University Venture Capital – The Promise and Pitfalls of University Direct Investments

Over the past three decades, universities in industrialized countries have become increasingly active as venture capital financiers. Here, we analyze if investments in university-affiliated portfolio companies, in the form of an institutional-personal relation between the university and the founders, are a commercially successful investment proposition. We use a hand-collected data set of 706 university portfolio companies in the United States and the United Kingdom to extend previous case-based evidence that investments in faculty- and student-led start-ups are an elusive promise that rarely pays off commercially. Furthermore, we provide evidence that geographic proximity to a top venture capital ecosystem is a highly performance-relevant characteristic for university investors.

Authors

Maximilian Kremer

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS)

Ann-Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Reiner Braun

Technische Universität München (TUM) - TUM School of Management; Center for Entrepreneurial and Financial Studies

Paper