New Jersey Institute of Technology, through the New Jersey Innovation Institute, this week is launching the NJIT Venture Fund, a $500,000 fund that will make one-time, $75,000 investments in early-stage startups — including those still in the concept stage — by members of the NJIT community.
ROI-NJ spoke with three key leaders at NJII — CEO Simon Nynens, General Manager/Entrepreneurship Will Lutz and Director of Growth/Entrepreneurship Chelsea Samuelson — about the fund.
Here’s a look at the conversation, which has been edited for space and clarity.
ROI-NJ: How will companies be selected for the fund?
Simon Nynens: We are very focused on how to approach this. For starters, they have to have a connection to NJIT. And it’s not only students and faculty, but also alumni. From there, we’ve included a technical committee from the university, so every area has a person that is represented on that committee. And there’s an investment committee that is comprised also of outside people, including Tom Wisniewski of Newark Venture Partners and Jill Ford from Toyota Ventures, to really make sure that it also has valid investment reasons to invest in these companies.
ROI: Of course, all of these investments start with the requirement that the company be connected to NJIT. Talk about the significance of that requirement?
Will Lutz: We want this to be driven by NJIT and the university’s specialties. Our investments should return an ROI. And we want these companies to be successful so we can invest in more companies. But, let’s be clear, we’re not taking a cut off the top to pay ourselves. This is about building community and building entrepreneurial ecosystem and supporting these companies.
We really see this as a bridge for startup founders who graduated from NJIT and faculty. We want to get them going.
ROI: How has the search been going?
Chelsea Samuelson: We’ve already had a soft launch to the NJIT community, doing an informative session that gives them the background for how they can access these funds and start businesses with capital from NJIT. We already have a pipeline of eight startup companies who have come in to pitch for that funding, and we’ll begin investing soon.
ROI: Let’s talk about the investing. It’s a one-time, $75,000 check. Why not do more for companies that show they are deserving?
SN: Two reasons. One is the ecosystem. There are others in Newark, such as HAX and Newark Venture Partners. We are making absolutely sure that we do not compete. The idea is that, if we start with an entrepreneur, and they are a better fit at HAX, we’ll be more than happy to pass them along. If they are further along and could benefit at Newark Venture Partners, we’ll be more than happy to pass them along. It’s very important to not start competing.
California did it right. Boston did it right. Texas is starting to do it right. We have to get it right here in the Northeast if we want to accelerate. I want to have a small piece of a large pie rather than a big piece of a small pie.
And we have consciously said that we do not do follow-up funding. If you do, you end up putting all your money in your start and then you don’t have any funding for the next generation.
ROI: Of course, the fund needs to make money to be self-sustaining. How will you turn your investments into capital for future investment — especially if you are only making a one-time investment?
CS: We’re making that $75,000 investment, but it does have strings attached to it. We’re doing it in the form of a SAFE, which is a simple agreement for future equity. Essentially, that means if the startup that we invest in then goes to Newark Venture Partners or someone else for A Series investing, and gets priced at a certain amount, we essentially get more equity for the amount of money that we put in up front, but we took more risk.
So, if we take this $500,000 and turned it into $50 million by investing in the next Google, we get paid out for our early investment at some future date, either through an acquisition or an IPO.
ROI: Will you take on additional investors to help build the fund?
CS: Right now, the fund is structured so that we’re only deploying capital from the NJIT endowment. We’re not currently taking on multiple limited partners to put money into the fund. But we will be creating — and we’re in the process of figuring out the actual mechanism — an angel syndicate to live on the side to make co-investments.
ROI: This sounds as if it’s going to be a great thing for the state. And Newark. Talk about the potential impact?
WL: We take very seriously our place as an important institution in the Newark and New Jersey community. We want to be the first money in. We want to be that first investment that might take somebody who doesn’t have doors open to them otherwise — whether it’s a student or faculty or alumni.
We’re working on ways to bring in people from the community to work with faculty and create companies together. And we’re trying to show entrepreneurs that they can stay here in New Jersey — that they don’t have to go somewhere else to get funding.
