Drexel University is getting its own venture fund.
The university is partnering with state-backed investment firm Ben Franklin Technology Partners (BFTP) to launch a $10 million fund that will back companies founded by those with ties to Drexel, the two organizations announced this afternoon. Initially, that means professors and graduate students developing technology and products at the school, but Drexel said it plans to expand to companies founded by undergraduates and alumni. (We couldn’t help but think about Orange Maker, the 3D-printing company that Drexel recently attracted to Philadelphia.)
Drexel will focus on companies with products that are ready to go to market, said Drexel Senior Vice President for Corporate Relations and Economic Development Keith Orris.
Drexel plans to raise $5 million and BFTP will match that for a total of $10 million. It’s a big number: BFTP and Temple University partnered to launch a $1 million Temple Ventures fund earlier this year. (With Temple and Drexel launching seed funds, will Penn follow suit?) StartUp PHL, the city-backed fund with First Round Capital that invests in Philly-based startups, is $6 million.
"We want to keep Drexel technology close to home."
The school’s fundraising office will reach out to donors to raise the fund, Orris said. It’ll be a philanthropic contribution — donors will not get a monetary return on their investment.
“We do think there’s an appetite [for this kind of contribution] within the donor community,” Orris said, pointing to the donor support for the Close School of Entrepreneurship, which launched with a $12.5 million gift.
While the fund is not yet raised, Drexel has some money to kick off the fund and start investing in companies immediately, Orris said.
The creation of this seed fund speaks to the shifting missions and strategies of both Drexel and BFTP.
For Drexel, the seed fund represents another way for the school to launch startups — something that both Drexel and Penn have increasingly focused on in recent years. (It’s also part of the school’s broader vision of creating an “Innovation Neighborhood,” an initiative that Orris oversees in partnership with university president John Fry.)
As part of its Drexel Ventures initiative, Drexel offers an entrepreneurship bootcamp for university researchers and professors, as well as non-dilutive grants for companies who are working to prove their model. The school has invested more than $2 million in grants and awards each year into very early-stage faculty companies, said Shintaro Kaido, Drexel’s director of startup services who will run the fund on Drexel’s side. The seed fund aims to be that next level of funding for companies.
Does Drexel aim to make returns off of these investments?
“We certainly will try not to lose money,” Kaido said, with a laugh.
But yes, he said, the hope is that the fund will make money that can be re-invested.
For BFTP, the fund is another way to make more investments in the region, said spokesman Jason Bannon.
It’s the same reason the firm has partnered with outside groups like First Niagara Bank and Temple University. The state contributes to one-third of BFTP’s funding overall, Bannon said.
“The only way that we can increase our activity is by diversifying our investment base,” he said.
(Temple Ventures plans to announce its first investments in early 2016, Bannon said, one year after launching. When asked if that one-year time frame is normal, Bannon said it was a matter of making sure that these companies, often founded by professors who are non-traditional entrepreneurs, have “business sensibility.” “It’s not shocking to anybody that this is taking time,” he said.)
The seed fund is also a way for BFTP to push its mission of economic development in the region.
“We want to keep Drexel technology close to home,” Bannon said.-30-