Investing in Brainpower

Now that the heavyweights of venture capital have all but climbed out of the ring, a new breed of firm is emerging. The companies are small and nimble, they take risks, and they're located in college towns across the country. One is Hanover's own Borealis Ventures, which brings capital to areas where intellectual property is rich but business infrastructure is weak.

Founded in 2001 by managing director Phil Ferneau '84, a Tuck professor, and New Hampshire software entrepreneur Jesse Devitte, Borealis seeds new technology initiatives across northern New England and the Dartmouth community.

"As deal flow in the venture capital industry has become more competitive, firms have begun to seek investment opportunities further afield than Cambridge and Silicon Valley," explains Ferneau.

Borealis' lead investor is none other than the College itself. Says trustee Peter Fahey '68, Th' 69, a retired Goldman Sachs limited partner, "The portion of the endowment invested in venture capital promises the greatest risk but perhaps the highest long-term returns."

History would concur. In the late 1990s Dartmouth saw wild gains on its venture capital investments. The average annual return for the five-year period ending in 2001 was 82 percent. In the 12month period ending in June 2001, private equity returned 320 percent.

Borealis sees its size as enabling it to make smaller, earlier-stage investments in which the terms are more favorable. Borealis has closed five deals so far, investing in biotech, pharmaceutical and software start-ups, four of them launched by Dartmouth faculty or alumni.