University Of California Proposes Creation Of Venture-Capital Fund For Student And Faculty Startups

SAN FRANCISCO (KCBS) – A plan to fund research at the University of California will be presented at the Board of Regents on Wednesday, calling for $250 million in venture-capital funds, which is one of the largest of its kind.

The university system said UC Ventures would be an independent fund to pursue investments in UC research-fueled enterprises. The Office of the Chief Investment Officer would make an initial commitment of up to $250 million to the fund.

“UC Ventures is the result of careful evaluation of best practices to develop the most effective investment vehicle to capture the economic value the University of California is creating through its pioneering research,” said UC Chief Investment Officer Jagdeep Singh Bachher. “Our goal is to build upon the technology commercialization efforts at UC while carefully managing potential risk exposures. We are confident an independent UC Ventures will achieve this.”

Officials said UC Ventures will seek to generate attractive, risk-adjusted returns by investing in commercial opportunities arising from the University of California. No tuition or state funding will be used.

“In addition to any financial benefits, we see this fund as a potential vehicle for providing resources to support the basic research and talent — among both faculty and students — required to develop innovations that can benefit California and the world,” she said in a statement.

Subject to approval by the UC Board of Regents on Wednesday, the University of California plans to launch UC Ventures in 2015.

But how risky is the proposition? “The rate of return can vary quite widely, which is one of the key reasons why I have issues with it,” Dileep Rao, a Clinical Professor in the Department of Management & International Business at Florida International University, told KCBS. “First of all, very few VC’s make a whole bunch of money. The common perception most people have is that just because you have money, you make more money. The reality is 4 percent of VC’s earn about two-thirds of the profit in the industry. Now, those 4 percent are nearly all in Silicon Valley. The question is, how many can UC use?”

Rao said one other concern is that many of the venture-capital firms have made their money in emerging industries and it’s unclear if there will be another emerging industry like semiconductors or biotech to make a profit.

According to University of California officials, UC’s Office of the Chief Investment Officer will hold certain key governance rights and help UC Ventures develop its own resident expertise to mitigate risks.  In collaboration with its 10 campuses, UC also intends to create an independent advisory board of leading figures in Silicon Valley and California to provide advice and industry insight to UC Ventures.

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