Venture Capital University

I was watching a video of Mark Zuckerberg, founder/CEO of Facebook, and I realized that Harvard, his alma mater, was extremely smart/lucky to get him. He's likely to donate millions and millions of dollars to Harvard over the course of his life. All that money could have gone to Yale, Stanford or CalTech had Harvard not made itself such a premiere institution where talent like Zuckerberg is likely to attend. There's also a bit of luck involved -- maybe it was really sunny and beautiful on the day that Zuckerberg visited Harvard, and now that 75 degree day could translate into 75 millions dollars.

All of this made me think: are universities venture capital funds in disguise? Their similarities are many.

First, both venture capital funds and universities are the source of some of the greatest ideas and breakthroughs in our economy and culture. How do they attract these ideas? They attract people who either currently have great ideas or who have the talent to develop great ideas.

Second, both venture capital funds and universities find these individuals through a rigorous, intensive application/review process.

Third, VCs and universities provide similar benefits. They both provide important networking capabilities, can be sources of key introductions, and can give you access to specialized advice from people who have extra expertise in an industry.

Fourth, VCs and universities both have big financial "pops" later on. VCs and universities are both looking for those ideas that will generate wealth that can later flow back into the institutions. With a VC, this comes through an IPO or a company's purchase. With a university, this comes through the major endowment, fund, or contribution from a graduate who has hit it big in some way.

Finally, there's always been an aspect of both institutions that seems somewhat wasteful. VCs put all of this money and effort into companies and so few of them actually have a major exit event. Universities spend all of this time and effort screening candidates, finding candidates, wooing candidates, and half of them spend half their time drinking, smoking pot and playing video games. But both seem to have the attitude that for every company that never gets off the ground, and for every promising student who uses his math skills to play online poker all day long, there's that one Facebook or that one Mark Zuckerberg who will repay the institution handsomely down the line.