Tuesday, September 16, 2014

What could possibly go wrong?

One of yesterday's postings dealt with the Regents' agenda and noted that there was an unclear reference to some kind of investment fund.  It was unclear whether that item referred to the $1 billion green investment fund or something else.  Turns out, it was something else:  [From UCOP]

University of California proposes creation of new venture fund to invest in UC innovation

The University of California today (Sept. 15) announced the creation of UC Ventures, an independent fund to pursue investments in UC research-fueled enterprises, subject to the approval of the UC Regents. The Office of the Chief Investment Officer would make an initial commitment of up to $250 million to the fund. UC Ventures will seek to generate attractive, risk-adjusted returns by investing in commercial opportunities arising from the University of California. No tuition or state funding will be used. With its 10 campuses, five medical centers and three affiliated national laboratories, as well as more than 20 incubators and accelerators, 233,000 students, 190,000 faculty and staff, and 1.7 million living alumni, the University of California is a rich environment for innovation that is already the target of venture capitalists from around the world.

The UC Board of Regents will vote on this proposal Sept. 18 during the board’s regular bi-monthly meeting at UC San Francisco’s Mission Bay campus.

“UC Ventures is the result of careful evaluation of best practices to develop the most effective investment vehicle to capture the economic value the University of California is creating through its pioneering research,” said UC Chief Investment Officer Jagdeep Singh Bachher. “Our goal is to build upon the technology commercialization efforts at UC while carefully managing potential risk exposures. We are confident an independent UC Ventures will achieve this.”

“In addition to any financial benefits, we see this fund as a potential vehicle for providing resources to support the basic research and talent — among both faculty and students — required to develop innovations that can benefit California and the world,” said UC President Janet Napolitano.

Recent examples of successful UC startups include Aragon (acquired by Johnson & Johnson in August 2013); Kite Pharma (IPO in June 2014); and Seragon (acquired by Genentech in July 2014).

UC Ventures will be a stand-alone, independent investment vehicle structured to operate with a long-term, investment horizon. UC’s Office of the Chief Investment Officer will hold certain key governance rights and help UC Ventures develop its own resident expertise to mitigate risks. The UC Ventures team will have day-to-day investment management responsibilities.

In collaboration with its 10 campuses, UC also intends to create an independent advisory board of leading figures in Silicon Valley and California to provide advice and industry insight to UC Ventures. These advisory board members will be announced in the coming months.

Subject to approval by the UC Board of Regents, the University of California plans to launch UC Ventures in 2015.


The actual proposal to the Regents is at

The problem here is that what is presented is all upside.  We will encourage innovation.  We will make money.  Future donors will be created.   Are there no downside risks?  Surely it is possible to lose money investing in start-ups.  When UC has invested in similar outside funds, it has had problems because of public documents requests.  Outside financial media want to know what is going on in the start-ups and insist that UC provide the (confidential commercial) info.  No problem on that score from this fund?  There have been concerns over whether faculty will be "encouraged" to be involved in this venture.  Unless individual regents raise such issues, it is unclear that they will be raised.

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