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Policy on Investments in New Companies Based on University Technologies

Policy Number T92-031 Appendix G
Effective Date May 24, 2006
Responsible Office/Person Board of Trustees
Related Policies
Additional History
Additional References

Doc. T92-031 (Appendix G)

Passed by the BoT 5/24/06

UNIVERSITY POLICY ON INVESTMENTS IN NEW COMPANIES
BASED ON UNIVERSITY TECHNOLOGIES

1. The University shall make available up to one-percent of the University’s operating cash portfolio as of June 30th each fiscal year for investment in University-technology based companies.

2. Such investments shall only be made as a co-investment with a qualified venture capital firm and on equal terms.

3. The University’s role would be that of a limited partner.

4. Investments shall be limited to a total of $500,000 per company which may be made all at once or in several rounds.

5. Investments shall be approved by the University Technologies Investment Advisory Board.

6. Investments shall be approved by the University Investment Committee.

7. The President shall issue guidelines for the implementation of this policy which shall include, but not be limited to, fund restrictions and operating guidelines.

GUIDELINES FOR IMPLEMENTATION

UNIVERSITY POLICY ON INVESTMENTS IN
NEW COMPANIES BASED ON UNIVERSITY TECHNOLOGIES

T92-031, APPENDIX G

A. General Guidelines

1. UMASS Treasurer will make available up to 1% of the operating cash portfolio each June 30 for investment in UMASS-technology based companies.

2. Investment will be limited to $500,000 per company including initial and follow on rounds.

3. Investment made only in UMASS technology based companies.

4. Co-investment can only be made with a qualified external venture capital firm’s investments whether sole or syndicated and on equal terms.

5. Angel investors do not qualify as the external investor.

6. The University will rely on external investor to take the lead, establish valuations, form the management team and create the new company.

7. The University’s initial investment will not be later than Series A round.

8. All proceeds from the sale of a company’s equity will be returned to the University’s operating cash portfolio.

9. Returns in excess of the principal investment plus a factor which reflects the returns generated on the operating cash portfolio of the University will be made available to the president and the originating campus in a ratio to be developed by the President in consultation with the Chancellor.

10. General Counsel will review documentation for transactions although external counsel with securities expertise may occasionally be required. The University will bear the expense of such outside counsel.

 

b. Operating Guidelines

1. External Investment Board

a. A University Technologies Investment Advisory Board will be appointed by the President based on the recommendation of the Executive Director (CVIP).
b. Each investment activity will be presented to the University Technologies Investment Advisory Board which composed of three experienced VCs drawn from a pool of appointed VCs and other appropriate investment experts (entrepreneurs, investors).
c. Members of the University Technologies Investment Advisory Board will serve on a pro bono basis and at the discretion of the President.
d. All potential investment candidates (new company representatives) must present to the Board for their deliberation and may be accompanied by the external VC co-investor and the CVIP Director.
e. Written material must be supplied in advance to the Executive Director and the University Technologies Investment Advisory Board which fully describes the investment opportunity and will include the company business plan, the financing plan, terms of the financing and the cap table.
f. All University investments will require the unanimous approval of the Board which will be made in a timely fashion.
g. Once approved, investment recommendation will be presented to Treasurer and the University Investment Committee for authorization of the investment.
h. If not approved by either the University Technologies Investment Advisory Board or the University Investment Committee, no further action is required although investment candidate may present again in the future if investment characteristics have been significantly modified.

2. Operations

a. Treasurer and the University Investment Committee will approve external VC as a qualified co-investor.

b. Directors (CVIP) will work with the Executive Director to create a pipeline of potential investment candidates. Executive Director, Directors and their staff will work with investigators, external consultants and entrepreneurs to create new investment opportunities.
c. Where appropriate, CVIP will request support from the MTTC.
d. Coordinating with the CVIP office directors, Executive Director will select investment candidates to be presented to University Technologies Investment Advisory Board.
e. UMASS representative may hold an observer board of director seat in a new company for a limited period of time.

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