Venture Capital is Netting Billions for College Endowments

Before the pandemic, major U.S. university endowments were already flush with cash.

But as markets have soared in the last year, colleges have unlocked once-in-a-generation gains that are more astronomical than whatever weird multidimensional thing their quantum physics professors are working on. New data shows who they have to thank: venture capital.

Following Yale’s Trail

Much to the rest of the Ivy League’s chagrin, Yale is a trendsetter. In the 1970s, the school paved the way for major American university endowments — i.e. those with more than $1 billion — by dedicating increasingly larger pockets of its investments to venture capital.

By 2020, major endowments at schools across the country had allocated an average of 11% to VCs, according to The Wall Street Journal. Yale had 16%. The strategy has proven a lucrative and reliable yield, but has gone into overdrive over the past year.

The S&P 500 returned 41% for the fiscal year ending June 30, according to the Journal. And the average valuation of early stage American start-ups has grown over 50% in 2021 so far to $96 million. VCs have passed those gains on to their major endowment clients:

• Endowments with more than $1 billion averaged a 36% return in the fiscal year ending June 30, according to Cambridge Associates.
• The University of Minnesota’s endowment gained 49%, the University of Virginia’s 49%, Brown University’s 50%, and Duke’s 56%. The endowment at Washington University in St. Louis posted its biggest return ever, at 65%, bringing it to $15.3 billion.

Just One Example: Take Sequoia Capital. The legendary Silicon Valley VC, which controls over $3 trillion in stock market value, invested $500 million in DoorDash and Airbnb. The two investments are now worth more than $23 billion. Among the participants in its flagship fund: the University of Notre Dame, Harvard, Vanderbilt, Princeton, and Brown.

Give Us a Break: While their alma maters are cashing in, Americans currently hold a record $1.73 trillion in student debt.