Editorials

UC’s venture fund is a calculated risk

Sacramento Kings owner Vivek Ranadive will lead a new venture capital fund, anchored by $250 million in University of California pension and endowment money, focusing on UC inventions and ideas.
Sacramento Kings owner Vivek Ranadive will lead a new venture capital fund, anchored by $250 million in University of California pension and endowment money, focusing on UC inventions and ideas. Sacramento Bee file

The University of California is a font of ideas and innovations. By the UC’s own count, researchers there average five inventions a day.

The system has 30 incubators and accelerators to help make businesses out of great notions, from anti-cancer drugs to new strains of strawberries; in the past 35 years, more than 800 companies have been founded with UC patents. So it makes sense that the university, on the lookout for new streams of funding, would want to share more directly in the profits from all that genius.

It also makes sense that the UC – which last year announced a $250 million venture fund that would invest in companies tied to its research labs, faculty and students – has tweaked that idea a little.

Several top universities have aspired to join the Sand Hill Road crowd, hoping one of their dorms will yield the next Google or Facebook. But such investments are extremely high risk.

This week, it announced that, though the fund still will focus on UC startups and be anchored by money from the UC investment office, it will be independent rather than in-house, and led by tech executive and Sacramento Kings owner Vivek Ranadive, who will kick in 5 percent of the fund from his own pocket.

That’s smart. Venture capital is glamorous, and a number of top universities have aspired to join the Sand Hill Road crowd, hoping one of their dorms will yield the next Google or Facebook. But such investments are extremely high risk. Most startups fail, and it’s hard to pick the exceptions.

Apple and Google were famously rejected by multiple VCs when they went in search of early-stage financing. Though a handful of VCs have done well, mostly in Silicon Valley, most lose money. Moreover, the skills needed to manage huge university pension funds and endowments aren’t necessarily the skills it takes to build a business and eventually sell it or take it public.

So hats off to UC President Janet Napolitano and Jagdeep Singh Bachher, investment officer for the UC Board of Regents, for knowing the university’s limits. Hats off to Ranadive, the father of two UC grads, for yet another public-spirited commitment.

And a special gold star for Bachher, who’s on a roll. Earlier this month, his networking acumen brought UC on as an institutional investor in the new climate-change venture fund led by Bill Gates.

Though $250 million sounds like a lot of money, it’s a fraction of the $100 billion or so the UC holds in its pension fund, endowment and other assets; from Bachher’s perspective, the startup gamble is little more than a tidbit of portfolio diversification.

But to a brilliant student or a star faculty member weighing whether to stick with a public university or decamp to Stanford or Harvard, the university’s investment could make all the difference. And if it hits pay dirt? All the better for Californians.

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