Finding success and navigating the “Valley of Death” for startup companies coming out of the University of Utah could get a lot easier thanks to a novel $5 million investment fund aiming to provide nascent entrepreneurs with opportunities to access cash when it is the hardest to get, and most needed.
Utah philanthropists Tim and Joan Fenton are backing the new University of Utah “Founders Fund,” a program aiming to accelerate promising student and university-connected businesses at earlier stages than might typically be of interest to traditional venture capital funds. And, unlike a typical academic institution donation, the $5 million comes in the form of an investment fund intended to generate returns over time from successful recipient businesses. Proceeds from those investments will, according to the Fentons, be plowed back into the fund so it can help even more startups in the future.
Local business giant and serial entrepreneur Tim Fenton said the new fund was inspired by his own early experience trying to traverse the “Valley of Death,” a term commonly applied to the precarious early stages of a startup effort when revenues haven’t started coming in and all available cash is going into developing a new product or service.
“I was attending the University of Utah and had been there for about three years when I started a new company,” Fenton said. “I was busy with that and about to become a new father. I didn’t have the income to continue at the U. and moved to put all my time and effort into this new company I was building.
“There have been numerous times I thought that it would have been a wonderful concept to have access to funding at that critical time for the business I was trying to start and it just wasn’t available.”
While that first effort faltered, Fenton’s entrepreneurial spirit continued to burn bright, and he would go on to build a wide-ranging business empire. He has spent more than 35 years in real estate development, construction management and executive management, including the creation of several high-profile residential and commercial developments throughout Utah, Nevada and Arizona.
In 2009, Fenton helped lead an investment fund targeting a distressed commercial loan portfolio valued at more than $700 million. And early in his career, Fenton spent years managing multiple companies from manufacturing to sales in industries ranging from sportswear and apparel to health and beauty products, including the acquisition and complete turnaround of one such company.
University of Utah President, and former dean of the David Eccles School of Business, Taylor Randall lauded the Fentons for their creativity and inspiration in creating a fund that will serve to bolster not only the success of business startups from founders in the university network, but also provide real-world experience for students who will be involved in finding, vetting and proposing the projects most worthy of financial backing from the new fund.
“The Fentons came to us and said they wanted to do something novel and innovative that would capture a number of objectives,” Randall said. “What we try to do is provide the best experiential opportunities for our students. The fund will not only give our student startups a stronger footing in their respective marketplaces, but for students participating in the vetting and analysis of these companies, using real investment dollars, it will be a game changer. It ceases being a student project, takes on a life of its own and students learn in a very, very different way.”
Paul Brown, the James Lee Sorenson Presidential Endowed Chair and Professor (Lecturer) of Entrepreneurship at the Eccles School, will oversee the Founders Fund, working with the Fentons on making final investment decisions as well as the student committee tasked with bringing the best potential deals to the table.
Brown said the fund will serve to lift an already vibrant startup culture at U., complementing programs at the Lassonde Entrepreneur Institute, the Sorenson Impact Center and the Master of Business Creation program at the Eccles Business School.
“We believe this could become a new model in business education, and it is a very significant addition to the startup ecosystem we’re building at the university,” Brown said in a statement. “While the Fund will initially be aimed at entrepreneurs in the University of Utah ecosystem, we’ll consider a variety of startups for investment.”
Brown, who brings years of private venture capital expertise to the Founders Fund team, said the effort is one of a kind and could be the catalyst that vaults the U.’s already high performing and highly-regarded entrepreneurial programming to the best in the nation.
“Our entrepreneur programming at the U. is solidly in the top 10 nationally,” Brown said. “I don’t know of anything like the Founder’s Fund happening anywhere else ... and I’m guessing it will only serve to accelerate how rapidly we’re moving toward having the best startup ecosystem in the country.”
In working to make the Founders Fund operational, Brown said the U. has the advantage of deep experience in overseeing student-driven investment efforts, thanks to two iterations of the University Venture Fund, programs overseen by the Sorenson Impact Center and Eccles Business School.
Thanks to that running start, the Founders Fund will close on its first investment deal in the next month or so, Brown said, and could make five to eight investments in the coming year. Funding amounts will vary, but a likely ballpark on individual investments will be $50,000-$250,000, according to Brown.
Brown said he and other professional staffers are in the mix, but the majority of the investment-side work will be carried out by students who will be responsible for sourcing potential deals, carrying out industry and competitor analysis, building relevant financial models and even pitching their deal proposals to the fund’s investment board.
“It’s absolutely a real-world experience,” Brown said. “The process is essentially identical to what happens in the private venture capital sector.”
Brown noted business startup efforts are coming from virtually every department at the school and he expects the companies that earn backing from the fund will be wide-ranging, from consumer products and services to software, smartphone apps and even innovations in food and packaging.
“As alumni and avid fans of all things that the university produces, we have long admired its ability to help students produce some of the most dynamic companies in the country,” Joan Fenton said in a statement.
Tim Fenton said he and Joan are looking forward not only to providing first-time founders with critical funding to pursue their business goals but also acting as mentors and consultants for the next generation of Utah business leaders.
“The vision, determination and entrepreneurial drive among the students at the University of Utah is remarkable, and we look forward to helping them bring their ideas to life through the support of this new and innovative fund,” Tim Fenton said in a statement. “There really isn’t anything quite like this in the country in the way the fund will benefit students, the university and the foundation, and we are thrilled to be able to make it come to life.”