How to Create a Successful Startup – a University’s Perspective
Since 2006, the University of Minnesota has created 67 startup companies and of those, only 18 percent are no longer in business. Compared to the national average, that’s pretty low. (Research out of the Harvard Business School says about 75 percent of all startups will fail.) And yet, universities provide a unique environment that may contribute to a greater likelihood of startup success. Here are three key ingredients that help to create startup companies with long-term viability.
World Class Technology
Research universities are knowledge-generating institutions that provide the ideal platform to pursue discoveries. The University of Minnesota has a long history of producing cutting-edge research and innovation in energy, life sciences, medical devices software, agriculture, food science, engineering and other industries. The U is home to such groundbreaking inventions as the pacemaker, the AIDS drug Ziagen and the flight data recorder.
Inventions that originate in a university lab continue to benefit from ongoing research and can be continually refined. Since university-developed technology is typically in a very early stage of development, it needs significant market-based input and improvements before it can be commercialized via a startup. Information gained from the lab and the marketplace is shared and leads to a better product in the long run.
Rather than being driven strictly by the bottom line, universities are driven by a larger purpose to find solutions to some of the world’s greatest challenges. Thus, inventions that stem from university technology often have a benefit to the larger society. This grounds the company in a relevant and useful product with wide-reaching implications and opportunities.
For example, one of the U’s most recent startups, Zepto Life Technologies, is based on biosensing technology developed by Jian-Ping Wang, an electrical and computer engineering professor and one of the U’s most prolific inventors. (This is the second of three spin offs from Wang’s 39 disclosed inventions.) The portable device he invented allows patients to be quickly screened for a variety of conditions, from infectious diseases to cancer, leading to faster diagnoses and, ultimately, better health outcomes.
Experienced Teams and Talent
Steve Jobs, entrepreneur and co-founder of Apple, was known for having transformed the technology industry, forever changing our world. He believed that it is the people that drive innovation in a company more than money. “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R & D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
The most valuable, diverse and dynamic aspect of any research institution is its faculty and students. Regular collaboration across disciplines and departments is a key element of university research and leads to the development of highly qualified research teams focused on solving critical societal problems. While faculty are the U’s primary inventors, several student-oriented programs at the U of M, including the MIN-Corps program STARTUP course, are geared toward encouraging students to explore the market potential of their inventions.
However, where researchers excel in creativity and technical expertise, they do not always possess the business experience needed to successfully attract the right investors and launch a company. To fill this gap, the U of M’s Venture Center, which works with entrepreneurs, researchers and investors to create new start-up companies based on university research, has a CEO-in-Residence program that pairs proven CEOs with faculty and early-stage technology opportunities for several months prior to actually forming a startup company. During this exploratory period, the faculty get to know the potential CEO and the CEO-in-Residence has time to obtain a deep knowledge of the technology, the research team and the market. Other programs, such as an Entrepreneurial Leave Program, also provide support for research faculty who are exploring business opportunities resulting from their inventions.
All of these opportunities together create a vibrant network of people and resources that bring together the best minds from business, science and research to focus on developing solutions to real problems.
Access to Financial Capital
While Steve Jobs may have considered it secondary to human capital, adequate financial capital is a critical element for any startup to succeed. This is especially true in the early stages of research and development when the technology is still untested in the marketplace and before the company begins to generate revenue.
The Venture Center maintains an extensive professional network with venture capitalists, investors and proven entrepreneurs who have successfully formed new companies and taken them to commercial success. It leverages this network and an in-depth understanding of industry trends and market opportunities to direct new companies to relevant contacts and resources. In addition, Venture Center staff have a working knowledge of current terms and conditions in the early-stage capital markets so that the startup company can obtain the most favorable financing structure and pricing.
All of these elements contribute to a unique university culture and setting that helps to accelerate good ideas and support the development and growth of new businesses based on cutting-edge technology. Ultimately, universities foster a culture of scientific discovery, collaboration, financial support and public service— that fosters innovation and provides an ideal environment for startup success.