Venture Studio U: The University as an Entrepreneurial Ecosystem
Most universities understand the importance of entrepreneurship on their campuses, but many still struggle to turn their ideas into successful startup companies. In an earlier blog post, Embracing Startup Creation On Campus, my colleagues discussed these motivations and challenges facing universities across the country in more depth. In this post, I’ll be tackling another common question posed to our team of university-facing innovators at High Alpha Innovation:
What is the secret to developing a thriving entrepreneurial ecosystem on your campus?
At a basic level, university entrepreneurial ecosystems are like the fire triangle, a simple model for understanding the necessary ingredients for a vibrant flame: fuel, oxygen, and heat. To better understand the answer to my central question, let's first look at today’s campus landscape and how university leaders are attempting to spark entrepreneurship.
FUEL: Any material that is capable of burning. Like wood that sets a strong foundation for any fire, fuel on campus is the foundation of a thriving ecosystem: the people and resources that form the substrate for ideation and innovation.
Sources of fuel on campus: A diverse set of students, faculty, and professors; innovative research labs, technology transfer offices, hackathons and entrepreneurship competitions, entrepreneurial curriculums.
Building this foundation starts with a diverse set of students, faculty, and researchers in the university ecosystem. Research labs are historically a great place to bring new technologies to life, containing the proper tools to bring people together and explore interesting topics. Technology transfer offices help bridge the gap between IP and the industry through commercialization. Hackathons and startup competitions incentivize students to come up with business ideas, and focused topics bring domain expertise. They also force rapid development and iteration of ideas. Entrepreneurship classes give context to frameworks and more importantly allow space for students to ideate and design business models. They also provide a safe space for failure and can encourage hesitant students to get a taste of entrepreneurship.
Universities know the importance of fuel and many launch startup companies. However, most startups live and die on campus. Research from BYU has shown that 40% of university-licensed startups from the top-50 research institutions have never hired a single employee. These startups, considered “walking dead,” are only found on paper and are still in search of commercialization - failing to create any economic value (see footnote 1). At High Alpha Innovation, we see a common failure of building with the wrong team. When venture building is in the confines of a lab or classroom, it is difficult to build a diverse and complementary team that has venture scalable potential. Many teams lack startup networks/experience and are faced with the tough decision of walking off campus to find traction and venture funding.
HEAT: Responsible for the ignition of the fire and also necessary to maintain the fire and permit spread. Heat on campus is characterized by culture and processes. This is a notably difficult part of the equation within the entrepreneurship ecosystem.
Sources of heat on campus: Entrepreneurship centers/hubs, incubators, and purpose-driven university governance.
An entrepreneurship-first culture that focuses on building startups enhances university stakeholders and has a positive economic impact on the surrounding community through job creation and financial returns. Minimal red tape on campus allows for all students to have equal opportunities and feel empowered to take a leap of faith. Entrepreneurship centers/hubs that sit in a central location and give access to all stakeholders at the university allow for the greatest cross-pollination of ideas. It’s their job to cultivate and create the friction and collaboration between departments, schools, and labs to generate the heat required for ignition.
Most people have great ideas and are curious, but risk aversion and a culture that discourages self-exploration (the soft skills of entrepreneurship) keep pursuits on the sideline and will never ignite an ecosystem of entrepreneurship. Many schools have redundant resources that are siloed or sit in a single functional area and access to certain resources is restricted to stakeholders with a certain title. This creates confusion as university entrepreneurs try to triage the best place to go to mature their startup idea.
OXYGEN: The lifeblood of a fire that serves as an environment for it to flourish – or simply exist altogether. Oxygen on campus is characterized by the growth and impact of funding availability. It is often said that cash is the oxygen of a startup, and campuses are no different.
Sources of oxygen on campus: Endowment funds, angel groups, student-run venture capital funds, and student, faculty, alumni, and business networks.
Making funding available at the earliest stages and with minimal strings attached is an ideal environment for ideas on campus. Schools that have student-run venture funds and accelerator programs are attempting to tackle the early capital problem and connect students to mentors. They provide a quality hands-on experience, so students can learn both sides of the equation. Universities with industry-sponsored research programs use experiential education to help researchers gain valuable insight into entrepreneurship and the challenges of starting a business. And angel networks on campus have a vested interest in the success of their alma mater and provide capital, mentorship, and diverse non-academic expertise.
Just as fire never spreads or grows without oxygen, ideas live and die on campus without cash. The marketplace has more cash than ever for good ideas, but in a university, certain limitations that limit dollars deployed to university startups. Many risk-averse external funds will not invest at the very early idea stage where funding is critical, and even more common, funds encourage students/faculty to leave the university before investment. And at one point or another, all faculty or post-doctorate founders are faced with the hard decision to leave their posts to run their company. In addition to facing the challenges of fundraising for and running a company part-time, many professors and university ideators would (understandably) rather continue their lifelong calling of teaching and producing research within the walls of their university.
The secret to a thriving university entrepreneurship ecosystem - a venture studio.
You can rub sticks together or use flint and steel – both create a flame – but you’re a lot more likely to succeed if you have the most rapid fire-starting elements together. Then all you need is a spark.
At High Alpha Innovation, that spark is our specialty: we believe that a thriving startup ecosystem incorporates all the elements needed for ignition. Our company-building model is the perfect fit to connect all of these on your campus and help entrepreneurs on campus avoid the hard decision to stay or leave campus if they want to run a venture-scalable business. World-class professors, researchers, faculty, and students can continue to contribute academically to the university and have ownership in the growth/financial returns of a startup. These founders can learn what it is like to start and scale a business with mentorship and coaching. We take the ideas, develop a viable business model around them, and connect them with a network of founders, operators, investors, and customers to help them succeed.
1. Todd Hollingshead, “Nature Study: Increasing number of university-licensed startups the US are not actually operating,” BYU Communications, January 23, 2020, https://news.byu.edu/intellect/nature-study-increasing-number-of-university-licensed-startups-in-the-u-s-are-not-actually-operating