At Michigan’s Wolverine Venture Fund, Students Learn Via Reality VC

6/9/10

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company, and U-M spinout, HandyLab, which was acquired by New Jersey-based Becton Dickinson for $275 million in 2009. Wolverine invested $350,000 over six rounds. The student VCs would have invested more, but their fund was so small at the time, that was the maximum they could have invested in any one company. Still they realized just past $2 million on the investment—about 6.2 times their money. Not too shabby for a bunch of “college kids.”

For each potential investment, Wolverine’s VCs first tackle the basics in class, then they do preliminary due diligence to determine whether to do a deeper dive. If they think it’s worth it, then they split into teams. There are students who specialize in areas like medical devices, medical software, material sciences, cleantech, and, increasingly these days, cloud computing and software-as-a-service.

The teams come back and present their findings to students, faculty, and supervisors.

“All along the way, they’re being pressed for, ‘Did you look at this? Did you look at that? Double-check that. Did you believe what he said,?’” Kinnear says.

The whole exercise in reality investing fits the philosphy of the Zell Lurie Institute at U-M, where “we try and get the students’ hands dirty, meaning [dealing with] real problems,” Kinnear says.

Kinnear has been on the U-M faculty for 35 years. He started to get involved in entrepreneurship training about 20 years ago and has been leading the Wolverine program for 11 years. Kinnear also has “real-world” VC experience. He is on the Michigan Venture Capital Association’s board and is chairman of the board of the Venture Michigan Fund, the state’s $250 million pool that invests in other venture funds.

So, Kinnear knows what he’s talking about when he says he finds the students to be exceptionally good at what they’re doing—and that they behave incredibly responsibly because they know it is not all an academic exercise. “Their raw talent is very high,” Kinnear says, “and their work ethic is extremely good.”

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