VC 101: Houston Fund Gives Students Startup Investing Experience

The University of Houston has waded into the venture capital market.

Administrators have launched the new Cougar Venture Fund this fall as part of its entrepreneurship curriculum for graduate business students.

“The goal is to teach students in an entrepreneurial finance class about raising money for a startup, what the options are, how to evaluate a deal,” says Keith Rassin, a Houston consultant and an adjunct professor at U of H.

The fund was created out of a $1 million donation by the Jerome Robinson Family Fund. Robinson, a U of H alumnus, was a businessman and philanthropist in Houston. This semester, students will be able to invest $25,000 of the money on three startups that have a track record of some kind, such as already having raised investment funds.

“We want to lower the risk as much as possible but still make it a good exercise for these students,” Rassin says.

The students, who have been broken into VC teams, are evaluating investment proposals from three startups that applied for funding last week. The startups are Molecule Software, a Houston company that makes Web-based energy trading software for small companies; Heat Genie, which has developed a self-heating packaging component for food and beverages such as coffee or soupin Austin; and Bonfire Wings, a Cajun and Creole restaurant.

Ultimately, the fund’s board of directors—a five-member group of Houston-area venture capitalists and company founders—has the final say.

Rassin says the university hopes that the management of the portfolio will spin off additional classes that can be offered to students.

Many universities have set up student-run funds in the last decade as a way to bring real-life startup experience into the classroom. The University of Michigan says it started the first such fund in 1999 with its $6.5 million Wolverine Venture Fund. Cornell University’s alumni donated $1.2 million to set up BR Ventures at the Johnson School of Management, where graduate business students run the fund.

The venture fund joins the Cougar Fund, a multi-million private investment fund in equity securities that is managed by U of H MBA and master’s in finance students.

“The worst thing is the students learn how to evaluate a deal,” Rassin says. “The best thing is maybe we invest in the next Twitter or Facebook.”

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One response to “VC 101: Houston Fund Gives Students Startup Investing Experience”

  1. Truth Williams says:

    Kind of focusing on the “venture” moniker a little too much. Venture can fall as early as seed/angel financing to growth/expansion rounds. I hope they are focusing on growth or even mezzanine/debt financings to get a legitimate return on later stage businesses (instead of burning the donation). I’m going to guess the restaurant isn’t trying to get bought out for 10X. That being said, the businesses are very different and might all have trailing revenues. If these businesses are truly pre-revenue “venture” investments, it’s taking shots in the dark and the students will be long gone to learn from the result. A second-year MBA student could see the return from the prior year’s late stage investment and learn from it. If the whole point is to make a high risk investment, that is just a waste of money. Keep in mind any student will learn from the due diligence process, market research, and memorandum writing process no matter the company stage.