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December 13, 2004
Business students to invest real funds: Up to $150,000: Theory and practise come together in safe environment
National Post
Mon 13 Dec 2004
Page: FP9 / Front
Section: Financial Post: Entrepreneur
Byline: Derek Hill
Source: Financial Post
Eighteen business students at Queen's University in Kingston, Ont., will soon have $3-million to spend -- and it's not Monopoly money.
Queen's University School of Business is offering an investment management course that is the first of its kind in Canada. Students will invest in startup companies with real money, drawn from the new $3-million TriColour Venture Fund.
"From the student's perspective, it's the ultimate in theory-meets-practise," says Elspeth Murray, associate professor and head of the Queen's Centre for Business Venturing. "What you learn in the classroom you actually get to apply, in a safe environment."
Other Canadian schools have student-run funds investing in stock markets, but this fund is the first to invest in early-stage companies. The course is open to up to 18 students in the MBA for Science and Technology and Bachelor of Commerce programs starting next fall.
Students will work in teams to research and recommend investments of $50,000 to $150,000, and an investment committee of seasoned professionals will provide sober second thought. Parteq Innovations, the technology-transfer arm of Queen's, will manage the fund on a day-to-day basis.
"It's nothing to sneeze at," Ms. Murray says, of the size of the investments, "but it's only going to pay the rent and cover payroll for so long."
The program was inspired by the University of Michigan's successful Wolverine investment fund, created in 1998.
Dr. Tom Kinnear, a professor involved with that program since its conception, met with Ms. Murray and Queen's business school in 2001 to discuss whether the project would work in Canada. A former Queen's graduate himself, Dr. Kinnear provided the seed grant for the TriColour fund -- which has grown to $1-million with donations from alumni and friends of the university.
"It is important that business students be trained to evaluate new ventures for funding, and this is best accomplished through real hands-on experience under mentors," Dr. Kinnear says.
"We're going to graduate students who will have 'been there, done that' by the end of their degree," Ms. Murray says. "That is a way we really contribute to a significant economic driver in this country -- and that's the availability and deployment of early-stage venture capital."
In reality, Queen's students will never act as a lead investor with a $3-million fund, Ms. Murray says. They will share resources with Canadian venture capital firms capable of good due diligience, such as Ventures West, and Celtic House Venture Partners.
"It's not about our ability to invest huge amounts of money. It's about our ability to invest wisely, alongside other investors."
Profits from student investments are to be reinvested, building their portfolio of offerings in new venture management. Ms. Murray hopes to create pools of capital to help start new companies and fund student internships.
"The primary purpose of the fund is education, but obviously, we want to make money and earn pretty decent returns," she says.
An average venture capital portfolio of 10 companies would produce two winners, Ms. Murray says, with several companies in the middle, and two clear losers. The best ones, however, would have five or six stellar performers, two in the middle and two losers.
"Those are just the odds," she says. "But the winners more than compensate, and that's what we're going for. I think we've really put in place many things that will help our portfolio look a lot more like the top performers than the average performers. If you look at the Wolverine Fund, that is what they're starting to experience. So that is our hope."
Ms. Murray envisions a day when Queen's has a series of funds focused on different industry sectors, and they can accept more students into the program. But for now, she has her hands full planning for next fall.
"I just think this is such a great opportunity. We're going to be the first business school in Canada to do this -- one of very few in North America and anywhere in the world. I think if I were a student I'd be pretty excited about the opportunity to do this."