The Dorm Room Fund
I was a dorm room entrepreneur.
I co-founded my first company, Infonautics, back in 1991 while I was a Junior at Penn. By the time I (barely) graduated, we had 20 employees. It was through this personal experience at Penn that I first learned that college campuses are wonderful ecosystems for creating disruptive ideas. And I'm not the only one that noticed and took advantage of this. For other examples, look no further than today’s largest tech companies -- it’s not surprising that Facebook, Microsoft, Dell, Yahoo, Google all started in a dorm room.
As I look at the environment facing today’s dorm room entrepreneurs, I notice a few things. Never in history has it been cheaper or faster to start a company. In my own startup career, the costs to get to “first product ship” went from $5 million in 1991 (Infonautics), to $2.5 million in 1999 (Half.com) and to $750,000 in 2004 (Turntide) – and that doesn’t even take into account the amazing strides and cost reduction platforms of open source software (mysql, memsql), flexible programming languages (python, ruby), cloud infrastructure (AWS, heroku) and new platforms (facebook, iOS6 and Android). The result has been that products can come to market and create massive user engagement quicker than ever. It took AOL 66 months to get to one million users. eBay and Amazon did it in 24 months. Foursquare in 13 months. And Path in around 15 days!
But just because it takes less capital to build a company now, doesn’t mean it doesn’t take any. And, for a student population already taking out five figure loans to pay for school, finding and obtaining that additional capital is often extremely difficult. Friends and family are usually stretched thin, and in most cases, already do whatever they can to ease the burden on their college relatives. At the same time, we’ve seen the growth of many wonderful incubators and accelerators – but those often require a student to drop out (or take a “leave of absence” from college). And traditional venture capitalists are not optimized to write $25K checks to fund a student’s idea while they are still in school. We’ve heard from several entrepreneurs claiming that it was “much harder to raise our first $25,000 then our next $2 million”. Given this, I just wonder how many amazing companies we would be talking about today had they received that first small check. Instead, I hear stories about how amazing students, under the giant burden of college debt, abandoned their startup dreams and chose to take full-time positions at established companies.
Over the past few years we’ve invested in companies that are disrupting financial markets – from Upstart (which provides a revolutionary new way for college students to raise money to pursue their dreams) to Funders Club (which is pioneering an innovative way for startups to raise capital) to On Deck Capital (which uses technology and data exhaust to underwrite small business lending). With these as inspiration, I spent some time thinking about how a new venture fund could bridge the disconnect between dorm room ideas and the capital to bring them to life. In my opinion, a fund would:
- Be run
by students – not suits A
student investment team would know the entire student and campus ecosystem –
allowing them to find, screen and invest in the best ideas
located on campus, so that it constantly has a feel for the vibe on
- Students are engineers, marketers, financers,
writers, doctors, lawyers and researchers – and allow them to focus on
investing in companies that disrupt
big markets that they (students) have expertise in
- Finance students based on their needs. Students are scrappy and often just need that first $10,000 - $20,000 in order to build their product and ship a minimum viable product – let’s call their current stage the dorm room stage
That’s why, today, I’m excited to announce the launch of the first Dorm Room Fund, with a pilot in Philadelphia. This isn’t a business plan competition. It is a student run investment fund and First Round Capital will be committing $500,000 in capital (or $15,000 on average per Company) to the fund – for them to invest in startups that are founded by a current student at (or recent graduate of) a Philadelphia-based university (such as the University of Pennsylvania, Drexel, etc). While First Round Capital will be the initial investor in the fund – and I’ll be helping them by serving as an advisor and member of the Investment Committee while they get it off the ground – our goal is to make this an independent, student-run fund…and for them to raise additional outside capital in the future.
We will be selecting the initial Investment Team of eight students – and our plan is that they will be responsible for selecting their replacements in the future. If you are a Philadelphia –area student at Penn or Drexel, and if you are interested in applying to serve on the investment committee, please visit www.dormroomfund.com . We’ll be holding an on-campus information session this Thursday (September 27th) and we'll email the details to every student who goes to the website and signs up.
While this is clearly a "pilot", if it's successful we expect (and hope) that Philadelphia will be the first of many cities where we bring the Dorm Room Fund. And our hope is that this Dorm Room Fund allows for more companies to be built while providing an unparalleled learning experience for the students on the investment team. Choosing Philadelphia as our first city underscores my commitment to creating a stronger and more vibrant Philadelphia start-up community. Over the years, we’ve seen amazing companies make it out of Philadelphia’s dorm rooms (Invite Media, Milo and Warby Parker, to name a few), when the capital finds them. And we can’t wait to add many more to this list.