Providing MBA students with real-world experience is vitally important to the Farrell Center for Corporate Innovation and Entrepreneurship. As part of its mission, The Center oversees the Garber Venture Capital Fund. Established in 1999 by Dr. John Garber and his wife Bette, this $5 million venture fund brings to reality the process of private equity investing in early stage technology-based companies.
MBA students engage in the venture capital process by enrolling in the ‘Garber Practicum’ seminar (ENTR 503). Entrepreneurs from several prospective investment properties present their business concepts to the class. Students then perform due diligence on these firms, eventually selecting one or two of those for more detailed analysis. Toward the end of the seminar, the student teams present their findings to their peers and vote on which, if any, properties warrant an investment. This decision process includes which investment vehicle is most appropriate (debt or equity), the amount of the investment, and other issues including warrant coverage, valuation, discounts and tranches or milestones that trigger additional investment. During the latter part of fall semester, 2010, a second year MBA student led the negotiating team for an investment in a green energy firm.
Since July 2002, the Fund has made seven investments, exited two, and written off two. It currently has three active investments: Healthy Humans LLC, a software platform that links patients to their physicians, Diamond Back Truck Accessories, a manufacturer and distributor of pick-up truck covers and other truck accessories and INDIGO Biosciences which has developed a unique method to cryogenically preserve nuclear receptor cells. The current analysis process utilized in selecting investments includes deep due diligence about a firm’s management, projected marketplace and the viability of its financial model.
Initial investments from the Fund have been between $100,000 and $325,000 and have been in the form of convertible debt or preferred stock. The Fund has begun to participate in the monitoring of its investments though an ‘observation’ seat during company board meetings.
Garber is the nation’s largest and most active student-centric venture fund. Significantly, it is not a traditional fund as it has no predetermined life span and has no limited partners. The Fund’s director acts as the full time general partner and the ENTR 503 students become semester long general partners.
The Fund has a board of advisors who meet semi-annually to review progress of its investments and to assist in generating deal flow.