In its ongoing efforts to rise to Top 5, the University of Florida has established its own venture fund to benefit startups founded on university research.
Starting this fiscal year, the university will provide $1 million a year to fund startups founded on UF technology. Jim O’Connell, assistant vice president for commercialization at UF and director of UF Innovate | Tech Licensing, envisions the venture fund could provide between $200,000 and $500,000 for 2 to 5 UF startups in a fiscal year.
“That’s great news for our faculty,” said O’Connell. “With the Institute for the Commercialization of Florida Technology shifting focus, neither the state or the university had a seed-stage investment vehicle. We felt the need to fill some of that gap, and this $1 million fund should do just that.”
Until 2017, the Institute for Commercialization of Florida Technology bridged early funding gaps for companies spinning out of Florida-based universities and research institutions by matching investments up to $300,000.
“The Institute was valuable to the tech startup ecosystem in multiple ways,” said Randy Scott, partner with HealthQuest Capital, which invests in growth stage healthcare companies. “The financing supplied was obviously important, but the network of larger institutional investors that the Institute had incorporated into its review process also meant a lot of priceless visibility to much larger investors nationally.”
In this new fund, UF will be a “following investor,” meaning that the university would base a decision to fund a startup on another investor’s due diligence work and commitment to invest a significant dollar amount in the company.
“Being a co-investor positions UF as a peer with the investors, which means much greater visibility into the investment process, greater visibility into the other investor’s views on the true long-term prospects for that startup,” Scott said.
For instance, if a company founded on UF technology gets a $2 million investment, UF could view the other investor’s due diligence report on the company and decide to invest $200,000 as a following investor.
“The university will not take board seats and will never have a controlling interest in the company,” O’Connell said.
In fiscal year 2019, which runs from July 1-June 30, UF faculty created 15 new startups. Since UF Innovate | Tech Licensing opened in 1985, more than 200 companies have started by licensing UF technologies. Eligible UF startups can be at any stage of development but must have a significant investor for UF to follow.
“Our intent is for this $1 million venture fund to be a magnet,” said Dr. David Norton, vice president of research. “While we recognize this amount of money by itself won’t make a huge difference, we believe it will highlight the work our faculty do, indicate UF has ‘skin in the game,’ and attract other, larger, investors.”
“If we prove that this model is successful, other universities in the state could use the same model.”
The venture fund is one more positive move by UF as it aims for Top 5 in the nation’s public universities.
“I would think the fund will be seen as a big vote of confidence to both the faculty entrepreneurs and also the external investors,” Scott concluded.