Dorm Room Fund: $500k pilot from First Round Capital for college startups

Early-stage First Round Capital has announced this morning the launch of its Dorm Room Fund, a $500,000 pilot investment fund run by and for college student entrepreneurs that will make small investments to college-bound startups, often below $25,000, starting in Philadelphia, focusing primarily on Penn and Drexel.

The goal is to fund 25 startups in two years and will look to expand the idea to other college-heavy markets, says Managing Director Josh Kopelman. That’s to say nothing of capitalizing earlier on the nearby university setting that has launched InviteMedia and Warby Parker recently — Kopelman, himself, founded Infonautics while a Penn student in 1991.

Visit the site to seek funding and to join the student committee making the investments, which could begin as soon as January.

First Round has had so much local news lately that it makes a local technology news site that is, full disclosure, going to take an office in their new headquarters, worry a bit about overexposure. Don’t worry, Kopelman emails Technically Philly, with only a bit of jest: “this is the final piece of our ‘rolling thunder’ Philly launch campaign.”

No doubt though that the Dorm Room Fund is a story.

The point here is that the investment needs of entrepreneurs keep getting smaller to ship an initial product, and perhaps nowhere are those needs smaller than with college kids in a dorm room. In his blog post announcing the fund, Kopelman points out that his three major ventures cost, respectively, $5 million to launch Infonautics in 1991, $2.5 million to launch Half.com in 1999 and $750,000 to launch Turntide in 2004. And the need has shrunk even more in the last decade.

Despite the rise of angel investment absorbing early rounds of financing (even those focused on Philadelphia), Kopelman says there is still a lack of opportunities, particularly locally, for kids in dorm rooms to get the $10,000 to $25,000 needed to devote time, get some support and the basics together to launch an idea. (Bringing institutional funding earlier in the game doesn’t compete with angel investing, Kopelman tells Technically Philly, saying: “It’s rare that a company just raises $15,000 or $20,000, rather I think that this fund will invest alongside angel investors.”

First Round is putting up the initial capital and creating a board of eight college students, who will be expected to replace themselves as they age themselves out of the college demographic.

“If successful, we hope to bring this to other cities and campuses, but given our desire to be more active locally, we thought it was important for us to launch it in Philly first,” Kopelman writes Technically Philly in an email, saying they could bring the model to four to six markets in the next three years. “We think it has the potential to be a really powerful way to find and fund the next generation of student entrepreneurs.”

At First Round’s new office unveiling last week, several speakers referenced the move as an important part of a continued effort to stem the brain drain (while this has broadly already happened in Philadelphia, Wharton and other entrepreneurs and tech talent still make the conversation relevant) of technologists.

The big test for the local value of the fund may be if the next crop of Invite Medias and Warby Parkers stay in Philadelphia.