Michigan’s Social Venture Fund: Founding the Nation’s First Student-Run Impact Investing Fund

by: Gautam Kaul

Publication Date: September 14, 2017
Length: 20 pages
Product ID#: 5-596-765

Core Disciplines: Accounting/Finance, Entrepreneurship & Innovation, Ethics, Social Impact

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Teaching Note

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In the business environment surrounding the 2008 financial crisis, a new field within investing emerged to address the shortcomings of a “profit-only” mission of business. The nascent impact investing industry sought to create positive impact beyond financial returns. Putting this idyllic-sounding idea into practice demanded that institutions interested in this line of work consider what social impact means, how to assess it, how returns in impact investments would differ from traditional investments, and where to invest capital.

Four students at the University of Michigan’s Ross School of Business realized the flawed structure of the financial system and wanted to see how they and their university could play a role in the impact investing industry. Collaborating with faculty and industry professionals, the students conceived the idea of a student-run venture capital fund that would invest in companies for both financial and social returns. Social Venture Fund was the first of any such organization on any campus. Before the students could even make an investment, however, they had to decide on the nature of their organization. The students wrestled with four questions at the same time as the overall impact investing industry was struggling with the identical questions: How would they define impact? What would their investment thesis be? How would they measure impact? In which sectors and geographies would they invest?

Teaching Objectives

After reading and discussing the material, students should:

  • Analyze the roles of different types of organizations and the functions they play in the impact investing field.
  • Discuss what frameworks should be used for measuring and integrating social impact in financial decision-making.
  • Explore the role students and universities can play in the evolution of the impact investing sector.