The Berkeley Frontier Fund debuts $50 million and pledges to donate $25 million to UC Berkeley

The Berkeley Frontier Fund debuts today with $50 million to invest in UC-related startups. And the fund has pledged to give the university $25 million as government budgets tighten.

Richard Chan, head of the fund, said in an interview with VentureBeat that the state can currently only fund about 13% of UC Berkeley’s total spending. That’s why he led the creation of a venture fund that could leverage the school’s technological literacy among its students, alumni, and faculty to boost startups.

“This project started just before COVID-19 when [Haas Business School Dean Anne Harrison] and I hosted a guided tour for the local Berkeley alumni,” Chan said. “It was then that we learned about the financial challenges at Berkeley. For the operating budget, only 13% comes from state funds. So it’s almost like a private school. What we thought about as alumni is, is there anything we can do to help the school?”

The idea was to create a meaningful and sustainable revenue stream for UC Berkeley.

“Essentially, we’re investing in Berkeley’s best startups,” Chan said. “And when we make money, we donate a significant portion back to Berkeley. In particular, we are talking about 30%. But every $100 we make, 30% goes straight to Berkeley.”

The fund is a rare attempt to find new ways to fund public schools, but other universities, such as UC Berkeley’s rival Stanford University, have long thrived on private donations — many of which come from alumni or professors who started at Stanford. oops have founded. In fact, Silicon Valley began in 1939 when Stanford grads Bill Hewlett and David Packard founded HP in a garage off the college campus. Stanford has its accelerator StartX, not to mention many wealthy alumni who have helped it build a huge foundation. The Massachusetts Institute of Technology Media Lab also has a fund.

“Because Berkeley is a public school, they can’t use public funds for private investment,” Chan said. “So first you need a fund that is independent of UC Berkeley. Second, you must have someone willing to do this and run this program. So I’m first gear, but I have a lot of help from other gears to move this big motor. So I am very grateful, very grateful for this alumni help.”

But better late than never. And the timing is right given the challenges universities are facing as a result of the pandemic, rising costs and tightening education budgets.

Though it’s a long time coming, Chan said it wasn’t easy to organize. He met with university leadership and assembled an advisory board to help implement it.

The fund has already made its first four investments: AyarLabs, Databricks, Mammoth Biosciences and Neurona Therapeutics. All were founded by founders associated with UC Berkeley. (Go bears! My alma mater).

Donations from the fund are allocated directly by a grant committee to support programs that benefit students across campus and help the university address the ongoing challenge of a lack of program funding. The fund will make its first donation of $2.5 million to UC Berkeley in Q4 2022.

The Berkeley Frontier Fund has set an ambitious goal of returning $25 million to the university over the life of the fund.

The fund is managed and advised by Berkeley graduates. Chan, a former managing partner of Ironfire Ventures and MBA ’04/BA ’96, directs the fund with support from university board members, dean and faculty chairs, and campus oversight from Rich Lyons, Chief Innovation and UC Berkeley Entrepreneurial Commissioner.

Why BFF now?

UC Berkeley is recognized as the world’s leading public university; However, it has been financially challenged for years. Today, the university receives less than 13% of its operating budget from the state. In addition, Berkeley’s per-student endowment is about one-tenth that of private universities of a similar size.

Over the past 20 years, Berkeley entrepreneurs have created more than $500 billion in public and private market value. BFF was founded with a mission to help Berkeley participate in this windfall.

“This extraordinary new Berkeley Frontier Fund is one of the most innovative ways for a public school to engage in the new age of entrepreneurship and pioneers a new way for successful alumni to contribute to Berkeley,” Lyons said in a statement . “The incredible talent and opportunity within the UC Berkeley ecosystem gives the fund a wide range of options when it comes to investing.”

One of the backers is Charles Huang, co-founder of Red Octane, maker of the Guitar Hero video game. He and his brother Kai sold the company to Activision years ago for $100 million. Jack McCauley, co-founder of Oculus and Tesla is also one of the Berkeley success stories to contribute.

One way the fund can help the university tap this capital is by investing in technology spin-offs and inventions emerging in its labs. BFF has a contractual relationship with the university which allows it to work with the university’s IP office on rights; This gives it access to investments in companies that use this Berkeley intellectual property.

While there are currently a number of Berkeley-focused venture funds partnering with university startups, most have no direct return to the university.

“The Berkeley Frontier Fund makes these direct contributions plus a unique front-end giving component. That
means that 5% of total fund commitments are donated within the first year of operation, making BFF a standout company among all other fundraising efforts,” said Loraine Binion, treasurer of the UC Berkeley Foundation and a member of the BFF fundraising committee, in a statement.

“To do good by doing good, we invite all UC Berkeley alumni to join us on this journey,” Chan said.

UC Berkeley also has its Skydeck accelerator program for startups.