UNC-Chapel Hill creates $5 million startup fund

UNC-Chapel Hill has created a $5 million fund to help startups commercialize technology developed at the university.

The new Carolina Research Venture Fund, an initiative of the university’s board of trustees, aims to address the dearth of seed funding available to startups. A long-standing maxim in the startup world is that the first infusion of cash is the toughest to raise.

At Thursday’s trustee meeting, Chancellor Carol Folt called the fund a great way to extend the university’s commercialization efforts by bridging the gap between “great ideas” and that difficult initial funding.

“I think it’s going to get used pretty quickly and if it’s successful, we’ll see it grow,” Folt said. “I think it’s going to make a big difference.”

The $5 million in initial funding comes from investment earnings derived from “non-state monies.”

“No tuition. No student fees. No state money,” said Rick White, associate vice chancellor of communications and public affairs. “Another way to look at it is we are taking investments and re-investing back in the state.”

Trustee Sallie Shuping-Russell said that the fund would receive an ownership stake in exchange for its investments, as is typical for early-stage investors. But because there is a “strategic value” to the investments that is in keeping with the mission of a public university, it won’t be looking for the outsized returns other investors demand.

“We won’t necessarily expect to have a 30 percent rate of return on a startup,” she said. “We do expect to be profitable.”

Those profits would be rolled back into the fund.

“The fund is essentially evergreen,” said Shuping-Russell, a managing director at investment management company BlackRock. “And we are also hoping to get some additional funds invested in it. This is just the start.”

Shuping-Russell anticipates that the fund will invest anywhere from $100,000 to $500,000 in startups. The board of trustees plans to hire one or more firms or individuals with experience in seed investments to oversee its operations.

“The main thing is, it’s not going to be internally managed,” Shuping-Russell said.

A board of directors consisting of trustees, administrators, researchers and others also will be appointed. The fund also will have an advisory board consisting of venture capitalists from across the country.

Joan Siefert Rose, the president of CED, a Triangle-based support group for entrepreneurs, applauded the initiative. “I hope others follow,” she said.

Trustee Chairman Lowry Caudill said that the university does almost $1 billion in research annually.

UNC-CH also announced a new cabinet-level position in which Judith Cone will serve as the interim vice chancellor for commercialization and economic development. She has been a special assistant to the chancellor for innovation and entrepreneurship.