Editor's note: Este artículo está traducido al español.
Former UNLV President Len Jessup is back in Las Vegas with a new project: launching Desert Forge Ventures, a fund dedicated to backing local startups while attracting new companies to the area.
Jessup, who led the university from 2015 to 2018, is now general partner of the venture fund, marking a shift from academia to private investment aimed at diversifying the region’s economy beyond tourism and gaming.
The Las Vegas Sun spoke with Jessup about the fund’s creation, its goals for Nevada’s startup landscape and why local investment capital is essential for economic growth.
Give me an introductory overview of Desert Forge Ventures?
We knew when I got here to UNLV 11 or 12 years ago that we would eventually need to have a venture capital fund aimed at the university and things going on here in the startup ecosystem. But it just wasn’t ready back then. And it is now.
UNLV is a Carnegie R1 research institution, so it’s got great things coming out of its labs from faculty and students. And also the startup ecosystem is hot right now. I serve as a fellow at the Lincy Institute on campus, and we just completed a study of the startup ecosystem. And in fact, we found that the data showed that the Las Vegas startup ecosystem has been ranked in the top five in the last few years in the country, not by volume, but by year-over-year growth in the activity. So the ecosystem is ready. The university is ready.
I started modeling what other universities were doing with their funds. For example, at University of Arizona, where I was as a student, and then business school dean, they had just started their first fund just as I was leaving years ago or so, and they’re on their fourth fund now — so they’ve had quite a bit of success. So we modeled after what Arizona did, and also a little bit modeling University of Utah, as well, with their venture capital funds. We had a lot of help, talking to a lot of people about the best way to do this.
What kinds of companies are you setting out to invest in, or what sectors are you focused on?
We’re working with a lot of people who are trying to diversify the economy here in the state, so that we’re more recession resistant.
The fun economy is thriving and doing really well and growing, and we’re adding professional sports, and we love trying to add in companies in tech, broadly speaking.
We’re sourcing companies on three levels. One, of course, is anything coming out of UNLV, and we’ve got a good relationship with the university, where we get a first look at things that are going on in labs and coming out. And then second, we’re also looking at anything else in the ecosystem here in Las Vegas. And then third, I’ve got a number of companies who are helping me to recruit founders to bring their startups into Southern Nevada.
It’s not a difficult sell, given the dynamics. That’s partly why the startup ecosystem is so hot. A lot of founders are moving in from other states and other countries, because of the economics here. With no state income tax, no capital gains, it’s lightly regulated compared to other states; relatively inexpensive for office space and warehouse space and wet lab space, compared to California in particular. It’s an easy place to launch a business compared to other states.
So I’ve got those three levels where I’m sourcing things, and we picked two that we’re making investments into. One coming out of my level one, out of UNLV, is WAVR. The technology there is atmospheric water harvesting, which means pulling water out of the air. We made a $500,000 commitment to WAVR, and then the Governor’s Office of Economic Development — we have an agreement with them that they’ll match our investments in a sidecar fashion. And they’ll do that up until $10 million. We’re doing it in tranches, so the first tranche is a commitment up to $5 million, and then they come in and they match us dollar for dollar.
The other one we committed to is in my level two, here in the valley, it’s a medical device that came out of UC Irvine ... Vena Vitals.
Why is it so important to have a venture fund like this one that is locally based to benefit the local economy and community?
We have a situation where there’s clearly a lot of money here, and people moving into town with money, but not yet organized a deep local, organized venture capital at the level that it needs to be.
There are some really good angel funds, but not quite enough yet for what we need. And we need to have it. Because the trouble is, the founders are coming here and they’re starting companies, but when they get beyond putting their own money in, and then they do friends and family, and they might get a little bit of angel funding, and then when they need some serious funding — like the million-dollar rounds that are going into these two companies that I talked about — if they can’t find it here, they’ll find it somewhere.
Typically when you get to that level of funding, whoever provides it wants to move the company to where the money is. The investors like the company to be close by, where they can keep an eye on it. And we want to keep these companies here. The thesis is that there’s not only a need for it, but we want these companies to stay and to flourish here. This is a firm that’s by, of, for Southern Nevada. So we care about these companies and these founders.
In most cases, my team, we know them and we care about them. And we’ve had several situations where we spent a lot of time helping a founder, where we’ve not even put any money in and might not, but we really want the company to succeed, so we’ll spend a lot of time helping that founder work through difficulties, just to make sure that company survives here.
How do you see the fund growing over the years?
I have a long-term vision for how this will go. In a short amount of time — just a few months — we’ve done a pretty good job so far getting the money that we need for this first time. And so I feel pretty good about where we are now. Once we get to about ($10 million) and we can maximize that matching money, then we’ll close it out. That’ll be Fund I. We’ll just focus on deploying the companies.
Then, as soon as we believe we’re ready and the investors are ready, we’ll head into Fund II.
A quick anecdote for Arizona. When I went there as a Ph.D. student in the ’80s, I got a Ph.D. in business, both in the management department and in the information systems department. And when I was there, the local company in Tucson that was hiring most of the graduates was Raytheon, which is not a big surprise. It’s still one of the biggest employers in Tucson, if not the biggest. And then when I went back 20-plus years later to be the business school dean there, that had totally turned around. Raytheon was still hiring quite a few of the students, especially out of business school, but the No. 1 company locally hiring students out of the business school was Ventana Medical Systems, which was a spinout from the university — a cancer diagnostics company from a professor in the medical school. And what I loved about it was that it grew up there in Tucson, and Roche bought it, but kept it in Tucson. And it’s now Roche Tissue Diagnostics — still there, throwing off incredible revenue for Tucson and for the state of Arizona.
So that really made an impression on me, seeing that when I went back there, and as I came up here to UNLV, that was why I had such a big emphasis on economic development. We knew we wanted this all to happen one day. And I, in the back of my mind, (thought) “Man, I want to create a dozen of these Ventana Medical Systems kinds of companies here in Las Vegas.”
So that’s now what we’re working on.
Is there anything that we should know about the name “Desert Forge Ventures?”
We wanted to play on our place, because we had a pretty strong sense of place, obviously, in our thesis. So we knew we wanted something that had that feel of the desert. And then we kind of landed on that notion of the forge, like, you’d forge steel coming out of a foundry in that we’re forging or helping founders to forge companies here in the desert.