University Startups and Spin-Offs: Guide for Entrepreneurs in Academia (2015)

Part II. Strategies for Universities

Chapter 17. How Universities Can Support Their Startups Today

Many universities are adventurous when it comes to research and new technology in a lab setting. But when the conversation turns to commercializing this research, academics often remain on the sidelines. There is still a chasm between academia, the business community, and the financial world. However, many decision-makers at universities I had the pleasure working welcome new ideas for entrepreneurship and commercialization. They have shown great interest and support, and I wish to thank them for their openness.

Clearly, no institution of higher learning can or should reform overnight and become a business school or an investment bank. Suggesting sweeping changes will therefore fall on dumb ears and will be more counterproductive than anything else. It’s better to focus first on a few simple guidelines that can make it easier for new startups to embark on the entrepreneurial path. I discuss some of these in this second part of the book. All of them require active participation by the startups. If a team lacks genuine interest in learning about practical entrepreneurship, then it will be very difficult to help them ­succeed. Let’s therefore assume that all entrepreneurs are keen to learn and are ­hell-bent on making their startup work.

Give Guidelines, but Don’t Micromanage

Universities should stop treating their startups with a one-size-fits-all approach. As this book explored earlier, universities should refrain from forcing ­entrepreneurs down the grant track as the first order of business. Writing lengthy documentation, proposals, or, even worse, business plans make little sense for startup entrepreneurs. Universities should let them experiment without doing much planning. Just as the grant track paints a false picture in young entrepreneurs’ minds of what it means to launch a startup, so do micromanagement and over protectiveness. All parents must at some point let their children make mistakes on their own. This process may be hard for advisors and professors who have been working closely with students and researchers, but it is essential for a startup to collect personal experiences in the real world. Without the opportunity to fail from time to time, startups will never learn to fly.

Universities can clear roadblocks and make resources available. This can enable students to develop their startups without hassles and help them to take the first steps towards entrepreneurship. They will have the best chance to succeed if non-entrepreneurial duties burden them as little as possible. Testing minimum viable products, putting together business models and financial plans, and engaging non-academics with potential partnerships are quite different tasks from the daily business of other academics. Make sure startups can do their work uninterrupted, at least part of the time. Research team members may still have other important roles to perform at the university, such as finishing their PhD or postdoc, and the team may be pursuing entrepreneurship on their own schedule. In this case, see that they fulfill their duties, and then let them run.

A startup mentor may also help set up certain guidelines to help the university understand what startup entrepreneurship entails over the first few months. Most faculty will be just as confused as the founders.

Mentors vs. Workshops

At a university I worked with, several students and researchers had the opportunity to attend workshops on Lean Startup and business modeling, one of which was conducted by author Alex Osterwalder, who invented the Business Model Canvas.¹ That weekend workshop was exciting; but the results for the individual startups were mixed, as I learned in one of my follow-up consulting sessions. The participants’ PowerPoint presentations were less academic and had been tuned up with more business speak. Nonetheless, fundamental insecurities about the journey ahead still prevailed. Teams were now aware that there was a thing called the “business model canvas,” but few had completed one for their startup. Those who did were staring at a piece of paper that made certain statements about their company and their market, with no idea what to do next.

When learning about the Lean Startup method, several of its concepts are far from intuitive at first sight. The main issues have to do with the business model canvas and the minimum viable product (MVP). If you are unsure what these are, then look them up in Chapter 2, where they were introduced. But let’s first go back to that workshop. Over the weekend, the startups learned about the need to collect feedback from the market about their product as soon as possible. In a consulting session the week after the workshop, I asked one of the teams, a software startup, about their next steps. They did not know how to respond. Using the business model canvas, they had completed several questions about their product, their potential market, and how to serve that market. However, the most important part was missing: the startup team was unaware that they should be making a test version of their software. How could they get any feedback from the market if they had nothing to test? A software startup without software is like a restaurant without food.

The team had always assumed that a large software firm would come along, start a joint venture with them, and then do the product testing and development on its own. They saw their strength in their sophisticated algorithm and therefore never bothered with a user interface for the software. But established companies are unlikely to flock to a startup with an invisible product and no feedback from potential users. Teams have to test their MVP to understand whether anyone in the market even wants what they produce. If they do, then the next question is whether consumers are ready to spend enough money so the startup can become profitable. With this first-hand intelligence, they can later approach a joint venture partner.

The software startup without software found itself stuck in a loop: they needed to get feedback from the market about their product, but to do that, they first needed a joint venture partner to help them make the product. And to attract a joint venture partner, they needed to get feedback from the market.

I am not trying to poke fun at these entrepreneurs. They are smart individuals. Analysis paralysis is common if you have been working on a project for a long time. Even though the solution may seem obvious in hindsight, a workshop rarely solves current challenges. It can therefore be advantageous to get the perspective of a mentor. This should be an entrepreneur who can offer a fresh look at things. The mentor can help the team solve challenges as they arise. If a seasoned entrepreneur is made available during a startup’s initial stages, the difference can be like night and day.

Another team I worked with wanted to create language learning materials based on certain academic research. Under “key resoruces” in their business model canvas, they listed the need to raise six-digit funding to complete a line of several books and audio programs in different languages. They would then sell this material to schools and universities. They were struggling to raise the funding at the time I got involved. A few simple questions turned up major flaws in their approach. Did they ever test a lesson with potential clients? Did it make sense to roll out the entire product line at the same time? What about testing which languages would have the deepest market? Stuck with planning and brainstorming their product line, the startup had never thought about proof of concept with real market testing. They assumed they would first have to complete the entire product line to be a real company. “Build, measure, learn” is not a household concept, and it may take some time to get the hang of it. Having a qualified outsider available for advice can make all the difference between success and giving up.

When getting feedback from potential clients, you need to be creative. In my own startups, we sometimes made software mockups in Microsoft Excel, dressed up to look like a web site (more or less). Clicking a button (nothing more than a colored cell) linked to a new sheet in the workbook to simulate the next page. Mockups can be messy; they contain bugs and often have just a tiny set of the features. But putting a simple mockup of your idea in front of people should be the first order of business. Most of the time, these take less than 24 hours to produce and require zero funding. Endless deliberating about how to start leads nowhere—the most important thing is taking the first step as soon as possible.

Creating an overall atmosphere of entrepreneurship at a university is a laudable goal, but it often leaves would-be entrepreneurs without workable strategies to achieve success. Most university staff and faculty have never started their own venture and can therefore provide only limited guidance when a startup hits the ground running. Working with a mentor one-on-one on specific challenges is infinitely more helpful. This will hardly break the bank of the university, but the benefits for the startups will be more powerful than the best business model workshop.

Integrate Startups in Management Activities

University research teams and management staff exist in parallel worlds. Startups can benefit from taking part in the everyday fabric of university life. Managing a university involves many activities in which startups could share. No sweeping changes are necessary; simply thinking of entrepreneurial students and researchers when planning events and receptions. Suppose there is a conference in town where the university has a booth. How about ­offering some space to startup entrepreneurs to conduct further MVP testing, interview prospects, and get feedback about their business models? Startups can profit from leaving the building to see how a tradeshow works. Make it known when such events take place, and give students and researchers the opportunity to take part.

Instead of giving visitors a general tour of the facilities, propose that they drop in on one of the startup labs that is showcasing an experiment with an MVP. When the government comes by, ask startups to pitch instead of having a professor give a lecture. Many possibilities exist to integrate startups in the everyday hustle and bustle of the university management and support.

Startup entrepreneurs can volunteer to guide certain visitors around the facility, all the while getting feedback about the problems they are working on. Because startups are learning to shift the discussion from features to benefits, every chance to reach out to test subjects can be used as practice to engage them for feedback. This creates knowledge about potential partners and clients that will move the startups further along with their business models and market studies.

Enable Industry Networking

Entrepreneurs must try to leverage everything at the university for their benefit. If your university is a certain size, it may take part in a conference or technology fair. Many small and medium enterprises (SMEs) and multinationals also attend these events. They provide an ideal platform for startups to network with potential clients, future joint venture partners, investors, and competitors right on the battlefield. Teams can collect business cards and begin a list of e-mail addresses and phone numbers that they can use in their evolution down the road. Startup entrepreneurs can never have too many contacts in their networks.

Attending university networking functions gets a new meaning for startups with a solid business model and the mindset of engaging others with actionable next steps. Because they have discovered the importance of a strong network, startup entrepreneurs know better than standing around with peers they already know, or wish they had never attended in the first place. They actively pitch their startup and engage contacts with actionable next steps. Luck favors the prepared: a single conversation or new contact can change the trajectory of a startup and give it a turbo boost.

This is all great, you may say, but our university rarely participates in such events. In this case, how can startups make more frequent contact with industry? One idea is to establish your own networking events. Hold on, you say; networking events we already have. Yes, companies may contact the university and tour the premises and labs to watch demonstrations and hear lectures about certain technologies. But are several companies ever invited together? How about an entire sector? What about a full industry group or trade organization? Interaction may exist one-on-one, but this lacks the scale to enable a vivid exchange of ideas and true networking. The university could offer a platform to make that happen. It would also be interesting for companies to network with each other. How about reaching out to industry groups or trade organizations and inviting them for an afternoon of networking, with refreshments? Instead of lecturing them on research and technology, startup teams can ask their opinion of MVPs and market assumptions. They can use the networking event to gain as much intelligence as possible without having to leave the building. Rather than startups reaching out to companies on their own, bring companies to them once in a while.

Fail Smart and Collect Data

Of course, it is never fun to admit that an undertaking failed. Most people feel uncomfortable with the notion of failure. As a result, they frame all of their efforts as successes. Even if a team failed to achieve certain results, they learned something in the process—at least they tried to do something. Unfortunately, this mindset allows failure to become an accepted, everyday event. If you frame failures as successes, startups will lose their edge. If they think that burning through $250,000 in grant money without launching a product is OK, then they are on the wrong track from day one.

In retrospect, however, even such failures can provide valuable data for the university and startups that will follow. They should review failed startup together with the team and register their findings. How did the entrepreneurs attack the endeavor? How long were they at it? When did they declare defeat and wind down the company? How many MVPs did they test? How many potential joint venture partners did they engage? What did they ask from those potential partners? Did they launch a product in the market? And so on. Myriad questions are possible.

If a university has a startup track, it can gain insight by recording all the steps its startups take. This makes it easier to spot patterns. Then startups can be tracked and gently nudged toward taking reasonable actions when they become confused or veer off course.

What you cannot measure, you cannot improve. Having more data to mine will hardly make the university a new entrepreneurship hub over night. Even when droves of data exist, not every startup will succeed. There is no fail-safe procedure that ensures hundreds of millions of dollars in revenue within a few short years. But learning what contributes to startup failure will result in a helpful tool that makes your university’s startup program smarter over time. It will take a while and several startups to arrive at a workable database. If ­failing smart sounds interesting to you, then you should begin collecting data as soon as possible. This may even become part of a course at a related business school.

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¹Alexander Osterwalder and Yves Pigneur, Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (Hoboken, NJ: Wiley, 2010).