By Tina Dressel
6 February 2008

The Dakota Venture Group (DVG) believes that even a small organization like itself can make big societal contributions by encouraging entrepreneurship.  Students at the University of North Dakota have been given the opportunity to take part in real-world venture capital and angel (high-net-worth individuals) investing. 

In 1997, Bart and Lynn Holaday founded the Dakota Foundation, a nonprofit group that fosters social entrepreneurship in the states of North Dakota and New Mexico.  The donation by the Holadays enabled the creation of the Evergreen Fund, which allowed the student fund managers to dabble in venture capital, while returning all the profits made from investments to the fund.

To date, DVG claims it is the only completely student-managed venture capital fund within the United States.  With the goal of investing in student ventures and ventures of companies in the Great Plains region, the group helps the local economy by investing in companies that may not be able to raise enough funding elsewhere.  Plus, the experiential learning for the student management of DVG is priceless in its own right.

How it started

During the very first meeting of DVG, there were five students and five advisors seated around a table.  Once the introductions were done and some details about the fund were provided, the advisors left the students to figure out how to organize and structure the fund. This tone has resounded, with advisors offering advice about investment opportunities but leaving the decisions up to the fund managers.  The experience that the fund managers have gained range from corporate decision making and running business meetings to producing professional financial and due diligence reports.

Since that first meeting, the group has grown rapidly and now manages approximately $300,000 in funding. DVG currently consists of five managing directors and 13 managing associates with a variety of backgrounds and aspirations including business, engineering, law and medicine.  The management team includes students ranging from sophomores to graduate students from the University of North Dakota. 

Their background comes in handy to examine the various business plans that are submitted.  DVG receives business plans from a variety of sectors including medical electronics and devices, aviation services, environmentally-friendly products, manufacturing activities and data communication technologies, among many other business types.

The first student-chosen investment DVG made was in The Wine Standard, a company that specializes in selling fine wine and wine accessories.  But Amy Indridason, managing director of DVG, says that one of the favorite venture investments of the management team is in The Simple Furniture Company, a furniture manufacturer that has patented a new manufacturing process that does not utilize formaldehyde in the final product, making its products environmentally friendly.

Choosing investments

DVG looks for several characteristics in a good investment, including a strong management team.  The business model has to make sense and the entrepreneur has to have a strong grasp of how he or she will turn their great idea into dollars and cents. Realistic expectations and plans for attainable market share, as well as scalability and plans for growth are also very important. Last but not least, the company’s exit strategy, or eventual pay-out to investors, is vital. Indridson was unable to provide specifics on the returns of DVG’s investments because it is confidential to the companies that are still being held by the group.

The group scours business plans, performs the due diligence to determine if the business is really what the business plan states, negotiates deals, and invests all on their own.  Students create due diligence reports, perform venture valuations, scrub deals, analyze venture financials, provide strategic investment recommendations, initiate fund syndication and monitor portfolios. Those companies that pass DVG’s standards are prime candidates for DVG investment.  In the past, the group has invested between $15,000 and $40,000 in each business. 

With each new year and each graduation of the current management team members, DVG seeks to bring in new students to give them an opportunity to learn what the management team boasts is an experience "few young people [can say they] have before completing their college education." 

As Indridason states, "We want UND’s best to serve on this fund."  The "best" get an unrivaled opportunity for them and companies in the upper Midwest looking for a potential infusion of capital.  It is a win-win situation, as the companies who submit business plans really enjoy the opportunity to work with a young, fresh talent pool, full of new ideas and perspectives, who may even be possible future employees.

While it is unlikely that many of the fund managers will become venture capitalists straight out of college, they will have a greater understanding of how capital accelerates growth in a company and some of the pieces behind why some businesses succeed and others fail. DVG fund managers consider themselves very fortunate for being able to take part in such a unique organization.

© 2008, Young Money Media, LLC. All rights reserved.