Student-run VC fund invests in VOIP service provider

University Venture Fund (UVF), a venture-capital fund run by college students with the guidance of professional investors, on Tuesday announced an investment in VOIP start-up Alianza Global Communication Services.

Marking its tenth investment, UVF put US$650,000 into Alianza, which sells VOIP-based PBX systems targeted at Latin American companies that often do business in multiple countries and are looking for low-cost alternatives to traditional phone systems, according to fund officials.

Based in Lindon, Utah, Alianza was founded two years ago by 26-year-old entrepreneur Brian Beutler, who relied on credit cards and family loans to get the company off the ground. Alianza now has 42 employees, nine offices, and over 1,000 customers, according to officials.

UVF partnered with Utah venture firm vSpring Capital, which took the lead in the Alianza investment.

UVF's model calls for students to research start-ups and pitch those they believe to be lucrative investment targets to the fund's founder and managing partner Jared Hutchings and volunteer investment professionals. The fund looks for investments often considered too risky by banks and traditional VC firms, he says. Hutchings started the fund in 2001 while still a student at the University of Utah with an investment from noted Silicon Valley VC Tim Draper, as well as investments from UBS and Morgan Stanley.

Professional VCs who partner with UVF on investments benefit from learning about new companies from student researchers, who can often spot new trends in areas like the Internet because they are young and close to that culture, says Hutchings.

Capital for the fund is raised from limited partner investors -- not from university endowments, as other student-run ventures are often modeled -- with the intention of paying back a "reasonable rate of return," he says. To date the fund has raised US$18 million.

The students, who don't profit financially from their investments but gain real-world experience, come from affiliated schools including the Wharton School of Business at the University of Pennsylvania, Westminster College in Salt Lake City, Brigham Young University in Provo, and the University of Utah in Salt Lake City. Students don't need to be MBA candidates in order to participate, says Hutchings, and can be either at the graduate or undergraduate level. Most don't get university credit for their involvement, he says.

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