Beyond the basics: Creating venture capitalists at UNLV
Most colleges offer an array of business courses from principles of microeconomics to statistics and financial accounting. But one former University of Nevada, Las Vegas professor thought their curriculum should include venture capital.
To get UNLV’s attention, Jeff Moskow, a part-time finance professor, donated $500,000 to create the Rebel Venture Fund; a student-run fund that will make early or late stage investments in companies that will deliver economic benefits to Southern Nevada.
“This was kind of Moskow’s vision,” said Andrew Hardin, director of the Center for Entrepreneurship at UNLV’s Lee Business School. “It’s about helping small businesses and business associated with UNLV, while providing students with an education.”
In August, the Rebel Venture Fund put $100,000 in the hands of its 25-member organization consisting of a nine-member advisory board, 14 graduate students and two undergraduates.
The advisory board includes Hardin, Brent Hathaway, dean of the business school; Rama Venkat, dean of the college of engineering, and six local investors.
Moskow’s gift was $100,000 a year for the next five years. The Rebel Venture Fund will make investments of between $10,000 and $25,000.
“There aren’t very many of these venture capital funds,” Hardin said. “Michigan and Utah have funds, but they are different … less student-oriented. Our program is very hands-on — making it a great way to provide them with a learning experience.”
Hardin said there is no better way for students to learn than to decide which proposals to present to the fund’s advisory board.
“There is no better way to learn how to do this than to do it,” Hardin said. “I can teach it all day long, but until you have to make a decision it’s just classroom instruction.”
WANTED: LOCAL INVESTORS
Student board members have already considered eight ventures in the Las Vegas area and recommended three companies to the advisory board.
Walls 360 Inc. is Rebel Venture Fund’s first deal, a $25,000 investment that is part of a larger funding round led by Vegas Valley Angels, an angel investor group in Las Vegas.
Walls 360, which creates on demand, reusable wall graphics, was seeking $200,000.
“We purposely wanted local investors,” said Walls 360 co-founder Tavia Campbell. “It’s making a connection with the community that is important to us. This has all been an angel round of financing.”
An angel investor is an affluent individual who provides capital for a business, usually in exchange for convertible debt or ownership equity. Vegas Valley Angels is part of a growing trend of investors that organize themselves into groups to pool their investment capital.
Walls 360 moved to Las Vegas in September 2011 from San Francisco, lured to the region by its low cost of living and an attractive business climate. When the company was founded, its sole source of distribution was its own website.
Today, Walls 360 has a number of distribution partners and licensing deals with major brands, including E.A. (Electronic Arts) and American Greetings.
“It was the best decision we could have made for our company,” Campbell said.
Vegas Venture Angels brought the investment opportunity to the Rebel Venture Fund. The UNLV students who did due diligence on Walls 360 were Laura Anderson, Stefan Colovic, Yun Guan and Rey Dos Santos.
Dos Santos, a senior at UNLV, acted as lead managing director during the process.
He said Walls 360’s successful track record and concept made them an attractive investment.
“They are on track to do about $1.1 million in sales,” Dos Santos said. “Their problem wasn’t that they couldn’t find customers, but that they were a little cash-strapped. We really like the (reusable wall graphics) market. We believe that it is underserved.”
Dos Santos along with MBA students Darius Rybinski and Sophia Liang recently sat down with the Review-Journal to discuss the fund’s future and it’s importance to a community that is trying to diversify its economic base.
MAJORITY OF INVESTMENTS ARE LOST
“When I came to UNLV I would have never expected something like this,” Dos Santos said. “A learning opportunity where I could sit side by side with these smart people. I thought that experience was reserved for universities with rowing teams.”
The Walls 360 investment, which was to be finalized Friday, is an important step for the Rebel Venture Fund.
“Going into it, we knew this could be our first investment,” Rybinski said. “It’s nerve wracking, because you don’t want to make a bad investment. The longevity of the fund is definitely a priority.”
It is widely known in the venture capital business that about one in 10 investments generates headline returns, such as an initial public offering, merger or acquisition.
A majority of investments are lost due to a company’s poor management or other business factors.
“We are confident,” Rybinski said. “We get to work side by side with some really smart investors who can point out the good and the bad of a proposal.”
Despite the hours students put in to conduct due diligence, some proposals fail to get funding. Smart Ads is one of those proposals.
“We thought we were going to make our first investment in Smart Ads,” Rybinski said. “The company does advertising on the lock screen of smartphones. We liked the company, but there were problems between the founder and some of his investors.”
For that reason, Rybinski said the deal didn’t go through.
“Smart Ads is a very good example about how tough this is,” Hardin said. “There were other investors interested and it looked really good. Things crop up at the end making it difficult sometimes to fund a proposal.”
Investments by the Rebel Venture Fund will be made in exchange for equity positions within the respective companies.
According to the fund’s investment guidelines, it is looking for high growth opportunities with a return on investment within five to seven years.
The companies seeking funding must have a strong management team, feasible business model and be located in Southern Nevada.
Companies at all stages of development will be considered, including startups looking for seed funding.
Liang, the fund’s student CEO, said as the Rebel Venture Fund matures, it’s crucial that people in the local business community are willing to give back “whether it is with financial resources, time or just being part of our relationship network.”
“Those are all key to make sure we have continued success,” Liang said.
The fund’s student board is also looking to broaden its background in terms of students from majors beyond business.
Liang said the board just got someone with a biomedical background.
“We are looking for engineers, computer science majors — so we can offer more to entrepreneurs,” she said. “It’s also about making a wider range of investments.”
Contact reporter Chris Sieroty at csieroty@reviewjournal
.com or 702-477-3893. Follow @sierotyfeatures on Twitter.
POSITIVE SIGNS
Las Vegas venture capital investments are showing positive signs.
After missing out on venture-capital investments in the first quarter, two Las Vegas firms secured financing in the second quarter, according to a quarterly survey.
Crowd Hall LLC, an online social network, landed $700,200 in the second quarter. Online magazine publisher Not Safe For Work Corp. picked up $250,000. Both were early-stage investments, according to The MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association.
Venture capital financing in Nevada has traditionally been hit or miss as the number of start-up firms has been far fewer than in the neighboring states of Arizona and Utah.
Thomas Bell, managing partner with the Las Vegas-based venture capital firm Coloma Ventures, wasn’t surprised by the lack of deals.
“It’s not the big game in town,” Bell said. “It is still somewhat of a new industry” in Las Vegas were the focus has been on the gaming industry.
The report found that between January 2012 and June 30 there were six venture capital investments in the Silver State totaling $8.05 million.
Nevada’s meager second quarter numbers compare to 25 investments for $233.6 million in Arizona, and 55 deals worth $441.5 million in Utah over the same period of time.
In California, 2,327 companies raised more than $20.38 billion in venture capital.
CHRIS SIEROTY/LAS VEGAS REVIEW-JOURNAL
