When Fortune reported that Dorm Room Fund, a student-powered investing group, had spun out from First Round Capital with $12.5 million in capital for its newest fund, it was almost an easy feel-good story. Here was a venture capital vehicle bent on providing experience to the next generation of would-be VCs, now flush with more dollars to further its work — what was not to like?
There was a catch, it turned out. Per Fortune, participants in the program are not paid and do not receive upside in deals that they execute. “In other words, if a [Dorm Room Fund] student spots the next Facebook, they won’t be a cent richer for it,” the publication noted.
Dorm Room Fund CEO Molly Fowler, meanwhile, defended the firm in an email to TechCrunch.