Six Stanford undergraduate and graduate students will allocate $500,000 over two years to student startups as investors for the Bay Area Dorm Room Fund, a 10-member investment team run by students and funded by Philadelphia-based venture capital firm First Round Capital.
The team comprises Adam Goldberg ‘15, Amanda Bradford M.B.A. ‘14, Anjney Midha ‘15, Bastiaan Janmaat M.B.A. ‘13, Neal Khosla ‘15 and Ruby Lee ‘13 M.S. ‘13, as well as four students from the University of California, Berkeley.
“Stanford — and Cal too — has more access to the startup industry and the [venture capital] world than schools in New York or Philadelphia or anywhere else in the world,” said Dorm Room Fund Director CeCe Cheng in explaining the national organization’s decision to form a Bay Area investment team.
Student investors were selected through an application process open only to Stanford and Berkeley students. They are expected to stay on the team until they graduate and are responsible for choosing their replacements.
Cheng said that she and other Dorm Room Fund leaders were impressed with the intelligence of Stanford applicants, as well as their leadership, investment and entrepreneurial skills.
“All [of] the six Stanford students came to me with ideas on how the Dorm Room Fund was able to impact a community like Stanford that already has so many resources,” Cheng said. “They were confident that they could make Dorm Room Fund stand out as a brand.”
A national effort
First Round Capital launched the Dorm Room Fund program in Philadelphia in September and brought the program to New York in the spring, drawing student investors from Columbia University, Princeton University and the University of Pennsylvania, among other schools.
The Philadelphia investment team has made six investments thus far, with an average investment sum of $20,000. The Dorm Room Fund will launch a Boston team in the fall, and plans to expand to several more cities within the next few years.
“It’s really the community and network that we’re building,” Cheng said. “That’s why we wanted to launch multiple cities rapidly.”
Applications closed for the Bay Area fund on April 16. Midha, who decided to apply for the program after hearing about it from a friend in the New York Dorm Room Fund, said that he hopes to gain more exposure to Bay Area student companies and help them develop into full-fledged business through his time on the team.
“I’d love to see us make a real impact where students have to stop thinking about full-on financing, because we’re filling the last missing link when it comes to funding,” Midha said.
According to Midha, one of the most challenging aspects of working with the fund is attempting to examine his friends’ startups from an unbiased perspective.
“As a friend, you want to see your friends succeed,” Midha said. “But as an investor, you need to distance yourself from that relationship and look at it objectively as an idea.”
Some Stanford investors have struggled with balancing their responsibilities at the fund with their academic work, with three-hour team meetings every Sunday and other individual meetings prone to disrupt their schedule.
Goldberg, who is taking 20 units this quarter, described his schedule as “fairly challenging.” Goldberg transferred to Stanford from Berkeley, where he founded a finance startup with friends but encountered difficulty finding funding.
“I feel that, as part of the Dorm Room Fund, I can help people find funding that didn’t really have the means to do so,” Goldberg said. “That’s the problem that I like to help solve.”
Khosla emphasized the pressure of being responsible for a significant amount of someone else’s money, noting that the team has sought to avoid failed investments by closely analyzing the management of the companies they consider investing in.
“I guess the most nerve-wracking thing is what if you make a bunch of failed investments … it’s not our money, its First Round Capital’s money,” Khosla said. “A lot of what we look at is the team that is running the startup and how much faith we have in that team to do well.”
Janmaat, who is also co-president of the Graduate School of Business’ Entrepreneur Club, expressed confidence in the investors’ skills and said he looks forward to learning from fellow team members and discovering new ideas and technologies.
“This is just one more way to get to know other entrepreneurs in the community and try to get great Stanford startups funded,” Janmaat said. “It doesn’t feel so much like an additional responsibility as much a complementary one.”
Although the team has not solidified a set of guidelines to govern its decision-making process, the one company that the team has invested in so far was unanimously approved. Startups can apply to pitch to the team online.
Khosla noted that because the investors come from a variety of backgrounds and majors, the diverse composition of the group leads to “really different opinions on different things.”
Goldberg agreed, adding that startups are especially difficult to judge from an unbiased viewpoint.
Comparing startups objectively is very difficult,” Goldberg said. “It’s like comparing apples to oranges.”