Venture Capital 101: Northeast Ohio College Students Learn the Money Side of Startups

Will Bruhn faced the challenges of finance and economics at Case Western Reserve University fully expecting to pursue a traditional banking or investing career.

He enjoys seeing how financials and markets predict results, whether it be an investment in a company or a stock.

That’s why he bit when a colleague suggested he join the CWRU chapter of the Northeast Ohio Student Venture Fund. The startups pitch their innovative products and services to students, who research the companies and have a say in deciding which one is worth a $10,000 investment from a nonprofit venture capital fund.

Brun was hooked. A regular career in finance has taken a backseat to the riskier work of venture capital, where investing early in a start-up company can yield large returns if there is future success, or return little to nothing if the company fails, as is often the case.

“If you’re investing in Amazon, Jeff Bezos doesn’t care if you put $100 into Amazon stock,” says Bruhn, a 2023 CWRU graduate who now works as an analyst at Mutual Capital Partners at Westlake, a venture capital fund. a firm specializing in healthcare information technology and medical device startups. “But for the founders (of these startups) it’s much more important. I felt like being able to give money and fund someone’s hopes and dreams was the best feeling in the world.”

Career-changing experience

For Bruhn and others, joining the Student Venture Fund was a career turning point. The fund was established at the University of Akron Research Foundation in 2011 and later expanded to CWRU, Kent State University and the College of Wooster.

More than 1,000 students attended the event, dozens of whom joined business startups, landed jobs in venture capital, or supported entrepreneurial efforts in the region and beyond. The results are consistent with the venture fund’s goals of attracting and retaining talent and demonstrating to students and entrepreneurs that Northeast Ohio can be a launch pad for businesses.

“It exposes students to what it’s like to go through due diligence as a start-up company from the other side of the table,” said Daniel Hampu, former executive director of the Student Venture Fund and now president and CEO of the Burton D. Morgan Foundation, which promotes free enterprise and entrepreneurship.

While at the Student Venture Fund, Hampu worked with Jessica Sublette and others at the University of Akron Research Foundation to expand the program to other schools. They created the investment fund with grants from Ohio Third Frontier, the state’s technology-driven economic development initiative, and the Hudson-based Morgan Foundation. Sublette currently serves as CEO of Bounce Innovation Hub, an Akron-based nonprofit business support organization that also manages the Student Venture Fund.

Sublette said the fund had more than just a financial impact on young companies and their founders, who received $10,000 in venture capital investment.

“As far as startups go, it’s really early-stage money friendly,” Sublette said. “They have the opportunity to come forward and experience what it means to undergo due diligence. Investment conditions are very friendly. … You know, if you fail in front of big money (investors), it’s not always going to be good for you.” The Student Venture Fund “is a very convenient way to do that and prepare you for the future.”

How the fund works

Here’s how it works: Every semester, the Student Venture Fund announces a call for early-stage companies seeking investment, typically receiving between 15 and 30 applications. Students from all four schools are reviewing applications. Each chapter, usually made up of a dozen or more students interested in entrepreneurship, then selects the top three companies. A team from the Bounce Innovation Hub reviews the selected projects and selects four companies to personally present to the students and the venture capital board, which includes Hampu and representatives from the four schools, Bounce and the University of Akron Research Foundation. After the presentation, the Bounce team assigns one company to each branch.

Then a couple of months of due diligence begins. Each chapter is led by a student manager who guides student “analysts” into a deep dive into all aspects of young companies, simulating the research conducted by venture capital firms. This is a rewarding experience for both founders and students.

Bruhn took advantage of these numbers while working as an analyst and then as a branch manager for CWRU.

“I love that part of the process—understanding their financials, looking at their projections of how much they think they’ll make,” said Bruhn, who has a master’s degree in finance and a bachelor’s degree in finance and economics from CWRU. “I like to think about the market they’re in and quantify it. How big is this opportunity? Is there a big enough market for them to really make a splash here?”

Evan Haug was on the other side of the table as co-founder of Leaf Automation, which is close to advancing a tool that uses artificial intelligence to optimize computer-aided design and design of solar panel arrays. His fledgling company worked with the Kent State Chapter of the Student Venture Fund in 2022.

“This was my first experience realizing that a startup was more than technology,” said Haug, a 2021 CWRU graduate. “I remember it took me a few days to answer some of these questions with my teammates and my advisors. … We were happy to answer them in a low-stakes environment.”

After months of due diligence, teams from each chapter of the Student Venture Fund come together, present their findings, and recommend whether their company is worthy of a $10,000 investment. There is considerable debate before the board of directors votes on the winning company.

“It’s going to get heated, I would say passionate,” said Sublette, Bounce’s CEO. “Of course, he stays professional and everything. But students devote a lot of time to this. This is real money. They make investments. Often when they’re really passionate, they’re also really passionate about supporting the founder.”

Surprisingly, chapters often vote not to invest in a startup they’ve been researching, says Elise Ball, vice president of programming at Bounce.

“They will say this could be a great opportunity, but we think we should pass because of what we consider to be weaknesses and things that need to be improved,” Ball said.

Haug’s company won a $10,000 investment that allowed him and his team to set up a booth at the International Solar Energy Expo in Chicago. On his last day there, a meeting with federal energy officials resulted in an award of more than $100,000 from the U.S. Department of Energy.

“The show was very successful,” Haug said of the show. “We talked to a lot of people. We approved the idea and it was all funded by the Northeast Ohio Student Venture Fund.”

Track record

So far, the Student Venture Fund has committed $470,000 in investments to 29 startup companies, Hampu said. Past investments have risen to $25,000 per startup, but are now mostly in the $10,000 range to keep the underlying investment fund healthy, officials said.

Those 29 companies earned more than $20 million from follow-on investors, he said. Eight companies went out of business, meaning they were acquired or their finances changed so that the companies recouped the student fund’s investment plus some profit.

According to Hampu, four companies went bankrupt. The rest are still running or in the early stages of launching. There were no unicorn successes among the startups, but there were some “really good” investment decisions made, Hampu said.

These include Akron Ascent Innovations, a dry adhesives startup that grew out of research at the University of Akron. Barry Rosenbaum, a senior fellow at the University of Akron Research Foundation, co-founded a company that passed Student Venture Fund due diligence and won a $25,000 investment in 2016.

As it turned out, the money was not needed, Rosenbaum said. The company was subject to parallel due diligence by a major adhesives manufacturer, which ultimately invested $1 million. But Rosenboom recalls that he was more impressed by the college students’ research.

“These kids really dug in and helped us with some very, very important questions around things like channels to market, economics and supply chains,” Rosenbaum said.

The release of Akron Ascent Innovations in 2021 allowed the Student Venture Fund to “get their money back with some return on investment,” Rosenbaum said. “It was just a very, very positive experience.”

For Bruhn, a young venture analyst, the Student Venture Fund changed the trajectory of his career.

“Venture capital (capital) is notoriously hard to get into,” Bruhn said. “Many universities don’t have programs like this, and many students come out of university without even knowing what venture capital is. So it’s just great to have (the Student Venture Fund) at the school.”

Hampu said the Student Venture Fund has done more “than we all could have hoped for.”

Speaking to faculty and staff at the four schools, “We think there’s a lot more that could be done because it seems like a really good program,” Hampu said. “And over the years he hasn’t gotten a lot of time or attention, but he’s still been able to do some incredible things.”

Editor’s Note: Ideastream Public Media receives support for its coverage of entrepreneurship and innovation from the Burton D. Morgan Foundation.