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I’m sitting on the right side of an auditorium in Sutardja Dai Hall at UC Berkeley, waiting for a pair of charismatic student entrepreneurs to tell me how they’re going to fix things with my girlfriend. The students tell me Pepper is the “Spotify custom-playlist” approach to planning dates: Pick a date type, account for location, budget, ambience, noise level and so on, and presto! The relationship is saved.
The founders of Pepper are presenting at a demo day organized by the UC Berkeley student-run accelerator Free Ventures. Alongside Pepper are Instant eSports (like ESPN Scorecenter but for eSports); Improving Outcomes (SurveyMonkey but for health care); Rooster (Craigslist but only for free stuff); and a handful of other startups — a sampling of the UC Berkeley student-run companies garnering a lot of attention from big-name institutional investors.
Last year, venture capital firms raised nearly $30 billion, the most they’ve raked in since before the Great Recession and a 70 percent increase over what they raised in 2013. In such a frothy environment, venture capitalists are looking for more places to stuff their money.
For a number of reasons, Berkeley is an attractive option. For one, academics turning their ideas into tech companies aren’t exactly unheard of — think Google or Yahoo. But having early access to ideas and research is especially useful, and so is cheap talent (one very recent graduate told me his “burn rate as a human being” was exceptionally low).
VCs across the country are already signing up students to run smaller funds to identify and invest in campus-affiliated startups. A recent Wall Street Journal article took a closer look at First Round Capital’s Dorm Room Fund, a student-run $3 million angel investment firm that targets student-run startups. Dorm Room Fund gives out money in $20,000 chunks, sort of a litmus test for larger investors that come in later.
Free Ventures co-founder Jeremy Fiance, who was formerly with Dorm Room, says that “for every dollar [Dorm Room Fund] invested, the startups average five dollars raised after.” Fiance also says this rate is much higher for Berkeley startups. Student- and faculty-founded Berkeley companies that Fiance highlighted include the ad tech firm Adsnative and the soon-to-be-launched robotics company Lily, both of which have secured at least $1 million in funding. But some VC firms, Andreessen Horowitz in particular, seem to be forgoing this student-as-talent-scout process altogether.
In 2012, Andreessen Horowitz backed Caviar, the food delivery service founded by Berkeley fraternity brothers that was acquired by Square in August. Last year, Andreessen Horowitz also led a $33 million investment in the cloud data-processing company Databricks, and this past March the firm invested $7.5 million in another data startup, Tachyon. Both Tachyon and Databricks came out of Berkeley’s AMPLab, a computer science department lab focused on big data.
Even if they weren’t mentioned by name at the Free Ventures event on Monday night, you can sense the effect of Caviar or Databricks-level money across the campus. Just last Thursday night in the same auditorium, Uber founder Travis Kalanick was on campus to dispense his own words of entrepreneurial wisdom to an audience that included SherpaVentures’ Shervin Pishevar. A week and a half from now, Salesforce CEO Marc Benioff will speak at Berkeley’s general commencement ceremony. In 2013, Cal attendee and Apple co-founder Steve Wozniak delivered the same address.
At the demo day, a pair of founders from each startup gathered onstage to pitch their company to a panel of judges assembled at the front of the room. The judges were a well-credentialed bunch: Nextdoor co-founder and CTO Prakash Janakiraman, Kleiner Perkins’ Anjney Midha, Base Ventures’ Kirby Harris, Dorm Room Fund investor David Sagalov and Berkeley astrophysics professor/Wise.io CTO Joshua Bloom. The Free Ventures sponsors were similarly high-level, including Greylock Partners, Paypal and Amazon Web Services.
Janakiraman, a Berkeley dropout who gave a keynote address toward the end of the program, told me afterward why he thinks the campus will be “the next big thing.”
“The pitches I’m seeing are on par with what I was seeing when I was [technologist in residence] 15 years ago at SoftBank,” Janakiraman said. “The polish, the presentation, the thoughtfulness, it’s all there. Stanford’s had that advantage, because their professors and a lot of their community have been involved in industry. We’re now starting to see that connection being built with a community like Cal.”
Correction: The story was updated to reflect that Janakiraman was “technologist in residence” at SoftBank and not part of investor relations.
This article originally appeared on Recode.net.
