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Garber VC Fund Exits American Education Corp.

With the acquisition of American Education Corp. (AEC) by K12 Inc., the Garber Venture Capital Fund at the Penn State Smeal College of Business has sold its shares of AEC for $764,518.65, with the possibility of additional milestone payments.
January 10, 2011

With the acquisition of American Education Corp. (AEC) by K12 Inc., the Garber Venture Capital Fund at the Penn State Smeal College of Business has sold its shares of AEC for $764,518.65, with the possibility of additional milestone payments.

AEC is a leading provider of research-based core curriculum instructional software for kindergarten through adult learners. K12, a provider of proprietary curriculum and online school programs for students in kindergarten through high school, announced its acquisition of AEC in November.

The Garber Fund's 37,500 shares of AEC were donated to the fund by its namesake, Penn State alumnus John Garber. The proceeds will be used by the fund to invest in other early stage companies.

The transaction marks the second exit for the Garber Fund, a $5 million MBA student-managed venture capital fund. It previously sold holdings in Schoolwires Inc. in 2008 for a total return on invested capital of about 55 percent.

The Garber Fund is used within a course environment for Smeal MBA students to experience firsthand all aspects of venture capital investment, including deal sourcing, due diligence, term sheet negotiations, closing, monitoring investments, engineering exits, and managing the portfolio.

Since July 2002, the Fund has made seven investments and currently has four active investments: Healthy Humans LLC, a software platform that links patients to their physicians, Diamond Back Truck Accessories, a manufacturer and distributor of pick-up truck covers and other truck accessories, INDIGO Biosciences, which has developed a unique method to cryogenically preserve nuclear receptor cells, and HireVue, an online platform for executive recruitment.  Initial investments from the fund have been between $100,000 and $325,000 and have been in the form of convertible debt or preferred stock.

"The Garber Fund is one of the nation's largest and most active student-managed VC funds," says David Lipson, director of Smeal's Garber Venture Capital Center, which oversees the fund. "Having access to such a fund and the opportunity it affords our students to fashion a rigorous venture capital process allows them to gain exposure to every aspect of early stage investing. It's the best way to learn."

The Garber Fund was established in 1999 with a $5 million commitment from Garber and his wife Bette to bring reality to the teaching of entrepreneurship and venture capital. The fund is part of the Nittany Lion Venture Capital Association (NLVC), an MBA student-run management group that works with small companies and other investment groups in early stage business planning, execution, and due-diligence assignments. NLVC forms part of Smeal's highly acclaimed entrepreneurship program, in which students are immersed in real-life situations throughout their studies.

For more information on Nittany Lion Venture Capital or the Penn State Entrepreneurs Network, contact David Lipson at 814-865-0195.

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