SIF183 LVG Seed Fund

Project Manager: Frederick H. Epstein

The purpose of this award is to provide additional funds to the LVG Seed Fund established in 2016 to accelerate the commercialization of UVA research technologies.

Approved: Summer 2021

Project Dates: 10/1/2021 – 9/30/2029

Total Funding: $10,000,000 ($6M SIF, $4M Medical Center Strategic and Reserve Fund)

Executive Summary:

This is an investment in the long term support of UVA innovation and investments are at the earliest stage of technology/company development. The objectives are:

A.    To accelerate translation of UVA technologies by launching new ventures based on UVA innovative research,

B.    To fill the ongoing “capital gap” for UVA technologies that are considered too early or too small for investment by traditional commercial resources,

C.    To attract external capital to these businesses, UVA and the local area by demonstrating institutional commitment,

D.    To generate a return on investment that, with its Evergreen structure, would refresh the Fund over time and provide capital for additional UVA technologies.

Current Status: Active

Progress

As noted in last year’s report, we anticipated the continuance of an ongoing investment cycle (9 months at that time), that would result in less funding for new deals in 2023 while investors turned their focus to follow-on investments to sustain portfolio companies.  Fund II was not immune to these conditions, as many of the companies we targeted for initial investment could not attract co-investors to fill out the syndicate.  A prime example of this market activity can be found in our own Fund I, where seven follow-on investments were made in portfolio companies to sustain growth/momentum because they were unable to attract new investors.

We were fortunate to close all those rounds with existing investors and even more fortunate that two of those follow-on investments did attract new funds from investors that are leaders in the industry. BrightSpec raised a Series C of $15M led by Genoa Ventures and Arboretum Ventures, while Ceres was able to attract $15M from a strategic partner, Streck Industries. 

Seed investments in the overall market had a fifth consecutive down quarter ending Q2 2023, with the trend predicted to extend into Q3 and well into 2024. The lack of funding for new investments can be attributed to the decrease in exit opportunities for venture funded companies. As acquisitions and public offerings continued to decline, and with no clear path to exit, funds are reserving more for each portfolio company which has a direct and negative effect on the funds available for new investments. 

Fund II evaluated more than fifty opportunities in the last twelve months, with many progressing deep into the diligence process.  While there were a number of these companies that made it to discussions around a syndicate, many of our co-investors backed away, citing the need to pay more attention to their portfolio companies than make new investments. We have a strong pipeline and are targeting two new deals as well as a follow-on to a Fund II portfolio company in the coming award year. 

Fund II and LVG became members of the Mid-South Innovation Hub I-Corps Program sponsored by the NSF.  Our staff led UVA’s initial session with several faculty-based teams participating in the program to commercialize their technology. A second cohort is scheduled to begin in October with three more targeted for 2024. 

Fund staff continue to play a major role in building the ecosystem serving in various roles with CVille BioHub, The Launch Place and VBHRC, as well as participating in national conferences that bring partners, investors and potential management to Charlottesville.  

In August 2022, we welcomed twelve second year Darden students to the seventh cohort of our year-long experiential learning class, Due Diligence in Seed Funds.  Two members of the class joined venture firms upon graduation, bringing over time, the total number of class participants working in the industry to more than 20. In August 2023, we welcomed our eighth cohort for the class with eleven new students.  For the sixth summer, through the Darden Venture Fellows Program, we again employed three Darden students in a summer internship.