University of Chicago is devoting a piece of their $7.1 billion endowment to startups.
On Friday, UChicago announced the UChicago Startup Investment Program, a $25 million fund that will invest in early stage startups related to the University. The money will come from UChicago's endowment and be managed by the Office of Investments. The school's startup hub, the Polsky Center for Innovation and Entrepreneurship, will also play a role vetting potential investments.
UChicago will target startups raising a Series A round, and will commit 20 percent of the investment round (though just up to $500,000). They anticipate making three to four investments each year. Startups must have a significant affiliation with the University, UChicago said. This will likely mean a startup would be based on university intellectual property, or faculty, alumni, students or staff would be on the founding team.
UChicago will also require an established venture capital firm to lead the investment round and take a seat on the startup’s board, with the goal of attracting more investors to the UChicago ecosystem and Midwest tech scene.
“By co-investing in new companies that have independent investments by established firms, we will enhance University-wide support for startups while encouraging venture partners to explore investment opportunities coming out of the University," UChicago president Robert J. Zimmer said in a statement.
“In addition to fostering innovation, we hope the UChicago Startup Investment Program will encourage our partner venture capitalists to take a deeper look in the Midwest and Chicago specifically,” added Mark Schmid, University vice president and chief investment officer. “We want to invest in companies that grow and create economic opportunities here and participate in the resulting benefits.”
The Polsky Center has several programs that develop and invest in university startups, such as the Innovation Fund and Polsky Accelerator, but mostly at the seed round stage. The Polsky Center staff will do the first round of vetting, then send promising companies to the investment office.
John Flavin, associate vice president of entrepreneurship and innovation, pointed out that this fund will help startups when they're ready to scale.
"This investment program is the next step in the University of Chicago’s commitment to entrepreneurship and innovation," he told Chicago Inno over email. "It will focus on later stage (Series A and later) ventures that are in scaling mode."
“Capital is a key resource required for scaling ventures once they have advanced to this pivotal stage,” he added in a university statement.
2016 has been a landmark year for entrepreneurship at UChicago. This summer a $35 million donation from Invenergy founder Michael Polsky established a standalone Polsky Center that now covers entrepreneurship across the entire university, rather than just at the Booth School of Business. A $5 million gift from former CDW CEO John Edwardson bolstered social impact entrepreneurship at the university. The school also marked the 20th year of their top-ranked university accelerator and pitch competition, the New Venture Challenge.
"With the recent expansion of the Polsky Center and now the UChicago Startup Investment Program, the University of Chicago has become a leading spot for aspiring entrepreneurs—in all fields—to develop and launch their businesses," said Flavin over email.
