Students to call the shots in Dutch venture capital fund

The Dutch Student Investment Fund was launched last week by the University of Twente to back spinouts from Twente and its partner institution Saxion Academy with funding of between €25,000 and €100,000.

The fund will be run by five students, assisted by experienced board members and investors including Erwin Holtland, an investor in the local business park Kennispark Twente, Steve Walsh, a professor of the University of New Mexico, Ray Quintana, associate at the US-based Cottonwood Technology Fund, and Thomas Mensink of Golden Egg Check, a business consultancy.

But do students have the experience to pick winners? “The students will obviously not be knowledgeable in the venture capital domain,” said Quintana. “The key part is not the maturity but the ability to learn and understand the process. Both the student entrepreneurs and the student investors will get a better understanding of the entire investment and entrepreneurial process.”

The fund has already announced its first investment of €40,000 to medtech start-up LipoCoat, which is designing a coating for contact lenses that will them less irritating for users. Overall, the fund expects to make around four deals a year, about the same as a standard fund.

Victor van der Chijs, president of the executive board of the University of Twente, said, “As an entrepreneurial university, we acknowledge the need of student start-ups for our economy. By starting the Dutch Student Investment Fund, we put action to our words.” Both Twente and Saxion have contributed seed money to the fund, but a longer term plan is to find corporate sponsors.

Twente is well placed to introduce the fund, according to Quintana. “It’s arguably the most entrepreneurial university in Europe with over 800 spinout companies in the last 30 years,” he said.

Student-run funds, which are small by investing standards, have been popular for more than a decade in the US, where they have at times out-performed professional funds.

The University of Michigan’s $7 million Wolverine Venture Fund started in 1999 and calls itself the nation’s first student-run venture capital fund. The Dorm Room Fund has student teams based in New York City, San Francisco Bay Area, Philadelphia, and Boston, with investments averaging $20,000 apiece.

Although the University of Twente claimed the first European student investment fund, there are similar funds managed by students in Oxford University’s Saïd Business School and London Business School.