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First Round Capital Gave 11 Students $500,000, And This Is What They Did With It

Instead of scouring college campuses for the next Facebook, First Round Capital is giving groups of students small venture capital funds to invest on their behalf.

As a student at Columbia Business School, Alex Ginsberg uses BuzzTheBar, an app that one of his fellow students created–it lets you order drinks with your smartphone and lets you know when they’re ready. It might sound trivial, but the fact of the matter, Ginsberg says, is that “Part of going to business school is going to a lot of bars.” So when he landed a spot as a student partner at First Round Capital’s New York City Dorm Room Fund, it was the first startup he pitched to his fellow partners. And shortly later, it became the fund’s first investment.

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Dorm Room Fund ‘s premise is that students like Ginsberg are more aware of promising campus startups like BuzzTheBar than office-dwelling venture capitalists will ever be. And that some of those startups are the next Facebook.

First Round Capital launched its first version of the concept with Philadelphia students in September and has since expanded the program to $500,000-student-run funds in New York City and San Francisco. It is planning a fourth in Boston. Though the venture firm provides supervision, the students nominate startups for consideration (there’s also an online form for entrepreneurs to submit their own startups) and make the final decisions on investments.

The New York Dorm Room Fund just made its first five investments, each of about $20,000. They’re not all bar apps. There’s no common theme in its portfolio, in fact, which contains a gel that stops bleeding instantly, a gadget for controlling radiators, software for diabetes patients, and sugar-free condiments. If there’s any thread tying them together, it’s a personal connection to someone on the Dorm Room Fund team.

In addition to Ginsberg, who is a current co-president of Columbia’s Entrepreneurship Organization, the 11 partners in the New York team also include the president of the NYU entrepreneur club, the president of the NYU alumni entrepreneur club, the president of NYU Stern School of Business’s entrepreneur club, and the president of the Princeton entrepreneurship summit. It’s a group that came to the table with several campus startup landscapes already mapped.

BuzzTheBar

Ginsberg cites the team’s collective network as one of the fund’s advantages. He doesn’t just use BuzzTheBar, but knows the founder personally and has seen him wait at a bar that was testing the app until it closed 4 a.m., just to make sure everything went smoothly. “People in investing are constantly saying the most important thing is the team,” he says. “To understand that, you have to spend time with people and see them in contexts outside of a pitch meeting…seeing these entrepreneurs on campus is not something any venture capital firm can really do.”

So, is inserting cash into the college entrepreneur network paying off? It’s too soon to tell. One of the startups the Philadelphia team invested in, screen-sharing solution Firefly, has gone on to earn more than six figures. First Round Capital’s CeCe Cheng, the director of the Dorm Room Fund, cites the startup as the biggest success story thus far.

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She also says that no matter how the startups turn out, the firm is creating value by connecting its college portfolio companies with each other through an online forum. “Obviously, it would be great if we invested in the next Facebook or Dropbox,” she says, “but another success scenario is that someone from NYU starts a company with someone from PhilaU because they met through us.” And, though there’s no obligation for entrepreneurs to consider First Round as investors for their future rounds or future companies, that’s not a bad motivation for supporting them early, either.

“In the future, hopefully, they think of us as good enough partners to consider us,” Cheng says.

[Image: Flickr user Roberto Trm]

About the author

Sarah Kessler is a senior writer at Fast Company, where she writes about the on-demand/gig/sharing "economies" and the future of work.

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