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March 22, 2021

Student-led Venture Capital, how is it different from other VCs? Story of Atland Ventures by Hunter Babcock

Student-led Venture Capital, how is it different from other VCs? Story of Atland Ventures by Hunter Babcock

Hunter Babcock, Managing Partner at Atland Ventures talks about the structure of Atland Ventures, their fundraising and their major differences from other VC firms. Hunter also spoke about who should really try to work with student-led organizations and who should aim for standard funding sources.


And today is a guest speaker who have hunter Babcock managing partner at Atlanta Ventures. And in this episode, we'll talk about how headlines Ventures was created and.

Why is that? It's because it's a fully student run organization and it works, like an actual VC fund, not like a donor fund. So, in this episode we'll talk how they manage to raise money how they run it?

How it's different from other bases, and who should try to get into such a student run organizations or try to raise money from them. So, let's kick it off by giving us some background on yourself. And on Atlanta Ventures.

Yeah, totally. Well, thank you for having me on the podcast. Really appreciate it, but to give a little more background, I'm a current Jr? At the University of Minnesota twin cities.

Uh, studying marketing in entrepreneurship, and kind of how I got into just venture space and entrepreneurship in general is had a really big fascination for marketing and high school.

Did some of my own marketing agency work mainly around logo design and some web design.

And then kind of coming to college, the opportunity to join island arose, and it's kind of never looked back from there. Nice. Nice. So yeah, tell tell us more about Allen Ventures. What is it.

Yeah, totally. So Allen is a 1M dollar student run fund founded roughly 2 years ago. And essentially we're independent, the University.

In that all of our, we have 17 limited partners who invested in us and we made we invest real money 25000 dollar checks.

Into preceed seed stage companies who are solving problems that are felt by our generation.

Nice and that's really cool. And Congrats on raising 1M fund. That's really impressive as students, especially so, tell us a little bit more about the organization itself. So, is it fully independent or is it partially sponsored by the university that you're working with?

Yes, so, in regards to like, how we're affiliated with the University, all of our students are all the partners within the fund. Our attend the University, whether it's in the business school or some other aspect. So we have 2008 current partners.

Um, and then 15 different majors represented, so really, really diverse group.

And kind of how they get involved is each semester applications that go out to become an analyst. And then once you're hired on, you kind of stay with the with the fund for the rest to you graduate.

And then, once you graduate, you become a passive shareholder. So all of our advisors, our alumni become advisors and still really play an active role in kind of building the fund strategy and really overseeing kind of some of our deals. And how we're, how we're looking into the future.

Since you mentioned shareholders of the fund, that's something we're going to dive into right now. Yeah. How does it work? How how do you compensate your own employees? So you've said that we have a pretty big team how exactly does this shareholding works.

Yes, so we're, we're structured like a normal VC and then we have a a split with our limited partners and then kind of on our side.

Students can receive share allocation by different different metrics so, whether it's attendance to our meetings or the performance reviews, or if they're on a deal team that sources a company that we invest in.

Or they do really good diligence, or even represent us at a, at a conference or a demo days, or some type of event. So they kind of through their entirety. They each semester, they'll get a certain amount of shares. And then it kind of goes into a pool and.

Uh, by the end of the time, you graduate, you'll have a certain percentage of the of the total fund and I think 1 of the unique thing too is, is we do have, like, a class credit that we receive. So, it's really kind of big on while we do have a fiduciary responsibility to our investors.

All the students really care about the education aspect and learning about how to how to critically analyze startups.

Whether if they want to kind of start their own business in the future, or go into investment banking consulting or VPC Africa nice,
just to make sure we're on the same page,
you were saying,


you know,

that you get part of the funds based on their performance,


that means that they get part of the portion.

Martian oh, God, I forgot the word portion. Portion of the share share share of that carried interest, right?

Yep, so it's an 8515 split.

Um, and and me of that 15, that's a, that's how we kind of split it up.

Nice, that's really cool structure. I never have seen it before, to be honest, so very, very excited to dive even deeper into the structure of the entire fund. So, 1st question is probably 1 of the most important actually, never mind before we move on to the most important question.

1 of the questions that asked pretty much every single investor that comes on to fundraising radio, would you invest in a, what stage? Which fields? And what's the average access?

Yeah, so I check size 1st check is 25 K. we're investing mainly at the Pre seed seed stage.

So most of the companies we do invest in, they all have a product prototype, and I've done a beta and then beyond that, a lot of them are post revenue. So have some type of traction.

And, and really revolving around products that our generation would use. So, products that we've, we've tried are using an R in there every day.

Or something like, and the way we think about it is, is this a product or a trend that we won't live without in the next 3 to 5 years? And if it's something that we could see our generation kind of holding onto and bringing to their workforce or bring into the future, it's really.

Sustainable kind of growth strategies so that's that's kind of our thesis and how we revolve.

And kind of source our deals, and in terms of interest industry interest, we don't really have any, any geographic or industry specific requirements. We're agnostic in both.

But a lot of students who come in are interested in marketing tech or education tech, or even HR systems.

And then I think that we've seen a resurgence and kind of food and bad and a little bit more in CPG lately.

Nice nice. That's real cool. And I love this approach of investing in gencsi focus products I believe is the future as part of Jersey of course, I'm biased, but I'm pretty sure most people agree with that part of it.

But now, let's move on to that important question. That was about to ask you, but never did. So, how do you make the investment decisions? Who said that you have a pretty big team? You have tons and tons of advisors. How do you make the investment decisions for the fund?

For sure, so kind of our fund structure from the 30 students that are normally involved.

We, we have a few different diligence teams, so we have directors who lead a lot of our diligence team. We're doing research on the companies and once they source a company, it takes anywhere from 3 to 4 weeks for us to get a deal. And we can accommodate up to 2 weeks.

So that's that's really cool. Is a.

A lot of the students are super passionate and and it's kind of like, well, we're doing school during the day. It's it's a lot of us really, really.

Value in all weekends are kind of spent with their Allen teams so we're able to really turnaround deals quick. And kind of our more of our process is.

Is it's a 3 pace kind of diligence approach so mm.

Once we have an introduction call with a founder, we'll jump 1 of the diligence teams will take the lead. This is a group of 3 to 4 students, and they'll start looking over kind of a phase 1, which is mainly looking at the product, the market management team and some financials.

Really reviewing is this a good fit for a thesis beyond that? We'll go to kind of a phase 2, which jumps into more like primary interviews looking at exit potential, and then reviewing some deal terms.

And then final step is is creating a memo that will be presented by the team at our fun meetings. So.

Every Friday, we have our kind of whole fun meetings, and this is where they present to the team and then we have a really good discussion.

And beyond that, we make a vote, and the vote is a super majority 80% to pass an investment. And once once we invest, then we work with the founder and and move forward from there.

That is really cool to more young. Their investors, the more younger managers of funds I see the more democratize their funds are recently. I interviewed the founder of.

Outlier Ventures, and he was he had a similar structure so I see I see a trend there now. Totally. It's been awesome. That's really cool though. Respect that.

So, let's move on to next question and talk about the founder perspective since most of our listeners are founders, let's focus on that for a little bit. What do you think is your major value add for the

founders that you invest in.

Yeah, so I guess, right after right after we send the 1st check, we really try to be an active part, and it's mainly seen through our ability to create a kind of an intern network for the company.

So, at every 1 of the portfolio companies we've invested in so far are currently in is we have 1 or 2 students who about becoming intern. And we've actually worked to create a curated network of.

Of students passionate about entrepreneurship data, anywhere from sales and marketing to kind of a data scientist or computer science.

Work to be placed at any 1 of our companies.
So these people can can do unpaid internships or any type of internship for a semester, summer,

or even go full time and to work with the company and really provide the most value there beyond that since since we're structured as a class to or have some type of education component we work to do kind of sort of consulting,

projects for our startups.

So sometimes we may have to do like gency persona or like a market segmentation for 1 of our startups or even maybe they're having some.

Some concerns around their web design, or a lot of students, because of that diverse perspective we can help consult on any 1 of those.

So, maybe it's doing, like, a semester long consulting project, just to give them some feedback from our generation and to keep in mind on board there.

And then I think the last thing is is when we're in around, we've seen that some of our founders really.

I think that we can be a strategic value, add in terms of giving a stamp of approval from, from gencsi. So, it will get a company that's maybe a social platform, and we invest in it and say that yes. gencsi really supports this and can see the growth then.

Other founders really see this as a valuable if that generation and the product and the market, it can validates product market fit right there. Um, and can be helpful to close around.

Nice. That's really cool. And being that stamp of approval is always. I bet it feels good and nice. Very nice. Work there. So.

Another question from the founder perspective again, you know, founders have dozens and dozens of options of choosing very fast.

Funding realm. Yeah, I'm losing my shirt, but yeah, they have multiple options of fundraising. They can raise from that, you know, standard equity saves convertible notes, all kinds of investors, etc etc.

What kind of founders do you think should go to Steven Brian organizations and not necessarily to your fund? Because I think there are any other independent student fund student funds, but to any

kind of student organization that can help start. So, what kind of services things to do that.

Yes, so I think, I mean, from our regards we've invested in safe convertible notes and price strands and comfortable with with any 1 of those.

And what I think is kind of unique about working with a student round find are found in general, is we really value giving a perspective, but we're also not.

I guess we're hands on, but we're also hands off and.

And we value your opinion, and we trust we trust a lot of the founders that we're working with and we kind of.

We're always there to respond to an email and kind of just kind of be that piggyback or the extra person, kind of on their sideline, or on their bench to be deployed and do stuff.

So, we've had founders call us who, who need something done quick for the next day, because an intern can't make it or something and we'll jump on and do that. So, really that type of a hands on a relationship. We really enjoy.

And I think along with this is 1 unique thing about all student funds is the access to the university resources and professor networks, and just being on campus can provide a lot of value in terms of.

Just providing research abilities or or having just conversations and kind of that massive kind of body behind can be.

A really good, I guess, thing to to be another resource to add into the founder's tool kit.

All right, speaking of uniquenesses of student run funds, what do you think is the largest? What's the most unique thing about Atlanta venture? Because there are tons of them?

I can see them from here, but from your perspective, what do you think is like, the most outstanding thing about Atlanta Ventures.

Yeah, I think I think what's really, really I found fascinating is 2 things internally. I think this is the most passionate group of people I've ever worked with.

I've been at plenty of internships and other companies I've worked for, and it's just having all students as part of the fund,

making all of the decisions being on all of the meetings together and attending classes at the same time and hanging out together on the weekends or,

and just.

Having that close knit community is something you'll never get like, ever again. So just how close we are uncomfortable we are with each other, but also willing and diverse in our perspectives and thoughts.

I think we have amazing conversations and these are the people that I want to be connected with for the rest of my life and I can see going being very successful in their, in their respective goals and industries and.

It's really just a launch pad for a lot of motivated and passionate people.

To join the workforce and in many different guards and make a real big difference in kind of the entrepreneurs of ecosystem and also just like General impact on on the world. So I think that's really, really cool. And then.

The other aspect is the fact that we are wonderfully, only student run funds to.

Have that independent fiduciary responsibility.

Really kind of sets us up for, like, students taking it real seriously and mm.

People work work super, super hard, every single week day in day out and we're.

We're we have our investors who we talk to, and we, we tap into our advisor network a ton because of that.

So, I think you get a ton more more out of the education side, because you're kind of put put in a position where you have a responsibility on your shoulders and and to fulfill that and you want to fill that. And you want to kind of prove yourself.

So always having that kind of thing in my back I want to prove myself is what helps me and pushes me to achieve more than I thought I could kind of coming into it.

Nice nice.

Sounds very inspirational to be honest and definitely this point, I feel like I need to ask more questions that are relevant to our founder listeners, but I'm really curious about how you raised that funds while being students.

So I'll ask that question anyways. So, how do you manage to raise this 1M dollars being a student? Blood fund was such a unique structure, such a unique approach. Yeah. So I would really attribute this to our, our, to kind of CO, founders, Lucas and Matt.

They were really inspirational when I joined the fund my freshman year, we were halfway through the race.

And just learning from them, and kind of how they founded it. So, Alan began as a group of students, just passionate about the space kind of working as a club. So we got plugged into our local angel network.

And we're reviewing deals for them and, and kind of giving them industry overviews and our perspective.

And they really, they really saw the values. So that kind of is what helped develop the thesis for. Our unique perspective is Jen as gency is really important.

So so from there, they reached out to the whole kind of entrepreneurship ecosystem within our university within Minneapolis, and within the Midwest, and found some great advisors to help us set up the fund structure.

And then from there, once we had our 1st kind of investor on board.

Um, who who really saw the passion behind this as an educational chance for students, a chance to network, and also a chance to possibly see some great returns.

Um, and then when you decided to make our 1st, 2 investments in local Minnesota companies.

That were very, very successful at the time, and still are very, very successful, and kind of having that backing really help to, to raise for the future. So.

I would see, I would see those guys on calls almost every day during class periods in the hallway of our of our buildings, just always always talking and making connections and it really set us up for success.

And from there, I mean, the fund's grown to become kind of a Minnesota name, and it's really been spectacular to see where we're.

Where are we common where we're headed? Perfect, perfect response. So now we get back to the founders.

Before you started before you joined the Athlon fund, you were not really involved in the VC community, rather on the founder side so on the startup side, right? So, when you joined the Avalon fund, what island Ventures I bet.

What was the most basically shocking revelation that you saw there was the thing that you did not expect VCs to do that turned out they were doing a lot. Yeah.

So, I think is interesting, because when I came into the fund, the video, we plan to recruit new analyst says shark tank pitch.

I remember specifically where we're pitching to Mark Cuban, and he was grilling the fire with questions about equity stake, and just questions around the market, and then ultimately didn't invest. And and after they play the video, they said, this is what VCs.

And I love shark taking out super passionate. So, like.
I gotta I have to try this out and coming in. I, I didn't know what I thought VC was, but I thought it was.

Kind of investing in any type of startup, but also like lifestyle businesses or any type of business that I could think of that would need money, but really.

I think kind of revelation to me was just how unstructured kind of VC is in terms of, like, relationships. I thought like.

Most species had kind of partnerships and.

And it felt more independent than I thought. So, just kind of, I think the biggest thing was working together with other student funds and building that kind of network of, like, minded individuals and from there, being able to share deals with other firms.

And kind of that becoming a really.

Important way for us to meet really interesting founders and to really.

Help with our, our network to, like, recruits and possibly work at other vc's as internships are in the future. So learning that was it was interesting but also just I loved talking to founders and meeting.

You meet some of the most incredible people who are just so empowering in my everyday life and, like, every single day, when I get off the call with a founder, I like, I wish I would have started that type of business or that's so fascinating. Like, hearing their story.

So, I think the emotional side behind VC, I really didn't understand.

And kind of the passion that these people, when they come in and pitch to, you have, um, it's really cool and then also just learning more about the.

How the industry works in a structured was kind of.

Shocking to me, right? So, yeah, most most of our listeners are actually 18 to 35 years old so.

I would say, like half of them margins either. Assume so. So.

Would you think is the major mistake that early stage, John founder specifically jazzy founders are making, or you see them make.

That's interesting. So, I think.

Some some, I guess my early mistakes that we see.

Would probably in term in terms of.

1, understanding valuation and kind of like.

When you should raise, I think a lot of the we have not not to that industrial run calendar.

And we haven't seen is kind of students coming out of universities and understanding. when's the right time to kind of engage an institutional investor.

I would consider us as like, a micro VC, but when when would we invest versus.

When would an angel invest and when would maybe it's it's time to do a competition or grant money. So I really want to when I'm talking to that that group and.

And demographic,

it's kind of understanding,


what kind of goes behind,

getting these PCs involved in and kind of what are their kind of visions for the company and whether it's a lifestyle business or a high growth,

potential business or maybe it's just not the right time to to go out for external funding.

And kind of making sure they're prepared and kind of understand the process is what I see in a while.

Perfect perfect response. Perfect advice there as well. So on this optimistic, I think, no, we're moving on to the last question of today's episode, which is a call to action. So Hunter, would you want to listen to do as soon as the app is over.

Totally so I guess I was trying to think about this 1 a little bit and I think there's 2 different things. If you're if you're a VC.

I someone involved in D. C. or our student passionate about the space. Really just talking to to our fund and, and we'd love to share any more.

Interesting deal flow or kind of how we're structured or anything with diligence.

And see how we could fit in kind of their ecosystem or our ecosystem together. Both student run funds or any BC looking kind of for our perspective.

I think that's 1 of our biggest things is it's being able to share gency trends and kind of put out our own perspectives on different industries or thoughts. So that's 1 thing we'd be happy to. And then the other for entrepreneurs, any, any founder both.

Or someone helping with a company solving problems, felt by our generation, we love to see your pitch deck or meet and kind of learn more about your company. You can email us at adventures at Gmail dot com.

Or reach out to me on LinkedIn, or or any 1 of those methods our website at Allen com.

Perfect yeah, I'll make sure to leave the links to Ellen Ventures and, and also a link to your LinkedIn there as well. And also I'll leave a link to the select channel called.

Jen, I believe so Ian investor that's definitely a place for it to go. I think that's actually exactly where I meant. Hunter is every.

Yeah, I think so, yeah, that's exactly where I met him, so it's a useful place you can make really cool connections there if you're trying to break into that's definitely a place for you.

So, yeah, if you're young, if you have something that you think is solving problems for young people, check out the description that says episodes, it's for you and.

For everyone else have a good day.