How It Works

Determining the optimal sponsorship group depends upon the goals for the fund and the structure and resources unique to the university. Below are 4 common sponsors and ways an Alumni Venture Fund might be used

1. Business school sponsors. These funds often supplement existing venture funds run by business school students that may or may not concentrate investment activity in companies coming out of the university.
2. Program specific sponsors. Funds that are sponsored by one or more science or technical departments, research centers, or institutes.
3. Cross-functional sponsors. Funds sponsored by technical and non-technical schools such as engineering and business or bioscience and law.
4. University-level sponsors. Funds sponsored by university administration to cast the widest possible net for finding investment opportunities. These are often part of broader multidisciplinary collaboration efforts.

The sponsorship group sets the direction of the fund, but often brings in key university partners early in the process to provide input and support.

For example, a business school may sponsor a fund where a committee of MBA students make the final investment decisions, but it includes the Bioscience Institute and Engineering Research Center as partners to assist in due diligence, serve as a source of deal flow, and to share information.

Fund partners may include:

• I&E Office
• Investment Office
• Business School
• Science/Technical Programs
• University Research Centers
• Tech Transfer
• University Advancement
• Trustees

All venture funds need well-defined investment objectives and investing guidelines, however there are some unique issues that need to be addressed when forming a venture fund for a university community. CoFunder works with fund sponsors to create a strategy to address issues related to when, where, and how the fund will invest. We also help sponsors decide the critical question of who participates in making investment decisions.

Investment decisions may be made solely by the university or in collaboration with CoFunder. Some situations lend themselves to the university retaining sole investment discretion. For example, a business school with an existing student-managed venture fund may sponsor an Alumni Venture Fund that will be structured as a sidecar to the existing fund.

There are other situations where universities may prefer to cede some amount of discretion to CoFunder. Some examples include:

• The university wants to retain flexibility to invest in not-for-profit enterprises or companies that are not expected to have a positive, risk-adjusted return on capital for its own account.
• University investment policies may be limited to current students and faculty (excluding alumni), focused exclusively on certain industries, or be subject to other investment constraints.
• Alumni Venture Fund sponsors may want to preserve the right of the fund to invest in subsequent financing led by other investors.

For fund sponsors that elect to have CoFunder participate in investment selection, our role and any governors on our discretion will be clearly defined in the fund formation process.

We designed our investment process to be simple and secure.

Our dedicated Deal Rooms contain all of the documents related to a transaction and allow potential investors to view multimedia collateral, watch investor presentations, and ask questions.

All documents related to the transaction are executed electronically using the same e-signature vendor trusted by Fidelity, TD Ameritrade, and Google Ventures. Our vendor redundantly stores all documents using bank-level security in ISO 27001 and SSAE 16 data centers encrypted with the AES-256 standard, so you can be documents and the digital audit trail is secure.

We have partnered with a leading trust company to serve 2 roles:

1. Fund Administer of the Alumni Venture Funds
2. Custodian of the securities issued by the funds

1. Fund Administrator
   In their role as Fund Administrator, this company will have three primary functions:
   
   • Escrow agent. When an investor purchases an interest in a fund, payment is made to our trust company partner. Assuming the minimum raise has been reached, the trust company will make investments in companies at the direction of CoFunder.
   • CoFunder’s Custodian. The trust company will serve as custodian of CoFunder’s Alumni Venture Fund’s interests in the underlying companies. In that capacity they will also provide all fund tax reporting and administrative functions.
   • Process distributions. The custodian will receive all distribution from underlying companies and allocate them to investors accounts according to their interests in the fund.
2. Custodian
   The trust company is also the default option to serve as custodian of the investors’ interests in CoFunder Funds. Our partner offers a variety of products including self-directed IRAs and other tax-qualified plans. The custodian will:
   • Be responsible for tax reporting to investors
   • Provide a web interface for investors to view transactions and distributions

If investors want information regarding Alumni Venture Funds to be accessible to advisors, the custodian can provide data integration into advisor Portfolio Management Systems and provide advisors with access to their clients’ web interface.

CoFunder’s platform allows portfolio companies and universities to communicate with investors on important topics and events such as:

• New products, reaching benchmarks, and making key hires
• Jobs and internship opportunities
• Special offers, programs, and company meet and greets for investors
• Information on subsequent financings
• Updates on industry and technology developments
• New university program initiatives, related research, and faculty hires
• Continuing education programs, conferences, and volunteer opportunities for alumni
• Updates on how alumni-directed CoFunder donations are benefitting their chosen programs