Investing in Dreams
Bauer MBA Students Make Startup Investment Decisions in Cougar Venture Fund
OVER THE COURSE OF A SEMESTER, STUDENTS IN BAUER COLLEGE’S COUGAR VENTURE FUND PUT INTO PRACTICE SKILLS NEEDED TO MAKE A GOOD INVESTMENT DECISION: DUE DILIGENCE, TERM SHEET EVALUATION, STARTUP COMPANY VALUATION AND MORE.
Small companies that aspire to be big companies need more than a great idea.
The popular TV show “Shark Tank” is all about business owners trying to convince experienced funders to invest in their companies. Students in the Cougar Venture Fund course at the Bauer College of Business have the opportunity to be the decision-makers who can make or break a small business dream, a la “Shark Tank.”
But long before they bestow any seed money in the very early stages of business incubation, they learn that evaluating potential companies is a process. Over the course of a semester students put into practice skills needed to make a good investment decision: due diligence, term sheet evaluation, startup company valuation and more.
They have the unique opportunity to evaluate real companies, real deals and drive the investment of real funds into these companies.”
KALA MARATHI, MANAGING DIRECTOR OF CVF & EXECUTIVE DIRECTOR OF INNOVATION FOR BAUER
By the time they are ready to recommend for or against investing $25,000 at the close of the semester, students are well-positioned for a career in entrepreneurship, venture capital or private equity.
“They have the unique opportunity to evaluate real companies, real deals and drive the investment of real funds into these companies,” said Kala Marathi, managing director of CVF and Executive Director of Innovation for Bauer. “It’s something students rarely have the opportunity to do.”
Marathi and Keith Rassin, an adjunct professor for Bauer’s Wolff Center for Entrepreneurship, co-teach the class. Both bring extensive real-world experience: Marathi is former managing director of the Houston Angel Network and was a founding member of a corporate venture group; Rassin is a serial entrepreneur and startup investor who has founded several successful businesses. A board of advisers made up of seasoned entrepreneurs and angel investors as well as representatives from Bauer College is also closely aligned with the class.
The fund was launched in 2014 utilizing a generous $1 million gift from the Jerome Robinson Family Foundation for Graduate Entrepreneurship. Since that time, students have invested in six companies. One of those companies achieved a successful exit after being purchased by a strategic partner at three times the initial investment.
“These are early stage startups,” Rassin said. “They have an idea, usually they have a business model, they may have their first customer or a beta customer, some kind of proof point. They’ve received at least $100,000 in funding so it’s seed stage and a great challenge for the students to evaluate.” Students benefit from interacting with board members who guest teach, such as angel investor Christy Luquire, a partner with Texas Halo Fund and successful co-founder of a venture-backed software company.
Luquire especially enjoys teaching venture capital term sheets, a subject that has the potential to be dense and dry but which can have a very meaningful impact on a business. “I teach the class in a case study format in an attempt to make it engaging and memorable for the students,” she said. “The concepts in the class are reinforced as the students review their companies’ term sheets in order to make investment recommendations to the Cougar Venture Advisory Board. I find it incredibly rewarding to watch students learn and apply these concepts as they go through the process, and I hope that they continue to be interested in the field and support our entrepreneurial ecosystem.”
Bauer senior Owen Loock recently sat in on a class taught by Luquire. He is on a team evaluating the viability of a cybersecurity firm seeking funds this semester. “I find it really fun trying to find numbers to support valuation,” he said. “But it’s more an art than a science. Some public companies aren’t comparable,” he said. “You may have to find private companies. You have to be really creative.” Students from various disciplines — finance, law and other fields — take the class.
“The most successful are those willing to put in the time necessary to confirm a potential business’ potential,” Marathi said.