Stanford University is getting into the venture capitalist game and investing in student and alumni tech startups, according to a report.
Not only is it starting an uncapped investment fund, but Stanford is also giving a $3.6 million grant to StartX, a non-profit startup accelerator for companies with a Stanford affiliation, according to TechCrunch. The university's business affairs department will oversee the investments. Along with the university, Stanford Hospital and Clinics will also be investing in startups.
StartX is independent of the university but must have at least one founder with a Stanford affiliation. The accelerator is funded by Microsoft, Cisco, Intuit and others at about $1.2 million a year, so the new grant is a big one.
StartX only invests in companies that have raised $500,000 in funding and a percentage of that coming from VCs or professional investors. Usually, for a first investment, it would be an expected 30 percent.
While the TechCrunch article seemed confused about the purpose of investing in student- and alumni-run startups, to us it seems logical. Several multi-billion dollar businesses came out of Stanford, including Google, Facebook and Instagram, so why not get into the business early and get a nice payout later? It would sure save on fundraising for the university.