ITHACA, N.Y. – An evergreen fund has bloomed at Cornell University’s Johnson School of Management. Alex Ivanov and John Kyles, M.B.A. students in the Class of 2000, created the $10 million-targeted Big Red Venture Capital Fund and incubator, a legacy they will leave behind as they move on to investment banking jobs at Salomon Smith Barney this summer.
The fund will back start-ups founded by Cornell students, alumni and faculty. It will link the idea people with teams of Johnson School students who will help to create solid business plans, Ivanov said.
With the help of faculty advisor David BenDaniel, the Don and Margi Berens Professor of Entrepreneurship at the Johnson School of Management, a yearly rotation of students will operate the vehicle. Each spring, a group of students will be selected to run the fund. They will overlap with outgoing fund managers for three months to transfer knowledge and to alleviate some of the inconsistency that is inherent to the process, Ivanov said.
Some of the students will manage the fund and its investments, while others will have the opportunity to work inside the companies. Besides providing business school students with hands-on experience, the founders hope the fund will attract recruiters from venture capital firms looking to hire business school graduates. While there is no target number of investments to be made, maximum investments can be no larger than 10% of the total size of the fund, Kyles said.
The Johnson School Development Office is raising capital for the fund, and expected to hold a first close on $2 million in June, Ivanov said. The first close will be comprised of donations from friends and alumni of the school. All donors must agree that any capital gains made by the fund will be reinvested in the vehicle for further investment. In exchange, the limited partners will be able to claim their donation as a tax write off and will have first crack at investing in the portfolio companies in later rounds of financing, Kyles said. All of the related legal work on the project is being done on a pro bono basis by the Stamford, Conn.-based law firm Finn Dixon & Herling LLP, Ivanov said.
As Park Fellows, Ivanov and Kyles were charged with developing a project during their tenure at the business school, in exchange for full scholarships. They joined forces upon arriving at Cornell two years ago, when they realized they were both interested in private equity and venture capital investing. Along with classmates Jean Mathews, Rich Ryan and Tim Krozek, the fund developers have worked for the past two years to make the project a reality.