Is Your University Endowment Fund Adequately Invested in Venture?
Written by Spring DigitalDx Venture Fellow Ananya Sheth
The recent pandemic-driven crash of the public markets poses a risk to university endowments’ growth targets. This is nowhere more evident than with smaller endowments whose portfolio share of alternative investments is lower than the Yales of the world.
Fortunately, universities have begun to realize that instead of de-risking by reducing their overall investment in alternative vehicles such as venture capital, it might be a better strategy to locate and build long-term investment partnerships with smaller funds backed by experts that have razor-sharp sector-specific targets.
This strategy becomes particularly effective in the digital healthcare sector as ticket-size minimums and investment timelines are more attractive to endowment fund managers.
Furthermore, technology-focused universities possess strategic assets in their intellectual and social capital that enable them to scientifically evaluate fund potential. This has the added benefit of creating a supportive relationship that can help the university to commercialize its own intellectual property via licensing deals, something universities like Stanford have capitalized on over the years to the tune of nearly $2 billion.
Lastly, establishing a relationship with smaller, more accessible yet very promising funds could enable the university to further align its investments with its overall mission.
University endowment managers who traditionally shied away from early-stage venture capital investments have now begun to recognize smaller but well-situated funds as a potential triple-win — a long term partnership with the promise of outsized returns that can be effectively de-risked.
For a deeper analysis of the data supporting this article, read more here.
About the Author:
Ananya Sheth is a Doctoral Candidate at the Innovation Science Laboratory of Purdue University and a Fellow at DigitalDx Ventures, an impact fund focused on the intersection of diagnostics and artificial intelligence. Ananya has worked in early-stage healthcare investing at Purdue University.
