Campus Capital fund seeks to ape US start-up success

A new import from the US has arrived in the UK: the campus-based venture capital fund.

Campus Capital, which has so far agreed partnerships with the universities of Sheffield and Manchester, uses students to seek out promising early stage companies in which to invest.

Modelled on established funds in the US, the aim is both to give entrepreneurial students experience of the venture capital world, and provide start-up companies with much needed money at an early stage.

“One of the best ways to understand how investors make decisions is to experience that from the investors’ side of the table,” says Samantha Deakin Hill, one of the fund’s founding partners and a mentor at Sheffield’s enterprise programme.

Campus Capital will not focus its investments exclusively on student or graduate start-ups, instead looking more broadly at companies in the “city region”, explains Deakin Hill.  

The US already has a number of venture capital funds that explicitly invest in student companies, some run by the universities themselves. Prominent among them is the Dorm Room Fund, which only backs companies with at least one full-time student on their founding team.

Now with investments in 90 different companies, according to the website Crunchbase, it has recently backed a company that makes "smart" basketballs that track your dribbling performance, and a firm claiming to be able to streamline the organisation of school field trips.

There are “more opportunities to invest in student start-ups” in the US than the UK, says Deakin Hill.

“What a lot of [UK] universities are very good at is providing early stage proof of concept funding, which will include a small grant,” she explains. But these grants are small indeed – normally below £5,000 – and one of the difficulties for UK start-ups is getting more sizeable chunks of money to be able to scale up their businesses, she adds. Campus Capital hopes to plug that gap by offering investments of £50,000 to £200,000.

Why, then, do student companies in the UK find it harder to tap into funding opportunities? “In the UK we’ve a massive history of invention and innovation, but entrepreneurship? Not so much,” says Sara Pates, head of enterprise at the University of Sheffield.

UK universities do have funds to commercialise intellectual property, she thinks, but “that tends to be around research”, rather than student companies, she says. One such example is the Oxford Sciences Innovation fund, launched in 2015 with £300 million of funding to provide capital and advice to help commercialise research that emerges out of the University of Oxford’s mathematics, physical, life sciences and medical sciences division.

Students, who often lack the connections and experience of more established entrepreneurs, can be a riskier bet when it comes to funding start-ups. Universities may well ask themselves “what’s the payback?”, says Pates. “So many [student-led companies] fail."  

Campus Capital is currently raising money for a £2 million first tranche of funding available from April or May this year.  

Alumni may choose to invest as a way of boosting their alma mater, Deakin Hill says. “There have been alumni of our current partner universities who have shown interest in giving back to the university but in a way where they could see a return on their investment,” she adds. Some alumni “aren’t interested in having a building named after them”, she continues.

If successful, the scheme could give UK students a taste of the funding opportunities available to some of their counterparts in the US – but there is still a long way to go. 

david.matthews@tesglobal.com