Eureka! Hard(tech) lessons from corporate and academic ventures
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The “eureka moment” of a frontier tech discovery is truly exhilarating for the involved scientists. Quickly, entrepreneurial-minded researchers fast-forward the maturation steps of their work and fantasize about the market outcomes, brainstorming around proof-of-concept, scale-up, and go-to-market. What the discovery can entail, and how it may impact the world, becomes the favorite conversational topic within the team and around the coffee machine. This early excitement — when everything is possible; after all, the first page of the journey has barely been written — is a formidable motivator for researchers to step outside of their comfort zone.
The truth is that going to market for frontier technologies is incredibly hard. Most researchers are not prepared for such a marathon. Maturation journeys are full of industrialization obstacles and market-fit dead ends. Early-stage venture teams experience bumps all the way. Due to the fundamentals of frontier technologies, the product development pace and the struggle to get financed dent the motivation of even the most experienced scientific entrepreneurs. While early euphoria quickly fades away, grit and resilience are to take the lead. Otherwise, the venture ends abruptly, or worst turns into a “walking dead”, i.e., a startup that is not growing or adding jobs for long periods of time. This is not new. A 2020 review of U.S. biotech spinoffs strikingly showed how 40% of them were actually not operating.
At AM2, we don’t believe in super(wo)men entrepreneurs in our fields. The venturing process requires aggregated efforts of leaders across many verticals — e.g., R&D, intellectual property, manufacturing, supply chain, marketing, product stewardship — that will collectively make the difference between a spinoff ‘try-out’ and a solid, fit-for-growth, frontier tech venture.
This reality implies two key principles. Firstly, the ‘ignition’ team must demonstrate a capacity to attract brilliant and fit-for-purpose professionals without slowing down the project development pace and jeopardizing economic value over time. Secondly, effective leadership is needed to introduce new technologies into conservatism-prone industrial sectors. Both principles require modern management styles (e.g., the destructive power of overdeveloped academic egos, which ends up being counterproductive in 99% of science-driven startups, is to be controlled), deploying continuous efforts to build a culture of performance and trust, and embracing a collective mindset to tackle failures head-on and learn from them — the latter being an expected trait of entrepreneurs.
When you look at the big picture, the global investment in R&D is staggering. It reached $2.5 trillion in 2020 — the equivalent of 2% of global GDP — about half of which generally comes from industry and the remainder from governments and research institutions. Therefore, frontier tech innovation thrives both in corporate and academic environments, fueled by different ambitions, objectives, and drivers. While most of us at AM2 have been experiencing both sides of the same coin, we regularly challenge the pros and cons of maturing technologies in these very different contexts.
Let us share a few thoughts on three key ingredients that somehow differ — or can be seen as complementary — between the two paradigms. We coin them the 3Ps: People, Product, and Pace.
1. People (journeys)
Are there professional archetypes in corporate R&D versus academic spinoffs, and can we relate to any patterns of frontier tech success? Those are difficult questions. We don’t have to make the case that teams are everything in the innovation realm. It starts with the profiles of the scientific founders or corporate lead researchers starting the show. Then building a complementary, motivated, and diverse venture crew is essential to reaching new heights. Good founders and corporate leaders attract advisors, financial backers, supporters, and partners, too. Over time, a whole community takes shape around the emerging venture. People really are the key.
Looking at where talents generally go, a large chunk of top scientists still go “full academia”, i.e., do research and publish without any ambition to cross the market-driven innovation Rubicon. Hot research is incredibly competitive and there are a huge number of super smart people whose only motivation is to advance science and publish: it is a rough battle to be recognized and get funding. You don’t have much time for anything else, especially when you start your career. Another large portion of potential innovation-driven candidates is drawn to corporations that offer financial security, a well-defined organization, a collection of unique resources, opportunities for professional training and development, options to quickly climb the ladder, and work-life balance. A large firm has the advantage to offer professional knowledge from Day 1 in the form of internal experts, industrial databases, predefined processes, etc. There is a dark side. As a researcher in a big corporation, you rarely drive the innovation car. At best, you contribute to the design. We could argue that European and Asian science ecosystems rather stick to this dual picture, i.e., researchers split between full academia or corporate journey. Culture, risk appetite, ecosystem maturity, and underlying fear of failure explain a lot: few scientists have turned entrepreneurs.
But times are changing. A growing pool of talents has become hungry for purpose, adventure, and often both. These professionals don’t hesitate to take risks and look at being part of the next unicorn-to-be. They are repelled by corporate constraints, bureaucracy, and politics. They are also well aware of the culture, intricacies, and obsessions in academia. They know that they can learn a lot, and differently, by working close to experienced entrepreneurs, top advisors, and ambitious investors. Even the perceptions of risk and acceptance of failure have been evolving dramatically over the last years, despite somehow conservative and elitist social fabrics both in Europe and Asia. So we meet a growing number of researchers ready to embrace hardship and insecurity with the ambition to build impactful ventures. And we welcome more and more senior executives who — following many years of corporate life — have the financial stability and the inherent drive to jump ship. More than opposing archetypes, we rather witness a growing porosity between the academic, the corporate, the science entrepreneurship, and the corporate intrapreneurship realms.
2. Product (strategies)
Corporations invest in R&D and innovation (aka R&I) with the hope that their investments yield critical technologies from which they can develop new products, services, and business models. For R&I to deliver genuine value to the firm, its role is woven into the corporate mission. At the core, corporate R&I aims at both shaping and executing corporate strategy, so that it develops new offerings for the company’s priority markets and reveals strategic options, highlighting ways to complement or enlarge the business. On one hand, corporate R&I demonstrates a clear advantage in terms of knowledge management, as well as influence over the targeted business value chains. On the other hand, firms tend to favor safer projects with near-term returns — generally, those emerging out of customer requests — that in many cases do little more than maintaining market share. Therefore, incremental projects account for a large part of large firms’ innovation portfolios. Overcoming organizational fixation has always been extremely difficult. As we wrote earlier, no research team can drive alone the corporate innovation car. At best, they can work on a piece of its design: the corporate environment will organize itself to deliver the end product.
On the contrary, academic spinoffs have no choice but to focus on transformational value propositions. They lack the market orientation and coverage of major firms, but they balance this disadvantage by making bold bets and more aggressive allocation of resources. While riskier, this strategy has been shown to often deliver higher rates of success. Surprisingly, we note that corporate R&D often lacks connection to new B2B customers. Given the challenges corporate R&D already faces in explaining its objectives and interacting with other internal functions, new product development generally relies on a game of Zoom via a handful of intermediaries about what the current customers want and need. In order to counterbalance this situation, corporate innovation teams look at building better bridges between internal R&D and the exploration of new market opportunities. Academic spinoff teams, on the other hand, have no choice but to face their potential B2B partners and customers early on. The absence of structure naturally facilitates and energizes the market discovery process. There is no secret: scientist entrepreneurs don’t have the luxury of resources and time once they are outside the university boundaries. Agility and short decision cycles are direct corollaries of their limited runway before hitting the next financing wall.
3. Pace (and financing)
And this relates to our last point. Macro innovation cycles are accelerating. Every industry and every business is impacted. The multiplication of software solutions and the availability of simulation and automation technologies brought down the cost of experimentation and massively improve R&D outputs. This means lower barriers to entry and more competition.
However, we observe that commentators and decision makers alike overemphasize the impact of digitization in the frontier tech space. The truth is that for most of what we do, software solutions accelerate only parts of the process (e.g., the early design of a solution, or the decision-making process when it comes to pursuing or killing a project). Otherwise, bits are not bricks. Frontier tech ventures still require specialized skills. They require millions in financing just to find out if the technology is viable. And it takes backers and partners who understand technology extremely well.
As a consequence, one of the main differences between corporate and academic environments is the organization of the funding cycles, i.e., how you will structure your micro innovation cycles.
For university research, the fight for money and space is significantly harder than in industry. Academics can spend months — or years — and most of their productive time on grants, just to afford a few years of materials, space, and talent. Yet, once grants are secured, a relative “freedom to operate” mode is activated. You have secured a platform where you can explore, discover, and mature some technologies. This is where and when the magic happens, and eureka moments occur. And this is one step before even thinking about launching a spinoff and accelerating.
On the other side of the spectrum, the corporate researcher or innovator enjoys more individual security and professional visibility. Salaries and budgets are institutionalized. However, corporate funding may have multi-year plans: in practice, budgets are made annually. Multiple events can be in the researchers’ way. Business becomes slow? 15% of the annual R&D funding is cut back across the board. Has the firm just welcomed a new CEO? R&I priorities abruptly change because the flagship projects were the “pets” of the previous one. The corporate innovation pace may look very different in reality from what the rosy public corporate innovation agenda infers.
Let’s conclude on this note: we do not put one model or paradigm against the other. Both corporate and academic environments demonstrate strengths and weaknesses when it comes to producing frontier tech innovation. Unsurprisingly, instead of one-off ventures, both sides have become much more interested in forging long-term, collaborative relationships, and frontier tech venturing — in the form of startups, and programs — has been growingly used to do so. Once again, success is all about people. And not just individuals: it is all about cultivating the right collectives.
