Prototype Capital launches to take pre-seed student investing out of the Ivy League

The two founders of Prototype Capital believe that pre-seed investment focused on student entrepreneurs needs to change.

While existing micro-investment funds focused on young entrepreneurs spend their time at Ivy League schools and elite private institutions, Prototype Capital’s founders are betting on great opportunities coming from the same places that have driven Steve Case’s “Rise of the Rest” investment thesis (and his new Rise of the Rest fund).

Founded in 2015 by Rajat Bhageria, the former chief executive of Third Eye Technologies, and Nandeet Mehta, the chief executive of Pyur Technologies, to create a network of student entrepreneurs and pre-seed investment scouts, the small fund is formalizing its activities this year with a tiny war chest (roughly $5 million for the next 18 months).

Prototype Capital co-founder Rajat Bhageria

“We at Prototype feel that the world is changing,” Bhageria tells me. “The next great innovation may not be from the typical Silicon Valley entrepreneur.”

Rather than focus on graduates and students enrolled in Ivy League or private schools like the Massachusetts Institute of Technology or Stanford, Bhageria and Mehta are looking at students in universities like Penn State, the University of California at Davis, University of Illinois Urbana-Champaign, the University of Texas at Austin; and young entrepreneurs in cities including Ann Arbor, Los Angeles and Philadelphia.

“Right now VCs in the young entrepreneur ecosystem are looking at startups from schools like MIT, Penn and Stanford,” says Bhageria. “But a great agriculture technology company may come out of UC Davis rather than Stanford.”

Investors, according to Bhageria, are completely unprepared for this change.

For Prototype, Bhageria and Mehta reached out to their own network of entrepreneurs located in these far flung places and offered them finders fees for companies that manage to raise capital from the firm.

The cash for Prototype has been fronted by an undisclosed Los Angeles-based venture capital firm, Bhageria said.

Prototype plans to invest between $25,000 and $50,000 to start, and increase its commitments to $50,000 to $100,000 after the first six months.

Beyond its focus outside of traditional geographies, Prototype thinks it has another advantage in the relationships it’s building with corporations.

Corporate partnerships, Bhageria says, are key to the next phase of venture capital investment.

Prototype co-founder Nanjeet Mehta

“It’s not going to be the next Snapchat that matters, it’s going to be changing and transforming these entrenched industries. You need domain expertise and you need data … you really need to work with governments and corporations.”

That’s why the firm is planning to host quarterly corporate demo days where 7 Fortune 500 companies will be on-hand to hear pitches.

Neither the focus on early entrepreneurs and pre-seed investment nor the push to bring corporate partners on board is all that novel. Bhageria acknowledges that Techstars and Plug and Play have both leveraged corporate partners and sponsorships to provide more weight to their early stage programs. And Dorm Room Fund (affiliated with First Round Capital) and Rough Draft Ventures (which works with General Catalyst) are both leveraging networks of alumni to find early stage investments.

Still, the combination of both theses — along with Prototype’s emphasis on schools outside of the traditional venture networks could give the firm a leg up.

Notably, other investors are considering a similar approach to tapping networks of entrepreneurial talent as investors. AngelList and Boston-based Accomplice announced the $35 million Spearhead fund yesterday to pursue a similar (and better capitalized) thesis.

Featured Image: Shutterstock

Published at Wed, 10 Jan 2018 23:00:27 +0000