A Bay Area venture capital fund run by UC Berkeley and Stanford students believes that it need not look past the dorm room for investment opportunities.
In April, Dorm Room Fund, a $500,000, largely student-run fund, began investing in the startups of currently enrolled or recently graduated students in the Bay Area. It aims to address the lack of financial resources for students who have innovative ideas and help their startups grow into strong businesses. Startups chosen by the fund typically receive a $20,000 early-stage investment.
Dorm Room Fund was first launched in Philadelphia by First Round Capital, a seed-stage investment group. Its Bay Area component comprises an investment team of four UC Berkeley students and four Stanford students led by a managing director from First Round Capital.
Rick Ling, a UC Berkeley sophomore and a member of the investment team, stressed that the Dorm Room Fund is focused on entrepreneurial development and that the students, not First Round Capital, make the important decisions at the fund.
“Our purpose isn’t to just provide capital,” Ling said. “It’s also to nurture new startups and to build a tight network of student entrepreneurs. It’s about making students understand that it’s OK to pursue a great idea.”
In order to mitigate risk, Dorm Room Fund does not force failed companies to pay back investments. Instead, if the entrepreneurs of the failed startup go on to create a successful company, debt held by the fund will be converted to equity in the new company.
CeCe Cheng, the managing director of Dorm Room Fund from First Round Capital, said the investment group created the fund to test its hypothesis that providing students with capital and resources will encourage more innovation. First Round Capital had invested in many companies whose ideas were born on a university campus, Cheng said, which was a significant motivation for creating the fund.
The Bay Area already attracts a large number of venture capital investments. But Cheng said it is difficult to find financial and business development resources as a student entrepreneur.
“Money is hard to raise in general — it’s especially hard when taking classes,” she said. “Students shouldn’t have to make decisions between their schoolwork and their company.”
Andre Marquis, executive director at the campus’s Lester Center for Entrepreneurship, said that a number of funding opportunities for UC Berkeley students already exist.
“We’re in the Bay Area — there is no shortage of capital,” he said. “But … having more early-stage investment is a good thing.”
Satish Polisetti, UC Berkeley graduate and the CEO and co-founder of AdsNative — which received funding from Dorm Room Fund — described the group as professional and no different from existing investor companies but emphasized the importance of the financial resources they gave.
“A very important component (of building a startup) is a little bit of capital so that you can get your business started,” Polisetti said. “Dorm Room Fund is providing initial capital for the startup to make investments.”