The University of Delaware is raising a $6 million fund within the Horn Entrepreneurship program to offer bridge funding to startups founded by its students.
The University Launch Fund was created to offer student entrepreneurs a first round of venture capital without giving newly founded startups a tight time horizon like a venture capital firm may do, said Glen Gaddy, managing director of the fund. The university has already raised about $800,000 for the fund, Gaddy said, and its first goal is to have $1 million raised as soon as possible.
Once the Launch Fund has $1 million raised, it will be able to start investing in student-led startup ventures, Gaddy said.
“What I don't want to do is, I don't want to miss out on opportunities that may come in six months because we're all spent out now,” Gaddy said.
Investors in the fund include Ryan Caplan, co-founder of Philadelphia-based startup Trovir; Tanya and Vess Bakalov, founders and CEOs of Hello Team and Pliant.io, respectively; Peter Wolf, a former pharmaceutical executive; and Michael Paszkiewicz, president of Maryland-based Vend Lease Company.
Gaddy is reaching out to business leaders in Delaware, alumni and people interested in the community’s economic growth. He is also the managing member of Philadelphia-based angel investment firm Robin Hood Ventures.
“The answer for everybody was that Robinhood would like to see more brightest entrepreneurs with really, really cool concepts because that's what we invest in. UD would like to see greater alignment with that follow-on capital. How do we do something together? And that's how we got to the Launch Fund,” Gaddy said.
For years, universities have licensed research out to corporate partners or spun out research projects to build companies, Gaddy said, and an increasing number of companies are coming out of universities founded not by faculty or researchers, but by students.
The Horn Entrepreneurship program has helped students bring their ventures from the idea stage to the minimum viable product and proof of concept stage, he said, but some startups hit a roadblock when it comes to raising growth capital. The University of Delaware stepped in to create a fund that would support student entrepreneurship before startups seek to raise pre-seed or seed funding from angel investors.
The University Launch Fund would be similar to the work of firms like Red & Blue Ventures, a privately owned and operated seed and early-stage venture capital fund that invests in companies attached to the University of Pennsylvania. While Red & Blue Ventures operates like a traditional VC firm, the Launch Fund is an evergreen fund supported by donations to the program through UD, and deal structures will be designed to get portfolio companies to raise follow-on capital “as easily as possible,” Gaddy said.
“What the university wanted to do was patient capital, knowing that many of the startups coming through the proof of concept — it would be very, very difficult to put them on a timeline that would get them to a venturable return,” Gaddy said. “And bridging that gap was more thinking like an angel than it would a traditional VC.”
