I think that’s possible,” Laurans said. (Collins confirms that this was the case with the SimpliSafe deal.)
“I’m supportive of new sources of capital,” said Michael Baker, CEO of the Boston advertising tech company Dataxu. “We need more diverse sources of funding for the startup economy, and it’s potentially good to provide a way for people who aren’t sophisticated investors to participate on some level.” (Dataxu received money from the MIT-focused fund, since some of its employees are alumni.)
But Baker, who has an undergraduate degree from Brown, said that the way Alumni Ventures advertises its funds on sites like Facebook is sometimes “a little bit too misleading. People are confused.” When he saw the name Waterman Ventures — Waterman is the main drag that runs through Brown’s campus — he initially thought it was a university-sanctioned endeavor.
Brown spokesman Brian Clark said that although the university does have a student-run venture fund called Van Wickle Ventures, which puts money into new ventures formed by students, faculty, and alumni, “there is no formal relationship between the university” and Alumni Ventures Group, and that Brown has not given permission to use the university’s brand “to imply affiliation.”
MIT also wants to be clear that Alumni Ventures’ activities aren’t seen as sanctioned by the university, which does have official initiatives like the E14 Fund and The Engine, which invest in and support alumni startups. Lesley Millar-Nicholson heads the school’s Technology Licensing Office, which often works with startups and venture capitalists seeking a license to use technology developed at MIT. “We have requested changes in [Alumni Ventures’] promotional materials to ensure there is no perception that they are affiliated with or endorsed by MIT, and they have generally been responsive to our requests,” Millar-Nicholson said. “We continue to monitor their activities to ensure they remain in compliance.”
Collins acknowledges that relationships with universities can sometimes be thorny. In phone conversations with prospective investors about putting money into an Alumni Ventures fund, he said, “Sometimes you have to be super clear with a would-be investor, and say, ‘We’re not part of Dartmouth.’ ”
He adds that entrepreneurship centers at universities are usually excited when Alumni Ventures starts a fund tied to their school. “We have internships, we’re funding companies, and we’re sponsoring business plan competitions,” he said. But the development office, responsible for seeking alumni contributions, can sometimes feel competitive with Alumni Ventures. Over time, though, he said, most development office leaders can be persuaded that alumni “look at donating as different than investing. And to the extent that we can build wealth among Dartmouth people, that is very good for Dartmouth’s endowment.”
Collins himself is more of an entrepreneur than a career venture capitalist. He started a New Hampshire toy company called Kid Galaxy, then built a consulting firm called Big Idea Group that helped inventors turn their concepts into products. But in his early 20s, he did spend four years as a junior employee at the Boston-based investment firm TA Associates, cold-calling startups to see if they needed capital. “I’m the guy who made the call and made the introduction and got the meeting set up,” Collins said. Two of the “notable deals” on his Alumni Ventures bio are from that era: Intuit, the maker of Quicken tax software, and Jenny Craig, the weight-loss program.
Alumni Ventures has raised nearly $225 million for all its funds since it was founded in 2014. Collins says the company is raising $30 million to $40 million more every quarter.
“You scratch your head and say, ‘Why hasn’t anyone done this before?’ ” he said. “It’s a once-in-a-lifetime opportunity.”