Monday, October 6, 2008

Teaching Cats to Swim

So I was at the NCET2 University Startups Conference in Washington last week, and one of the hot topics was the role of faculty members in university spinout companies.

I have strong feelings about this, which I've documented here. But since not all the readers of this blog will have suffered through one of my presentations, I figured it was worth writing about.

Jack Biddle (co-founder of Novak Biddle, a top-notch VC firm in northern Virginia) started the controversy by saying that his goal was to pull faculty members out of the university... and that smart universities (he explicitly mentioned Stanford) will have liberal leave-of-absence policies to encourage just that. He minimized the value of licensing the university's intellectual property... "If we have the people, we don't need a license. And the license isn't worth anything without the people."

Niloo Howe from Paladin Capital responded by saying that they typically don't want the people... they just want the technology. "Companies led by professors focus on science experiments, and we don't fund science experiments.)

My take? They're both right, and they're both wrong.

As I've said so many times over the last few years: Teaching faculty members to be entrepreneurial is like teaching cats to swim.

swimming_cat.jpg


  • It can be done.
  • You will lose blood.
  • You’ll never be satisfied with the results.
  • You will annoy the cat.

At Georgia Tech's VentureLab, in most cases, we try to discourage faculty members from becoming CEO of their startups. CEOs require a particular mindset, a particular focus... and, usually, a particular set of experiences and scar tissue that most faculty members don't have.

(There are exceptions to every rule, including this one.)

Faculty members make great Chief Scientists, or Chief Technology Officers, and even board members. (And Georgia Tech faculty can spend significant time on such tasks without taking a leave of absence.) As the originators of the technology underpinning a startup, they deserve significant founders' equity. But once you've made tenure at a university like Georgia Tech, you have developed a certain skill set that frequently doesn't transfer to an entrepreneurial startup. (As Cali Tran of North Bridge Venture Partners pointed out, faculty members frequently manage laboratories with dozens of employees and million-dollar budgets... but "laboratories don't scale. Companies have to.")

At Georgia Tech, we actively recruit VentureLab Fellows... experienced entrepreneurs who use their market knowledge to evaluate innovations and build new companies. Typically, a VentureLab Fellow has already built one or more startup companies, so they have a deep understanding of the non-technical issues involved... recruiting, fundraising, dealmaking, etcetera.

This model works. The professor focuses on continually pushing the edge of the technology. The entrepreneur focuses on building the business. A few graduate students may be attracted from the laboratory to the startup, and that's not a bad thing (as long as academic conflicts of interest are avoided). And investors put their money into a proven entrepreneur who is building a professional management team, not an academic who may be distracted by science experiments.

We've done this a dozen times or more at VentureLab. Investors have endorsed our approach with over a quarter billion dollars in private equity investment. We plan to keep it up.


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