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Mike Wright, Imperial College Business School
© Imperial College Business School
Entrepreneurship In and Around Universities:Myths and Challenges
Presentation at Vancouver, January 17, 2014
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• Research on entrepreneurial mobility– Between institutional contexts
• emerging markets, returnee entrepreneurs
– Between organizations • serial entrepreneurs, management buyouts, university spin-offs
• Chair, Academy of Management Entrepreneurship Division and Mentor Award winner
• Co-Editor, Strategic Entrepreneurship Journal• Numerous books and articles
– “The world of research has gone berserk/too much paperwork”– Some recent books…..
My Entrepreneurial Back Pages
© Imperial College Business School
Introduction
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• What myths do we have about entrepreneurship?
• What are the implications of debunking these myths?
• Which are of resonance for academic entrepreneurship?
• What are the lessons for universities & (academic) entrepreneurs?
• “10” Myths based on my research program over last 15 years
Myths and challenges
© Imperial College Business School
Introduction
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Entrepreneurship is innovative, high growth start-ups
© Imperial College Business School
Myth 1
• Traditional policy and research focus, but too narrow• Need to focus on growing existing firms not just starting
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Entrepreneurship is innovative, high growth start-ups
© Imperial College Business School
Myth 1
Aspall:
Family owned high end cider manufacturer founded 1728
8th successor generation entered to innovate and turnaround
Building on tradition of quality,
Developed new high end vinegars and fruit juices.
Established Aspall as a “cool” brand.
Top 25 US Beer in 2011
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Entrepreneurship is innovative, high growth start-ups
© Imperial College Business School
Myth 1
Seagate Technology:
Buyout of “Busted Tech” listed computer drive producer in 2000
Enabled restructuring & innovation stymied when as listed corporation forced to compete on cost efficiencies
Growth from innovating smaller, cheaper drives for video-game consoles
Becomes #1 in innovation & enterprise in disc drives
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Entrepreneurship is innovative, high growth start-ups
© Imperial College Business School
Myth 1
Terracycle:
Social entrepreneurship venture founded by Princeton student Tom Szaky, grew to 24 countries, 102 employees
Bootstrapping finance to collect organic waste from university restaurants through network of student-volunteers.
Combines broader societal objective with entrepreneurial ways to achieve these social goals
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• Traditionally has been little focus on the context for entrepreneurship in policy and research
• Where has been examined, rather narrow perspective of the legal/institutional environment
• Growing recognition that context is more multi-faceted and policy needs to take this into account……
Entrepreneurial context is about legal environment
© Imperial College Business School
Myth 2
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Dimensions Description Institutional Implications for development of
entrepreneurship in different legal and cultural contexts
Spatial Geographic locus and mobility of stakeholders
Temporal Venture and stakeholder life-cycles
Social Variation in networks across sectors
Organization, ownership & governance
Different venture objectives & performanceRole of different stakeholders in ownership and governance
Market context Complexity, newness, competition, volatility, appropriability
Variety of Context
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• Universities: spin-offs have contextual issues related to:
• Lack of commercial orientation• University ownership of IP• Time from research to market• Revenue generation to meet budget
constraints• Potentially conflicting objectives and
ambidextrous organizations• Differences between universities
regionally• Links to varying local industry networks
Entrepreneurial context is about legal environment
© Imperial College Business School
Myth 2
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• Traditional focus on hard science with patents
• Or on high growth ICT
© Imperial College Business School
Academic Entrepreneurship is hard IP by faculty
Myth 3
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• But Alumni increasingly provide important academic entrepreneurship, ICT especially:– Students– Drop-outs– Graduates
• Spin-offs from subsequent employers by graduates perform better than direct spin-offs
• Financial & social ventures
© Imperial College Business School
Academic Entrepreneurship is hard IP by faculty
Myth 3
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• Entrepreneurs as heroic individuals with ‘special’ expertise
• But most start-ups involve a team– Need for complementary skills– Team needs to evolve
• Entry and exit
• Academic start-ups lack skill & cognitive diversity– Similar people you know at start set
trajectory of shared understanding– But need to evolve– Build links with those they need to
help them© Imperial College Business School
Entrepreneurs are heroic individuals
Myth 4
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• Governance focuses on accountability– Role of independent directors
• Directors need skills & contacts to help firms grow and survive– Sector experience, Gender diversity,
successful prior entrepreneurial experience, ….
• Spin-offs with academics & TTO boards limited – Need contacts to identify required
skills
© Imperial College Business School
Boards are there to monitor managers
Myth 5
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• Entrepreneurs start one successful business & stick with it– But up to ½ of businesses
started by serial entrepreneurs– Learning depends on pattern of
previous success/failure
• Many academic scientists are serial entrepreneurs & can mentor colleagues– Better than support agencies
© Imperial College Business School
Entrepreneurs are one shot wonders
Myth 6
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• Provide access to customers, alliances, suppliers, acquirors, etc.– But embeddedness paradoxical
• Academics embedded in networks with other scientists for grants & publications– Need to access networks with
commercial actors– AND to know how to recruit the people
who can give them that access
Entrepreneurs’ networks are always a good thing
© Imperial College Business School
Myth 7
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• Considerable debate about discovery or creation
• Implications for uncertainty and risk• Framing opportunities may especially
be problem in university context as:– Distance from market readiness– Uncertainty of new markets
• Poses challenges in how opportunities exploited
• Critical junctures and how they are overcome….
Opportunities lie waiting to be
discovered and the route to market is clear
© Imperial College Business School
Myth 8
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Research
Pre-organization
Re-orientation
Sustainability
Opportunity
A: Opportunityrecognition
B: Entrepreneurialcommitment
C: Thresholdof credibility
D: Thresholdof sustainability
Spin-offs need to traverse critical junctures
Development
HOW are these transitions achieved?
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• Market for products vs market for technology– Formal IP spin-offs take years to generate product revenue– During this period value of technology may rise– Implications for financing, skills development, etc
• License the technology, sell patents [technology market]
• Sell or IPO the company [financial market]– Value from expected future returns– Valuation uncertain and can be volatile
• Especially if regulatory hurdle not overcome
Opportunities only have value in the product market
© Imperial College Business School
Myth 9
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Renovo Spin-off – Scar Prevention Drugs Never generated product revenue
£8m VC funding in 2000; £23m 2nd round VC in 2003
IPO
Positive news about drug
trials$12bn market
Failure of trials
Better trial news;
licensing; market cap
£138m
Failed Phase III; founder resigns
2yr launch delay
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• Value depends on economic and social value– Relative importance of each
• How to create and capture value?
• Implications for:– Hybrid ventures and organization
Opportunities only have value in the product market
© Imperial College Business School
Myth 9
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Social Venture Types
Quadrant 1: Commercial Social Producers
Strong corporate hybrid identity within single organization
Quadrant 2: Community Social Producers
Dual objectives through hybrid structure (profit vs non-profit part)
Quadrant 4: Commercial social donators
Decouple economic from social activitiesHybrid processes
Quadrant 3: Social producer intermediaries
Compromise balance between social and economic process
Economic leverage Social leverage
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• Much funding focuses on the beginning of start-up– Grants, accelerator programs
• …..But start-up is a process• …many funding rounds before viability • Especially an issue with innovations generated from
universities– Far from market– Long timescales: Biotech/health vs ICT
• Challenge to make investor-ready at a value acceptable to the university and the VC
Entrepreneurial finance gap is at the start
© Imperial College Business School
Myth 10
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“Valley of Death” and multiple finance gaps in university spin-offs
Finance needed to meet gaps over time
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• Disconnect between strategy, science base, resource & capabilities– Quality & scope of research &
faculty base– Expertise of TTO– Culture of Departments and
academic tribes• Supportive of
commercialization?– Objectives, risks and returns
unclear/unrealistic– Which kinds of spin-offs are they
supporting?© Imperial College Business School
Universities align strategies & support for
academic entrepreneurship
Myth 10 +1
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Mismatched Support Modelsfor University Spin-Offs
RESOURCES
ACTIVITIES
Resource
deficie
nt 41.8%
Competence
deficie
nt 13.9%
Low selective 23.3%
Supportive 16.3%
Incubator 4.7%
Low High
Low
High
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• Select teams not just from close friends but what you need– Colleagues in engineering, science, arts, business….
• Evolve boards with the right balance of skills and contacts• Seek mentors from experienced entrepreneurs who may be
colleagues• Build wider networks with commercial contacts • Be prepared to adapt your original opportunity and trajectory• Be aware of the need for different rounds of funding from
different sources over time• Be clear where the value is: product, technology, social…..
– Implications for above + structures and processes
© Imperial College Business School
Some Suggestions
Implications for (Academic) Entrepreneurs
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• Direct academic entrepreneurship– Novel research to create innovations leading to spin-offs by academic
scientists and students
• Indirect academic entrepreneurship– Education & research experience lead indirectly to entrepreneurial
graduate actions via Corporate Spin-offs & alumni start-ups
• Redesign TTO & courses to support student & alumn start-ups– Start-up “garages” for students and alumns– Cross-disciplinary student /faculty projects– Develop different types of industry reach-out/reach-in
© Imperial College Business School
Rethink Academic Entrepreneurship
Implications for Universities
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Thank You!
Questions?