Tuesday, May 03, 2011

No, most tech startups are not built around new university-based research discoveries

There's a cardboard version of where new tech companies come from and how to generate more startups that I've heard repeatedly over the years—including several times since coming to London.

It goes something like this: research at universities leads to new discoveries (usually patentable), and commercializing these new university-based discoveries is where most startups come from. While some of the more entrepreneurially-minded professors/researchers might build a company around these inventions themselves (especially if the university has an inventor-owned IP policy), often these gems just sit there waiting to be commercialized. What we need to do, therefore, to create more startups is have folks roam the halls looking at research discoveries and figuring out how to build new companies around them and get them funded.

Even in Waterloo, we'd often hear that version of startup creation—never from people who actually worked in the startup support community, but it wasn't an uncommon belief outside of that small group. Folks in government seemed to be particularly attached to these stories (and still often confuse research funding with commercialization funding, since they see the two as adjacent points on a line) and have made policy decisions based on these beliefs.

The problem is, only a tiny percentage of tech startups are created this way. It's not zero—tech transfer offices do a lot of work in this area—but it's less than 10. Which is to say that more than 90 percent of tech startups aren't formed through this process or anything resembling it. When you're looking to grow a startup community, this is not the process to focus on.

I've raised eyebrows a few times in London explaining to people that the overwhelming majority of startups in Waterloo aren't built around new university-generated discoveries. That's not the story they've been told, and they were all ready to have London follow the model that's been proven to be a success in Waterloo. Let's talk to researchers, find the new discoveries, give them some money and watch the magic happen—that's how you create great tech startups. Or so they think.

Except that it isn't the model followed in Waterloo at all. That's not where most Waterloo startups came from—or Toronto tech startups, or tech startups from any other tech centre I know. And it's not going to be how most of them are created in London either. Universities play a huge role in startup creation, but it isn't the one that many people believe.

Several years ago, Mike Lazaridis gave a talk on the commercialization of research that clearly and correctly identified the role of universities in the process—which also turns out to be the universities' primary role in startup creation, as well. People have fawned all over Mike in the years since (maybe not so much this year), but for whatever reason, his comments never really caught on. I'll give it one more shot next time.

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