Business Incubator Series: Art Boni, Donald H. Jones Center For Entrepreneurship, Carnegie Mellon University — Pittsburgh, Pennsylvania (Part 5)

By guest authors Irina Patterson and Praveen Karoshi

Irina: How is your program funded?

Art: There are a variety of financial sources that support us: We have endowments, we have sponsorships, we have gifts, we get funding from the government, and we get funding from foundations. All of that comes in to support what we are doing.

We also – and this is a very small component – sometimes own equity in the companies we are working with, and sometimes four to five years downstream there could be a liquidity event, so that is an additional source of funding.

Irina: How does that work?

Art: We make convertible note investments in our accelerator companies. We have done equity investment earlier. Oftentimes, one of our sponsors or partners is a wealthy individual who will make an investment in an early-stage company as an angel, and basically that equity is then held by the university. So, it is an equity investment that is treated as a gift to the university.

In the case of the accelerator companies, we use convertible notes. So, we don’t take equity, but it will become equity as they get funded. Obviously, our goal is to pick good opportunities. We work with them very well, they become successful, and our investment will turn into equity that will generate cash and come back to the university.

Irina: Do you have any another initiatives?

Art: We have our entrepreneurial fellows program. The program, which we call the Swartz Fellows Program, was funded by James Swartz, who is [a Tepper School graduate] and one of the founders of Accel Partners, [a global venture capital firm] in Silicon Valley.

The fellows program targets students who are not necessarily starting up companies right out of school. What we do with them is work with companies in our network that are venture-backed, and we place these students in internships during their summer between their first and second year.

Irina: What do you see as your limitation?

Art: Well, there are limiting steps all over the place, if you will. One thing is making sure we get good ideas coming into our programs. So, we try to recruit students who come in with [good] ideas.

We look outside for technologies. We also work closely with other people on campus, in the technical schools and in the transfer office, who have the technologies that our students can work on to commercialize.

We have relationships with multiple parties outside of the university; some of them are companies that have technologies that don’t necessarily fit within their portfolio. We have individuals who come to us with technologies they would like students to work with. For example, one of our alumni came to us with a great idea, and I have a team working with him on forming a company around it. So, that is one area, the input.

The next major limit is the staff, the bandwidth [that is needed] to work with five to ten opportunities simultaneously. We try to leverage ourselves by bringing in mentors and advisors.

The other limitation is the capital required to make this thing go forward. We are in the process of trying to raise additional seed capital for the accelerator program. Then the next limitation is the capital after they leave the university, getting the companies into a network where they can get funded to move forward.

Irina: Thank you, Art. This has been a very interesting conversation. Thank you for your time.

This segment is part 5 in the series : Business Incubator Series: Art Boni, Donald H. Jones Center For Entrepreneurship, Carnegie Mellon University -- Pittsburgh, Pennsylvania
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