Apr. 29–CHAPEL HILL, N.C.–A new venture-capital firm is aiming to amass between $20 million and $30 million to invest in fledgling companies based on technology developed at the University of NorthCarolina at Chapel Hill.
Called Carolina Ventures, the new fund is the first to be formed by UNC Ventures Management, a for-profit subsidiary of UNC Management Co., which is an independent non-profit that manages the university’s endowment assets. UNC Management will invest $10 million in the fund while the rest will be raised from outside institutions and possibly some wealthy individuals.
The fund is focusing on UNC startups, essentially making it easier for university researchers to get money to start businesses, but officials emphasize that it isn’t an exercise in economic development but a money-making venture.
“We’re not going to do every deal,” said Mark W. Yusko, president and chief executive of UNC Management. “We want to cherry-pick the very best deals to help them through the very difficult transition from lab bench or science to company-building.”
Carolina Ventures will step out in a rough period for venture capitalists, with private equity funds suffering double-digit losses for the past two years amid a slow economy.
But Yusko said investment opportunities abound at UNC, and the treacherous investment environment has forced more venture capitalists to invest in established, later-stage companies, creating a huge need for the seed-stage capital that Carolina Ventures will have. He expects Carolina Ventures will start putting money in startups by fall.
“We’ve seen a number of deals that could have very easily been commercialized, had there been additional seed-stage funding available,” Yusko said.
Yusko hired Michael Schafer, a former partner with Tullis-Dickerson & Co., a Connecticut-based venture-capital firm, to manage Carolina Ventures. The paperwork to officially conduct fund raising is a few weeks away from being completed, Yusko said.
Carolina Ventures is reminiscent of Centennial Venture Partners, now called Academy Centennial Fund, which was launched in 1998 with $10 million to invest in technologies coming out of N.C. State University. Academy Centennial was co-sponsored by the university and the N.C. Technological Development Authority and has made investments in 15 companies, including Web business HowStuffWorks of Cary.
There have been several companies spun out of UNC-Chapel Hill in recent years. One is Raleigh-based Micell Technologies, which is developing high-tech uses for a carbon dioxide-based cleaning agent. It was founded by Joseph DeSimone, a UNC chemistry professor.
Duke University has also had a fair number of spin-offs launched from its research labs — AIDS drug development company Trimeris, for example — but has done so without the aid of a dedicated venture-capital fund.
Another initiative with a goal similar to Carolina Ventures’ is being put together by individual investors in Chapel Hill. The Arboretum Fund is in the early stages of talking to investors, with a goal of putting together a pot of $1 million to invest in even younger companies being formed with ties to the university.
E.S. “Stan” Eskridge, who will serve as general partner for Arboretum, said that once the money is raised it would be invested in small chunks to do things such as conduct a market study or hire someone to write a business plan — to get companies ready to talk to formal investors.
“We don’t know that this is going to work,” Eskridge said. “It’s a little different from anything else out there.”
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