Bored with the standard class gifts the graduating MBAs at Northwestern University's Kellogg Graduate School of Management this year decided to get into the venture-capital business. With $235,000 in pledges and matching gifts expected over the next five years, they set up a fund to award seed capital to student entrepreneurs.

This year, the university is providing $10,000 to get the program started, but once pledges have been collected, the fund will draw on the income to make its investments in student businesses. The investments will not be huge. They will run from $2,000 to $10,000 -- enough, perhaps, to do market research or take time off from school. Unlike regular venture capitalists, at this time the fund won't take an equity position in the new businesses. Successful recipients will be expected to pay back the money, half of which will go into the school's scholarship fund.

"This is a way to help people take risks they might not ordinarily take," explains Tom Gerlach, a 1984 Kellogg School graduate on the committee to administer the fund. The committee also includes a venture capital professional, local entrepreneurs, a Northwestern professor who specializes in small business, and a member of the second-year class. Gerlach says he hopes the fund will enable students to translate business plans prepared as class projects into actual companies. "When I took the new-venture formation course, there were 3 or 4 projects out of 11 that could have gone forward," he notes.

Gerlach, who hopes to own and manage a Chicago restaurant with a partner, says he is one of only a handful of students who start businesses after graduation. "The fund will help bring students like ourselves to the school," he says. "Business school is changing."