Venture Capital Problems

Harvard's Vice President for Finance Elizabeth C. "Beppie" Huidekoper says Harvard's problems with venture capital stem from a quirk of the financial world.

Venture capital funds provide money to new companies. In recent years, with the advent of hot new markets like the Internet, venture capital funds have become increasingly popular. Venture capitalists have begun limiting to make sure large corporations don't dominate.

Within venture capital, caps on the highest-paying funds mean that big investors and smaller investors often put about the same amount of money into a given fund.

So Harvard was prevented from taking the bull market by its horns. It had planned to put 15 percent of its investments in venture capital, but ended up on investing ten percent, according to Harvard Management Company President Jack R. Meyer.

Huidekoper says this problem with under-representation is similar to the problem populous states like California would face in the federal government if there were no House of Representatives.

"It's a little bit like there's only [the] Senate," she says.

So with twice the money in its coffers but the same amount in dollars invested in venture capital as other schools, Harvard feels the benefit of these lucrative funds, which paid off 136 percent in 1999, in a proportionally smaller way.