Inside a Student-Run Angel Investment Group

Dec 14, 2020

For the past semester, I have had the pleasure of being a part of one of the country’s only undergraduate student-run angel investment groups. Named after the generous donor that gave us our endowment, S. Melvin Rines, this group is called the Rines Angel Investment Fund. This article will explain some background about the Rines Fund, how we conduct our due diligence process, what Fund members do, and how we fit into the entrepreneurial ecosystem in NH where we are based.

The Rines Fund began in 2015 when Jeffrey Sohl, the Director of the Center for Venture Research out of the University of New Hampshire, and S. Melvin Rines wrote it into existence. The Rines Fund is an evergreen, student-run angel investment group with $350,000 assets under management that focuses investments on seed and pre-seed stage startup companies. It is both a class and a student organization, with the classroom experience directed by our founder, Jeffrey Sohl.

One might ask why one of the only student-run angel groups in the country is based out of a state university in New Hampshire. Well, the University of New Hampshire (UNH) actually has a lot more to do with angel investing than even most angel investors realize. It is at UNH that the term, “angel investor,” was coined by the original Director of the Center for Venture Research, William Wetzel. Furthermore, the Center for Venture Research is one of the leading research centers in the world pertaining to early-stage equity investing, informing both public policy decisions in this space and countless publications such as Forbes, the Wall Street Journal, the New York Times, Fortune, and Business Week. Between being located just over an hour from the growing startup hub that is Boston and having access to some of the best angel deals in New Hampshire, the Fund (as we endearingly call it) has significant, high-quality deal flow. In the Fund’s relatively short lifespan, it has become one of the top 50 most active VC firms outside Boston.

Being an evergreen fund, the Rines Fund will continue indefinitely, whereas a typical VC fund ends after about 10 years. Unlike student-run VC groups, the source of the Rines Fund’s capital is an endowment. This means that we do not need to generate returns for limited partners - only for the Fund itself. Instead, proceeds from exits are reinvested back into the Fund to ensure its continuity for generations of students to come.

The Fund meets during a regular class-time, during which we participate in a number of activities that educate us on topics related to early-stage equity financing. This includes Professor Sohl sharing his research on angel investing with us, hearing from high profile guests like the CEO of John Deere and a GP at August Capital, “EClinics” where we help entrepreneurs out of UNH refine their pitches and business models, and exercises designed to provide feedback and further questions to each respective due diligence team. This time is also when entrepreneurs will come in to pitch to the Fund.

Our main deliverables as Fund members include 3-5 page flash reports and 20-35 page due diligence reports. Every Fund member completes a flash report on the Team, Product, Market, and Financials/Exit Potential for each company prior to their pitch so that each and every one of us can ask the company the questions core to determining whether the company would make a great investment, rather than easily researchable clarifications. The due diligence team assigned to the given company then conducts extensive research and analysis that they present to the class after 3-5 draft revisions. Promptly after the due diligence presentation, Fund members vote on whether or not to invest, with each student having an equal vote. If the vote to invest passes, the due diligence team then must pitch the investment to the Fund’s investment committee, an advisory board of experienced investment professionals. If the investment committee agrees to invest in the company, the investment is made. After the investment is made, or, after the decision is made not to invest, our extensive due diligence reports are distributed to our angel partners and to the entrepreneurs who pitched, as a value-add to the entrepreneurial ecosystem.

Our angel partners, other prominent angel groups in New Hampshire, are the main source of our deal flow (though not the only source). In exchange for providing us their high-quality investment prospects, we provide our partners with our comprehensive due diligence reports to help them make their investment decision. In addition, similar to how a angel syndicate functions, the Rines Fund adds its investment amount onto whatever amount the angel partner(s) invest. This is in part because our investment amounts are often not large enough to stand on their own and in part so that we can add to our partners’ investment totals so that they are that much more of an attractive investor to startups. Fund members can attend angel meetings with our partners to learn from their due diligence process and how they critique prospective investments. To provide added experience for Fund members, our angel partners will often ask us to complete additional due diligence reports on companies they are considering investing in, especially concerning specific areas in which the angels are particularly interested in researching more extensively. The Rines Fund’s relationships with angel partners are built on strategic mutual benefit and collaboration in investing, and they are a crucial aspect of how the Fund runs today.

The Rines Fund usually has between 25 and 30 members, with 4-5 due diligence teams comprised of 4-5 students each. The Fund selects its members out of the UNH student population through a rigorous application process with onboarding for new associates taking place during either Summer or Winter break after acceptance. During the onboarding process, I read a few books concerning angel investing, watched several hours of videos, and read a significant amount of material online. After onboarding, an accepted student enters the Fund as an Associate. Associates are responsible for much of the legwork of the due diligence reports. Like other Fund members, they also have the opportunity to attend angel partner meetings, complete additional due diligence reports for angel partners, and write an article on the Fund’s publication, Rines Insights. Every Associate works on at least one due diligence report per semester, but often more than that.

The due diligence teams are led by Principals who are responsible for scheduling meetings with entrepreneurs to go over additional questions the due diligence team may have after the pitch, obtaining important documents (especially financial documents) from entrepreneurs for analysis, serving as a mentor and resource for Associates (particularly new Associates who are completing their first-ever due diligence report) and leading the due diligence team in completing the numerous due diligence report drafts and the due diligence presentation which the team delivers to the Fund after the finalization of the report. Unlike Associates, Principals serve one semester at a time and must reapply for their position each semester. This gives the Fund flexibility in being able to offer this position to more students than if becoming a Principal was a ‘permanent’ promotion. The Principals report to a member of the Executive Committee (EC) who serves as a resource for the Principal and an additional point of contact for the entrepreneurs. This designated EC member also proposes edits on drafts of the due diligence reports.

Above the Principals is the Head Principal, who also serves as a resource for Principals and proposes edits on drafts of the due diligence reports. The Head Principal oversees the timelines, drafting, editing, and distribution of due diligence reports. The Head Principal serves this position for one year at a time.

The Executive Committee is comprised of five positions: two Co-Managing Directors, a Director of Operations, a Director of External Relations, and a Director of Marketing and Membership. Together, the Executive Committee plans classes for the Fund, plans events that the Fund hosts, vets prospective investments before they are given the opportunity to pitch to the Fund, and makes other big-picture decisions. While the responsibilities associated with the individual EC positions tend to overlap in many cases, there are some duties that tend to remain fixed for each position.

According to Aidan Kittredge, one of our current Co-Managing Directors, “As Co-Managing Directors, it is our job to plan the class curriculum, monitor deal flow, lead weekly executive committee meetings, act as a bridge in communications between the administration, mentors and advisors, and the Associates, oversee other team leaders, and deal with any disciplinary matters that may arise. Our main responsibility is to ensure the successful flow of classes and the due diligence process as well as note educational and personal goals and interests of our members and address those accordingly.”

The Director of Marketing and Membership runs the marketing efforts to recruit new Associates and runs the onboarding process for new Associates, serving as their primary resource during this process. The Director of External Relations manages the Fund’s social media, the Rines Insights publication, relationships central to the Fund such as those with entrepreneurs and guest speakers, and other external relationships the Fund may have. The Director of Operations organizes the Fund’s EClinic events. This involves sourcing a UNH led start-up company to come pitch to the Fund; the Fund then discusses all areas in which the entrepreneur has done well or could improve on. After the Fund’s feedback is given, the Director of Operations sends a summary of it to the business. The Director of Operations is also responsible for setting up the Fund voting for investment decisions, scheduling guest speakers, and working to improve any observable inefficiencies within the Fund. EC members serve for one year at a time and may reapply for other EC positions or for renewal of their current position after this time has elapsed.

Concurrent with any position that a Fund member may have, they can additionally be a Liaison. Liaisons closely manage our relationships with our angel partners, attending all of their given angel partner’s meetings and overseeing due diligence reports for any due diligence that angel partners request. The Liaison position is the only one in which the Fund member serves for the duration of their time at the Fund without needing to reapply.

While it is competitive to obtain any ‘promotion’ at the Rines Fund, the general fluidity of the Fund’s positions allows most members to get leadership experience at some point in their career at the Fund.

To be able to have real early-stage private equity experience as early as freshman or sophomore year in college is game-changing for students and the Rines Angel Fund serves as proof that not only are undergraduates up for the job, but they can provide a unique benefit to the entrepreneurial ecosystem. As universities continue to search for opportunities to enrich their students’ educational experiences, I would urge them to consider offering similar experiential, real-world opportunities that serve to produce qualified, competitive students that will go on to enhance the university’s prestige and make a big impact in the professional world.