First Round's Dorm Fund
Since it seems that First Round (and please correct me if I'm wrong) is training VCs in unis with their Dorm Room Funds, what's to stop an enterprising student from networking their ass off to find mentors, on campus entrepreneurs, etc, learn what they need to analyse/valuate companies and approach angels or VCs with a scout fund or crowdfunding and do the same thing?
As someone who has worked/been involved with the Dorm Room Fund team (I applied unsuccessfully, but I have friends who are analysts on it), it's a little bit different than what you are asking. Apart from the incredible amount of work that more than one person would have to do above (it'd be hard to approach a VC and say that you are the end-all in terms of investment). You also wouldn't exactly be able to do this until you've proven your experience in the industry and have taken enough relevant courses before (most likely) someone would invest in you and your team.
DRF is pretty much $500,000 for a group of the investment team to invest as a group. First Round has no say in what they invest in. DRF earns the usual 2/20 on the 500k. The 20% of gains will go to the schools that the members of the team are from and the 2% is for the DRF operations/whatever they want (pizza, open houses, pay yourself - it's all up to the members). The program is all set up by First Round and you have their "blessing" to spend the money. Founders are offered an uncapped convertible note (aka, First Round only gets equity based off whatever the second valuation of the company ends up being [this is very founder friendly]). Additionally, the majority of the people on Investment Teams in DRF are not finance students. They're entrepreneurs. Either people who have started companies, or are e-board members of entrepreneurial clubs. Knowing technical valuation in the VC world isn't as important as knowing the operational aspect of running a startup and understanding the founders above all else.
It's a lot harder to find any Angel or VC who is willing to trust you and a group of people at valuing companies and then potentially blow $500,000 of their money. Who are then especially founder friendly. Especially when a lot of schools are starting their own seed stage investments (no equity - just angel seed money).
That being said, it could be possible and would probably take a few years for you to establish yourself as someone who could do that, but wouldn't it just be easier to start a company yourself and learn an incredible amount there and then see where that takes you or jump to VC after undergrad?
tl;dr: DRF is a little different. Mainly full of entrepreneurs. You could do what you said, but would probably be easier to start a startup and then exit to VC after the fact.
Thank you for the clarification, much appreciated! Your approach suggestion definitely makes sense.
Any idea if/how much those student analysts get paid? An estimate is fine with me - I have an offer for a similar position as a student and have been asked what I want compensation to be. I don't have any idea what would be a good number to say
That sounds like a legit program
Yeah, it's a pretty impressive program. It's an exclusive 'club' and it opens up a network for you of other college investment teams, as well as networking with First Round. Additionally, a bunch of well known tech founders have signed up as advisors for the program. http://dormroomfund.com/about#advisors
To answer OP. This is completely possible. In fact, Romulus Capital is the prime example of this. Krishna Gupta co-founded romulus capital when he was a junior at MIT. He is an incredible entrepreneur and literally hustled law firms and accounting firms to work for him basically pro bono. Setting up a venture fund is not as easy as it sounds. You have to realize you're actually trying to run a FUND that's meant to RETURN MONEY.There's a lot more to running a venture fund and DRF is taking all of that risk and business model risk out by giving the money out.
Dorm Room Fund is something completely different. The Dorm Room Fund is a charity fund that is meant for First round capital to have networking access to great entrepreneurs who want to learn more about VC. They're interested in establishing a relationship with these people so when they are creating their company 3, 4. First round can use that pre-existing relationship. 500k is a joke amount for First round to have a call option on elite university talent. In fact, an insider information that you guys might not know is that the DRF fund is LITERALLY out of First Round's marketing budget.
Source- I know Josh kopelman and the director of DRF.
Wow. Thanks so much for the info. I asked this same question of a VC analyst on this site and he basically told be the idea had zero merit (in a less cordial tone).
AMA
Any more details on Romulus?
Would something like this help with PE/VC recruiting post-banking?
Thoughts:
The fact that Neal Khosla is a member of DRF just cracks me up. 80% nepotism hire? 90%? 95%? Does he even go to their meetings? Does Vinod help him source deals? I need details.
Some of DRF's companies are just fucking terrible.
A&B?: You make...ketchup? That's a small business, not a start-up. Sorry. Buzz the Bar?: I'm sure your frat bros thought this was a fantastic idea, but the world doesn't need yet another bar app. Dagne Dover?: So this is Bonobos for handbags. Luxury goods online. What on Earth? You realize Gilt has been shitting the bed for the past 4 years, right? And there are maybe 2 eCommerce success stories other than Amazon? And if I'm spending $245 on a handbag, I want it to have a recognizable brand? Skillbridge: Classic mistake: founder sees a market that appeals to him (and only him) and assumes the rest of the world needs it too. I can assure you that Americans thinking, "If only there were a way I could pay an ex-Goldmanite $100 an hour to do my freelance M&A modeling!" Plus, why does this need seed funding? You make a website and people email you.
Defend these companies to me, even as seed investments, WSO. I'd genuinely love to hear the rationale.
I work in VC and my firm has very close ties to First Round. The dorm room fund is a marketing gimmick, like most of their platform stuff. 99% of the companies that are funded through it are absolute crap and FRC doesn't care because the $20k that each company gets is less than the cost of their breakfast. One partner could fund the whole program by himself without batting an eyelash. They do it for 2 reasons: 1) to be able to say that they have great ties to university talent and 2) to be the first firm to find the next Snapchat. Reason #2 is much more important than reason #1.
Exactly what I wanted to point out.
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