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VC firm seeking founder’s equity in Midwestern university start-ups

By Jesse Schwartz
Published: March 28th, 2018

A U.S. venture capital firm that focuses on university start-ups is looking beyond Silicon Valley and east coast hubs for its next technology investments, focusing instead on the relatively untapped Midwest for hidden gems of innovation.

“When you look at the landscape, you have over $60 billion invested annually into research and development through U.S. universities and research institutions, and 25% of that $60B is within the Midwest,” says John D’Orazio, co-founder and managing partner at Ikove Venture Partners.

“So, you have these enormous amounts of dollars, these high-profile researchers in these universities which are churning out this intellectual property. It’s a diamond in the rough that just needs attention to be polished and realized,” D’Orazio adds.

Ikove is based in Ohio State University’s Electro Science Lab. Within an hour and a half of their office, $6 billion is spent each year to support research at OSU and the U.S. Air Force research lab alone. Ikove has been investing its money and raising additional funds to support 10 investments so far, which have generated more than $100M in equity value.

“We’re going in at the source — directly to the research labs where basically there is no company or infrastructure. There is only strong IP,” says Ikove co-founder Flavio Lobato.

The firm recently launched its Startup Nursery Fund to bridge the gap between these institutions’ R&D and successful, venture-backed commercialization. While there are many funds like this across the U.S., Lobato says Ikove has a different approach.

“In most situations, founding equity is not available. What’s unique about the fund is that it allows investors to get founding equity in each of the companies which graduate out of the nursery,” he says.

“Let’s say we’re raising $1M. The fund invests $250K directly and the first calls are to the [limited partners] of the fund. If they’re interested and they fill out the remaining $750K, then that round is closed. If not, then we go to our network, but they still have founding equity. It’s a fantastic way for investors to get founding equity and secure the right to invest in the early stages of the company,” Lobato adds.

“We’re actually really great feeders for the VCs,” says D’Orazio. “If we carry this reputation as an early agent of commercialization, then they know that this technology and this company has been vetted and gone through the ringer to be launched into this ecosystem. We think we’re very complementary to their business model.”

Source: AlphaWeek

Posted under: Tech Transfer e-News

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