First Round Expands $500K Student-Run Investment Arm, Dorm Room Fund, To New York City Universities

Last fall, First Round Capital debuted The Dorm Room Fund in Philadelphia, which was a $500,000 fund run by an all-student investment team to invest purely in student-run startups in the area. Last year’s venture paired 11 undergraduate and graduate students from University of Pennsylvania and Drexel University. Today, First Round is announcing the expansion of this initiative to New York City. Students can apply here.

As Phin Barnes, New York-based Partner at First Round Capital, explains to us, the idea behind the Dorm Room Fund is that if students are motivated enough and smart enough to start a company while in college, then they are capable to run a venture fund. And these students are tapped into the ecosystem where these ideas are being created.

Here’s how it works. First Round has put around $500,000 into a fund for New York City student startups. Students from Columbia, NYU, Princeton, and Cornell’s Tech Campus can apply to be part of the fund (around 10 to 11 will be chosen), and then these students source investments and make decisions unilaterally to invest in startup ideas. As students graduate, more will be added. On average each investment is around $20,000, and is structured as an uncapped-convertible note, which is the most founder-friendly transaction, says First Round’s CeCe Cheng, who is now the Director of Dorm Room Fund.

First Round signs off on every investment and is available to the student group to consult on questions, but this is largely run by the students. In fact, First Round will conduct a training for the group with the goal of helping them to understand investment philosophies and scout out interesting ideas and businesses independently. Any carry made by the investment (i.e. if the startup is acquired) is put back into the universities.

The Philadelphia pilot went well, says Barnes and Cheng, and the group has made five investments, including customer service SaaS startup Firefly.

Cheng said that New York is the next logical place to expand the initiative because of the high density of students and startups in the area. She adds that First Round will be looking at a number of other cities to expand to in the near future. Considering the criteria, these could include Boston, San Francisco, Chicago and many others.

Last year, General Catalyst debuted a similar fund, called Roughdraft.VC in Boston. NEA has a seed fund to back student ideas at Harvard.

First Round has been one of the firms leading the charge on engaging students (see the firm’s Common App for engineering students to find jobs at portfolio companies) at the university level in entering technology. And it’s good for the startup ecosystem to help students find capital to get their ideas off the ground. Not only is it a great way to actually find interesting ideas that could be the next Facebook or Google, but even if these ideas don’t end up turning into products, it’s a good way to keep an eye on promising talent.