by PETER DORFMAN
For those familiar with the high-risk, high-return business of venture capital, the phrase “philanthropic venture fund” may sound like a contradiction in terms. But in March 2018, Indiana University launched just such a fund, and it is generating start-up capital earmarked for the commercialization of IU discoveries as well as new business ventures founded by or run by IU faculty or alumni.
The IU Philanthropic Venture Fund has looked at about 180 opportunities and invested in 12 companies so far, says Teri Willey, fund manager and executive director.
The fund is embedded within the IU Research and Technology Corporation, supporting the economic development and job-creation goals of the university. It also is affiliated with the IU Foundation, which works to attract donated capital for the fund, and works closely with the university’s Innovation and Commercialization Office.
“It’s like any other early-stage venture fund—we invest cash for equity,” Willey explains. “But it’s an evergreen fund. When we get a cash return on an investment, instead of dividing it among the limited partners, we return it all to the fund for reinvestment. Anything beyond what we need to keep the fund at about $50 million goes back to the university to fund innovation and entrepreneurship. The pool of capital we work from is primarily donated capital. We hope eventually we won’t need donations, but instead the fund will be topped up by equity realizations.”
By realization, Willey refers to the moment when the company is sold or goes public, which is when investors get their return. IU has two active venture funds, which have seen 12 such realizations totaling about $35 million over the last decade—from about $750,000 in cash investment, Willey says.
Startups don’t have to be in Bloomington to be funded, but several have been conceived here. A recent investment is in Ziptility, a company that helps water utility operators digitally map their water mains and other buried infrastructure. Ziptility is based in The Mill, a co-working space and technology incubator located in Bloomington’s Trades District, which also is where Willey and her associates work.
Willey, 60, has a background in venture investing and technology transfer. She recently set up a similar fund at Cambridge University in England. “It’s a fun, satisfying job, acting as a business agent for scientists,” she says.