November 22, 2010
Investing in university innovation is very difficult. In fact, I would argue that it is nearly impossible for traditional venture funds. Part of this is the inherent expectation gap between university inventors and venture capitalists. The latter wants focused, multi-disciplinary founders (tech & biz), and universities generally don’t have those. I wrote previously about some strategies used by TandemLaunch to address these difficulties through hands-on assistance but there is a much more basic problem to overcome first.
The traditional venture capital system relies on entrepreneurs and founders to seek out the money. Decades of funding scarcity have conditioned entrepreneurs to craft business proposals, hone their elevator pitch to minimize the time drain on the VC partner, and willingly travel all over the map to get an audience with the investor. Been there, done that.
This limits the business development activities of traditional investors to brand building and similar activities that guide the flow of eager entrepreneurs to their office rather than the one next door. There are exceptions, but the vast majority of investors still operate this way. In nine round of financing I don’t remember of a single investor actually coming to our office or pro-actively engaging in any other way.
With university inventions they will wait forever in their offices…
University inventors don’t pitch, or at least not in the format expected from the traditional investment community. Part of this is a basic cultural conflict. Where VCs are “the man” in the traditional entrepreneurial game, university professors hold that spot at universities: their time is very precious compared to the rest of their environment (i.e. students), people come to them (e.g. office hours, lectures, etc.), and they have a mentorship role with an implied superiority. Moreover, they have access to substantial funding without having to knock on dozens of doors with their hat in hand. They might bemoan the administrative effort required for grant applications but imagine the outcry if NSERC were to require grant applicants to fly to Ottawa, present a 5-30 minute pitch while their audience twiddles with BlackBerries, subject themselves to merciless grilling leading to a 1:50 or so rejection rate, and then be told that they have to give up some control over their project in exchange for the money.
So the first thing you need to do if you are serious about investing in university technology is to go out and find deals. University Tech Transfer Offices can help you because they effectively aggregate some of the inventions for their institution. But at the end of the day you need to spent time on campus finding those brilliant sparks.