This article was published in the Fall 2019 issue
of Silicon Slopes Magazine
by Michael Sackley
After years of listening to customers of the software companies he worked for, Tanner Nordstrom had an idea for a new approach to software. There was just one problem: he didn’t have the business savvy to make his idea a reality.
“I knew in my mind there was this mountain to climb,” says Nordstrom, “but I had no idea how to go about finding the right trail or how to approach this incredible challenge.”
Instead, he entered BYU Marriott’s MBA program with a goal to get involved with BYU Cougar Capital, the student-run venture capital fund. What he learned there completely changed his approach to fundraising and helped him figure out how to build a team.
Before Nordstrom graduated, he’d created his own startup, HiveWire. His main investor was also a BYU Cougar Capital alum, as were two of his angel investors, his business partner, and even his attorney.
“I came out of the MBA program not only well trained and equipped but on my way up that mountain with great momentum,” Nordstrom says. “BYU’s alumni network is considered one of the best in the world, and the pinnacle of BYU networks is Cougar Capital.”
You’ll find BYU Cougar Capital veterans scattered throughout Fortune 500 companies and in the scrappy startups of Utah’s Silicon Slopes. HiveWire, Jive, SaltStack, and Mighty were all founded by BYU’s Cougar Capital alums. You’ll also find alums at the companies investing in those startups — Pelion Ventures, Peterson Partners, Sorenson Capital, Alta Ventures, and a dozen other investment firms. BYU Cougar Capital’s fund, which now has a portfolio of more than $4 million, has invested in about fifty companies as a syndicate partner (many of which have resulted in successful exits), including over a dozen Silicon Slopes tech companies.
Peering through the glass at BYU’s Tanner Building, you’d be forgiven for wondering just what on earth is going on in the MBA program. Why are BYU Marriott students so good at venture capital and private equity? How do they keep winning venture capital competitions year after year? What makes them so agile in the world of tech innovation? Where are those students getting their business acumen?
BYU Cougar Capital
To answer those questions, it helps to start with BYU’s venture capital expert, professor Gary Williams. Before joining the faculty at BYU Marriott, Williams had run, bought, and sold several companies. After he sold his last company and scaled back to board roles at others, he came to BYU Marriott to pass on what he’d learned.
“I’d hired hundreds of recent college graduates over the years,” he says. “They were all smart, but they didn’t always have the tools to succeed in the workplace. I didn’t think they were getting enough experiential learning.”
Noticing BYU didn’t have classes in early-stage financing for small to medium businesses, Williams started a venture capital class and an entrepreneurial strategy class. And then, seeing similar programs at Cornell and Michigan, he founded a venture capital fund for MBA students — BYU Cougar Capital.
“We raised about $600,000 through donations to start a venture capital fund,” he says. “Each year, we bring in anywhere from twelve to fifteen students, and they literally run the fund.”
In BYU Cougar Capital, MBA students oversee the search for new investments, due diligence, investment decisions, contracts, and even exits. Its fund has vastly outpaced the funds at other universities, and today, it would qualify as a top-tier firm by industry standards.
“It was phenomenal, and it continues to be,” says Dave Christison, BYU alum and the COO at HiveWire. “It’s an exercise in critical thinking: How do you analyze founders and companies based on limited data? How do you frame your investment decisions? How do you present those decisions to an investment committee? As I’ve gotten into the post-MBA world, those skill sets are paramount.”
Even for students not aiming for careers in venture capital, BYU Cougar Capital is an unparalleled opportunity to understand how things operate on the front lines in places like Silicon Slopes — where entrepreneurs can start and grow their nascent businesses.
“As I started researching MBA programs, one thing that stood out about BYU Marriott was BYU Cougar Capital and Gary Williams,” says Brad Hoke, a 2016 MBA grad who now works in strategy and marketing for Adobe. “It’s rare that in a grad program you’ll have a student-run venture capital firm that gets to see dozens of real deals each year and chooses whether to invest in them or not. That is why BYU ended up at the top of my list.”
Today, BYU Cougar Capital is so popular with MBA students that the prerequisite classes actually require an application. Even the undergrads decided to get in on the action after finance student (and BYU football player) Adam Pulsipher came back from a summer internship with a venture capital firm and wanted to continue what he’d been learning. “Venture capital is fascinating to me,” Pulsipher says. “When I got back to BYU after my internship, I was looking for ways BYU students could make a splash on the national scene.”
At Pulsipher’s request, BYU Marriott faculty created and supported an undergrad venture capital — private equity class and student club. Much like their MBA counterparts, the undergrads didn’t just want to learn; they also wanted to apply what they learned — and compete.
The Super Bowl of Venture Capital
In addition to running a high-performing investment fund, BYU Cougar Capital has become a perennial juggernaut at the collegiate Venture Capital Investment Competition (VCIC), beating teams such as Dartmouth, MIT, Oxford, Chicago, Carnegie Mellon, UC–Berkeley, Georgetown, and Leeds. After third- and fourth-place finishes early in the decade, BYU has gone first, second, first, and second again the last four years. Last year, BYU Marriott even fielded its first team for the undergraduate VCIC — and it too claimed first place.
“I’ve talked to founders from all over the world who’ve competed against BYU at the VCIC,” Nordstrom says. “One of them said, ‘You guys are on another level — it felt more like a top-tier venture capital firm, not a group of students.’ He said it didn’t even feel like a competition.”
Yet when Williams initially asked for entry into the prestigious competition (where more than seventy universities worldwide fight for top honors), he was turned down. The brackets were already full. Then one year, a team backed out, and BYU was granted the wild-card spot. When the school’s first-time team came in third in the global competition, the VCIC invited them back. “Nobody’s ever done this,” the competition’s director told Williams. “Based on this performance, we’ll grandfather you in for a few years.”
The VCIC, which Erika Nash (an MBA-JD who now works in private equity at Sorenson Capital) once compared to the show Shark Tank, employs a March Madness-style tournament. If a team wins the regional, it’s on to the global — or for undergrads, national —c ompetition.
BYU Marriott does, in fact, enjoy a few advantages at the VCIC. Before the regional, the teams compete in an internal round that includes first-year MBA students, something not all universities do. “The internal round is a ton of work,” says Holly Preslar, who went on to a position in venture capital at Pelion. “But Gary wants everyone to have these experiences, and it’s an incredible opportunity for first-year students to get involved.”
Once the BYU Marriott team makes it into intercollegiate competition, team members have another leg up, thanks to the school’s tight-knit alumni network. Teams are allowed one day to reach out for outside information, and no one is more generous or helpful than BYU Marriott alums. BYU Marriott teams also have templates and information from past winning teams, all of which they draw on to play their best hand.
“People are willing to share what made them successful with the next team down the road,” Preslar says. “It had taken them a lot of work, but they weren’t stingy with what they created.”
At the end of the day, competitions such as the VCIC — in addition to projects such as BYU Cougar Capital and the undergraduate venture capital club — are about a lot more than the optics of a win or school pride. It’s the best-possible preparation for a career in entrepreneurship.
“These experiences offer some of the most significant learning at BYU,” says Taylor Nadauld, who began co-teaching the undergraduate venture capital class and advising the undergraduate venture capital club in 2017. “In terms of job preparation and exposure to real-life stuff, this is a highly impactful experience for students and demonstrates that they have a mastery. It’s not like memorizing formulas they can use on a test. This is the height of critical thinking.”
If you ask team members what they gleaned from BYU Cougar Capital or the VCIC, they’ll tell you no other experience has better prepared them for the innovative, high-tempo world of Silicon Slopes.
“The experience was unique, the exposure to real-world situations is unparalleled, and the network is outstanding,” says IsoTruss founder and 2016 BYU MBA grad Nathan Rich. “BYU Cougar Capital was everything I hoped for and more.”
Read the rest of the articles in the Fall 2019 issue of Silicon Slopes Magazine