Universities Venture into Capitalism

, Malcolm A. Kline, Leave a comment

Universities may want to adopt a basic rule to avoid mission creep: When you have failed in your basic task, it is probably not a good idea to enter into new ventures outside of that undertaking.

With graduation rates that could at best be described as anemic and skill mastery among graduates which might be characterized as pathetic, universities are venturing into the world of venture capitalism.

“Universities across the country have developed entre­pre­neur­ship programs in recent years aimed at encouraging students and faculty to turn promising business ideas into actual companies,” Steven Overly reported in the The Washington Post on Valentine’s Day. “Now, an increasing number of them also are giving money to help those businesses get started.”

“In the past several months, some of the nation’s top universities have poured millions of dollars into venture capital funds. The goal is to help promising businesses secure much-needed money while also giving the university a chance to reap handsome returns if the firms find success.”

“But venture capital is a high-risk, high-reward investment. The vast majority of start-up companies fail to make it big, so investors often back many of them in hopes that one or two will yield a significant financial return.”

“As a result, some critics have questioned whether universities should dedicate a portion of their budgets to such risky investments, especially when many states are slashing higher-education funding and tuition is reaching historic highs.”

“In the Washington area, universities have organized networks of investors and introduced them to promising start-ups, many of them having ties to the institutions. But others are going further.”

“The University of California announced the creation of a $250 million venture fund in September that will be invested in companies with ties to its network of schools, medical centers and research labs.”