The Prospect Fellowship, named after the office’s old headquarters of Prospect Street, is seeking applications with a due date of Oct. 14.
Gino Salza
10:47 pm, Sep 29, 2024
Contributing Reporter
Gino Salza, Contributing Reporter
The Yale Investment Office is accepting up to five candidates to become fellows in their new Prospect Fellowship, which will support investment management entrepreneurs in an intensive eight-week program.
The fellowship, which promises no stakes or revenue shares, is looking for long-term relationships with investment startups, regardless of where they are in the startup process.
“Fellows will receive funding,” the Investments Office’s application reads, “while harnessing the resources of Yale Investments and forging deep connections within our office and network.”
In an interview with the News, Marcella Rooney, a spokesperson for the office, discussed the parameters, acceptance process and future of the fellowship. She told the News that accepted fellows will receive an initial seed capital, followed by investment capital.
“We will lend fellows up to $2 million in working capital to get started on establishing a firm,” Rooney told the News on behalf of the Investment Office. “[This will be followed by] a minimum investment of $25 million at launch with an additional $25 million as a follow-on investment.”
Rooney added that they will consider smaller amounts for different strategies, but nonetheless, the package includes an investment offer of up to $52 million in working and investment capital for accepted fellows.
The fellowship is accepting applications from startups that are at any point in the process. Ideal applicants will likely have significant investing experience, but no single application profile is favored by the office, according to Rooney.
“Great talent can be at any stage and great ideas can come from anywhere,” Rooney explained. “We back promising individuals who have a differentiated perspective on investing. As such, the application and selection process focuses on people, not track records.”
Rooney shared with the News that finalists will be selected for an in-person interview in New Haven, but aside from a few days in-person at the beginning and end of the fellowship, all other programming will be available virtually.
The fellowship has received traction from the investment community. Charles Skorina, the founder of Tucson-based investment management firm Charles Skorina & Company, complimented the office’s willingness to do smaller-scale startup investing.
“Good for [Matt] Mendelsohn and the Investment Office. This is true seed investing,” Skorina told the News. “Show me another school that is willing to put only $2 million as a seed investment — you can’t.”
Skorina noted that the fellowship is an extension of what the Investment Office has been doing for years. During his interview with the News, he cited Hillhouse Investments, a global private equity firm that was founded in 2005 with initial seed capital from the Yale Investment Office. Today, Hillhouse has more than $70 billion in assets under management.
The $20 million seed investment in Hillhouse was negotiated by David Swensen, the office’s Chief Investment Officer at the time. Swensen, who passed away in 2021, is known for the “Yale Model,” a diversified portfolio that saw an average annual return of 11.8 percent from 1999 to 2009.
When asked about David Swensen, Rooney told the News that the Prospect Fellowship will be a continuation of his values.
“David is widely considered one of the world’s most innovative, respected, and successful institutional investors,” Rooney told the News. All prospective fellows must share Swensen’s high integrity, including “a clear thought process, a sound investment philosophy, a durable edge relative to their competitors, a passion for investing, and a high standard of ethics.”
Rooney said that the Investment Office pledges to provide resources that promote integrity and support success, including guidance and support in founding an investment firm — from operations and technology to legal agreements — in addition to engagement with speakers, mentors and advisors from Yale’s network.
Given that there are no stakes or revenue shares, the Investment Office instead is seeking capacity rights and proportional investment rights with each fellow’s firm. The Investment Office seeks this exchange to grow alongside investment leaders in the next generation.
Rooney said that the Investment Office intends to offer the Prospect Fellowship annually, but with time may adjust the investment figures and acceptance count to serve Yale’s strategy, which Rooney described as being historically consistent.
“The mission of Yale Investments is to serve current and future generations of Yale scholars by producing excellent risk-adjusted returns with the resources that our many generous donors have provided to our community,” Rooney told the News. “With Prospect, we hope to offer a new avenue for productive, value-added partnership at the moment when it is most impactful.”
Rooney said that the office added that many of Yale’s partnerships last more than 10 or 20 years, with one having lasted for more than 40 years. Most of these partnerships began similarly to the Prospect Fellowship: with small anchor investments.
Given the long-term vision of the Yale endowment, Skorina noted that it will be interesting to see how Prospect Fellows act following the end of the fellowship.
“Eight weeks is not a long time to evaluate someone’s potential,” Skorina told the News. “Regardless, it sounds interesting. It sounds innovative.”
From 1985 to 2015, Yale’s investment in venture capital as a percentage of its endowment increased almost 15-fold, per the Investment Office’s annual endowment update. The Prospect Fellowship, an extent of venture capital, will further demonstrate Yale’s growing interest in the field of seed investing and venture capital.
Applications for the Prospect Fellowship close on Oct. 14.