Taxpayer Money to Flow Into Startups Through California Universities

Why should our pensions and mutual funds be the only ones lucky enough to gamble on Silicon Valley's most inflated startups? Thanks to multiple changes in the University of California system, taxpayers now can invest in emerging tech companies too.

University of California President Janet Napolitano announced today the repeal of a 25-year-old policy that "barred the university from investing directly in companies that commercialize technology that has emerged through UC research."

Having universities invest taxpayer money into startups may sound risky, but Napolitano has a plan. The UC president also announced the creation of the"UC Innovation Council" to help ensure that the university doesn't pump funds into any bad investment. The outside council will be made up of innovators ranging from "investment and business executives, venture capitalists and technology experts."

According to a UC press release, the university is also getting into the tech incubator racket:

In tandem with the rescission, Napolitano also approved a pilot project that allows campuses to accept equity in startup companies, rather than charge them fees, for accessing university services.

Several campuses have, or are creating, "incubators" in UC-owned or leased space where fledgling UC-associated companies can start commercial ventures that promote the practical application of university research. Accepting equity helps the start-ups by avoiding draining them of cash and also allows the university to participate in financial returns. The university currently does not have a formal policy regarding accepting equity when companies take advantage of incubators or other university services, and the pilot project will provide an operational framework consistent with UC governance and risk management strategies that allows campuses to do so.

Given the drastic budget cuts the UC system faced during the Great Recession, Napolitano is jumping at the chance to cash in on Silicon Valley's success. However, she is clearly not convinced the Valley's ventures are good businesses.

In a pair of emails sent this week from Napolitano's office, all faculty were warned that use of "sharing businesses" like Uber, Lyft, and Airbnb was under review. Her office's legal counsel is concerned with issues "revolving around the safety and security of our employees when they use such services."

But who cares if they're safe as long as they're safe investments?

To contact the author of this post, please email kevin@valleywag.com.

[Photo: Getty]