Venture Capital & University Endowments: A Call for Diversity

A New Era for University Endowments and Venture Capital

The appointment of Matthew Mendelsohn as Yale’s new chief investment officer signifies a pivotal moment in the growing trend of university endowments investing in venture capital.

Mendelsohn’s Focus and Yale’s Influence

Having joined the Yale Investments Office in 2007, Mendelsohn has consistently prioritized venture capital – an asset class attracting increasing interest from institutional investors. Yale’s investment strategies have long served as a benchmark for other endowments.

The Rising Importance of ESG Initiatives

As endowments broaden their investment portfolios, they are simultaneously encountering increased pressure to integrate ESG (Environmental, Social, and Governance) initiatives. These initiatives are anticipated to significantly influence future investment returns.

Beyond Divestment: Investing in Venture Education

While divestment from fossil fuels is a prominent demand from students, endowments should also explore investing in educational opportunities. This would create more accessible career paths within the venture capital industry.

The Closed Ecosystem of Venture Hiring

Currently, the venture capital world suffers from a lack of accessible internship and fellowship programs. This limited access perpetuates a remarkably insular hiring process, where networking and introductions are often more valuable than open applications.

Endowments as Catalysts for Change

Endowments are uniquely positioned to address this issue. By forging collaborative partnerships with VCs (Venture Capitalists), rather than solely acting as limited partners, they can achieve multiple objectives.

Benefits of Endowment-VC Partnerships

These partnerships would allow endowments to:

• Continue investing in top-performing funds.
• Expand opportunities for individuals interested in venture capital, particularly those from diverse backgrounds.
• Cultivate relationships with emerging talent who may become future limited partners.

Collaboration with University Career Centers

Greater collaboration between endowments and university career centers, leveraging existing relationships with VCs, could further enhance these initiatives.

Shifting the Focus of Internship Programs

Endowments and VCs can shape programs to prioritize education and mentorship. Many existing programs utilize interns and fellows primarily for tasks like due diligence and startup scouting.

Successful Models for Inclusive Venture Education

Programs like BLCK VC’s Black Venture Institute, Recast Capital’s Enablement Program, and VC Include’s fellowship for first-time fund managers provide excellent examples of effective and inclusive venture capital education.

Expanding Access Through HBCU Partnerships

Initiatives such as the Black Venture Capital Consortium’s summer internship, connecting students at HBCUs (Historically Black Colleges and Universities) with VCs, are promising. However, closer alignment between endowments and VCs could unlock even greater synergies.

The Need for Diversity in Venture Capital

Partnering on educational programs can help diversify the composition of venture capital. Currently, 93% of venture capital funding is controlled by white men, highlighting the urgent need for greater inclusivity.

A Win-Win Scenario for All Stakeholders

This collaborative approach benefits everyone involved. By fostering diversity in venture capital, endowments and VCs can unlock a new era of innovation, identifying and supporting startups that might otherwise be overlooked.

A Long-Term Investment with Aligned Interests

Endowments are uniquely suited to pursue this long-term strategy, as the interests of all parties involved are strongly aligned. This represents a significant opportunity to shape the future of the venture capital landscape.