UT System: No Financial Return on MyEdu Investment--Bain Capital Ventures Connection???

[TexasTowelie]

In 2011, the University of Texas System Board of Regents approved a $10 million investment in MyEdu, an Austin-based education software start-up. This week, after MyEdu was sold to Blackboard — a large technology company — for an undisclosed amount, system officials acknowledged that there would be no financial return on the investment.

“Texas taxpayers would like to know where their $10 million equity investment has gone,” Gordon Appleman, a Fort Worth lawyer and prominent University of Texas at Austin alum who has been a vocal critic of the regents, told the Tribune.

When the UT System entered into its agreement with MyEdu, it was seeking services specifically tailored to its institutions, including — according to the motion the regents passed —"degree planning, degree auditing, integrated schedule, course and credit planning, student-professor online collaboration systems, student-professor online collaboration systems, student evaluation systems, financial planner, manager and college credit, and cost calculator systems with fully integrated mobile functionality."

The agreement called for the system to have access to MyEdu's tools license-free and royalty-free for five years.

More at http://www.texastribune.org/2014/01/17/ut-system-no-financial-return-10-million-investmen/ .

[font color=green]In the linked article there is a hyperlink that connects to another article written by the CEO of MyEdu, Michael Crosno in November 2011 that defends the initial $10 million investment made by UT. There were a couple of sentences near the end of the article that captured my attention:[/font]

...Much has been written about whether this was a wise investment. Only time will tell. But with growth capital from Bain Capital Ventures, one of the most prominent early-stage investors in the world, combined with our strategic partnership with the UT System, they should like their chances of returning a profit.

[font color=green]Therefore, the following questions came to mind:
1) Was the Bain Capital Ventures connection to MyEdu a factor as to why the UT System expects to receive a 0% return on investment?
2) What was the ROI of Bain Capital Ventures for their capital investment?

[/font]

[Ilsa]

1. No return on investment or no return OF the investment?

Did they at least get the $10mil back?

[TexasTowelie]

2. I had the same question as you did, but couldn't find the answer within the article.

My take on this story is that UT purchased software that was tailored for UT-Austin and that is the return OF investment. Meanwhile, other university systems use the software for free. I doubt that $10M is any account (Bain Capital would raid those funds).

[TexasTowelie]

3. There was a story in the Austin American-Statesman tonight.

UT will not be getting the $10 million back.

The release didn’t explain why the expenditure of $10 million in public money didn’t yield a financial return, an omission that some observers said was troubling.

“There are lots of unanswered questions and apparent inconsistencies,” said Gordon Appleman, a lawyer in Fort Worth and a former chairman of a UT System donor group.

Kirk Walden, an adjunct business professor at Texas State University and principal of Austin-based Walden Consulting, which follows the venture capital industry, said the UT System’s investment “had to be a fabulous deal for MyEdu because they get working capital to improve the product without actually giving up any equity. It’s better than a loan. Here they got the cash and they don’t have to pay it back.”

As an unproven startup, “MyEdu also got inherent credibility out of the deal,” Walden said. “What better endorsement could you have than from one of the highest-profile universities? What does that do for your sales pitch when you head out to pitch to other schools?”

http://www.mystatesman.com/news/business/ut-system-got-no-return-from-unusual-investment/nc4c8/?icmp=statesman_internallink_invitationbox_apr2013_statesmanstubtomystatesmanpremium
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[Ilsa]

4. Thank you! Isn't this the most disgusting thing?

I wonder if it will be investigated. This is white-collar theft of public funds, IMO.

On edit: I wouldn't call it "no return on the investment". I'd call it a Loss. An investment to be written off. That "no ROI" term makes it sound like they got the money back without appreciation.