The challenges of strategizing over hard tech teams
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Major innovations that are able to deliver key improvements in climate change, global health issues or new supply chains are largely grounded in academia. Universities are no longer regarded as only providers of basic research and skilled labor but increasingly as true engines of growth with a mandate to innovate and build businesses. As such, university-originated ventures become strategic vehicles for societal, regional and global innovation.
The future of these ventures mostly depends on the capability of entrepreneurial academics to morph scientific results and hard tech into a successful company.
As most ecosystem players would recognize, the teams that are formed at the beginning of the venturing process have a major influence whether and how those technologies end up being brought to market. Interestingly, we barely discuss how individual entrepreneurial academics navigate the process of forming those teams. The mainstream debate emphasizes the roles of university and market players –including technology transfer offices, incubators, accelerators, investors and various types of mentorship– looking at their efforts to shape the composition of venturing teams in order to prep them up for future investment.
But those players are not necessarily involved in all academic startups, especially during the venture pre-emergence and creation processes. Technology transfer offices may choose not to pursue the commercialization of a technology, either because it seems insufficiently promising, based on know-how or trade secrets difficult to evaluate, or simply due to a lack of resources. The founder can also “bypass” the university administration and the available entrepreneurship programs, either by lack of trust or ignorance of their existence. Pursuing such “back door” routes to market are common and rarely tracked. Here, the prospects and frameworks for go-to-market essentially depend on the entrepreneurial academic’s own interest in moving the process forward. University-born ventures emerging slowly –sometimes over a period of five to ten years- it ends up with a long period of gestation and hybrid incubation during which a nascent venture is essentially led by an initial founding team chosen by the inventors.
In Singapore, a positive entrepreneurial culture is massively supported in research institutions. Previous efforts made by pioneering professors, students, and university administrators as well as the first entrepreneurial success stories making the global headlines are now leading other faculty and students to believe that entrepreneurship is both possible and desirable.
Top local universities have been evolving in ways that call into question the blanket assumption that academics lack entrepreneurial knowledge and connections. Many contemporary academics have completed their graduate studies and begun their careers within institutions that support entrepreneurial activity in a variety of ways. It is not uncommon to meet with entrepreneurial scientists who demonstrate key foundational knowledge about the structuration of their venture team, as well as relatively broad social networks that include professionals with significant entrepreneurial and marketing backgrounds.
Obviously, we don’t believe that all scientists become entrepreneurs. Even scientists with world-beating ideas are rarely motivated to commercialize for financial gain. What we believe is that more and more entrepreneurial academics initiate, shape and support the relay-race that ignite the venturing process. They make thoughtful, conscious choices regarding team formation, building on their own experiences, roles, identities, and motivations. Very similar to entrepreneurs in the private sector paradigms, entrepreneurial academics employ a mix of resource-seeking and interpersonal attraction formation strategies: they simply do so in distinctive and systematically varying ways.
Some can criticize that their convictions originate in academic environments, where time is abundant, labor is cheaper, and infrastructure is readily available. At early venturing stages, we believe it is an opportunity. Many academic founders make faster progress as insiders, taking advantage of university resources and testing the market with potential customers and partners. Down the road, though, these dynamics flip, and being within the institution starts to slow the venture down, because universities are not set up to commercialize technologies. Within the current generation of local spin-offs, we observe that academic founders tend to use their own theories and operational frameworks of entrepreneurship. It includes both team-specific concepts and convictions about the go-to-market strategies of the technologies they develop, as well as the resources they need in order to move the venture forward.
Early-stage venturing dynamics are crucial to build a healthy company and ecosystem. Below are three pillars that we believe key to set up the initial team:
Organizing a leadership relay race. Not being the person running the show can be difficult for a top scientist to accept, but it is a decision worth getting right. Entrepreneurial scientists know that their brilliant technologies need good leadership. While finding a CEO should not be the priority while kickstarting the company -great CEOs are anyway scarce and difficult to draft- deciding who in the inventors is going to leave an academic career to lead the company is key. This has two major implications. First, making sure that the first leaders are both fully in charge and accordingly incentivized. Second, structuring a balanced cap table that allows key people to join down the road, since the leadership relay race has just begun.
Splitting the equity. One of the most common mistakes scientific founding teams can make is that equity allocation rewards past contributions, when it is actually to anticipate future ones. The equity split should incentivize people who will probably have to work 7–10 years post spin-out to make it a success story. Many believe that academic co-founders who are not fully hands-on should typically own less than 10% of a startup. While our experience demonstrates that every venturing journey is different and capital allocation should be designed according to the envisioned leadership relay race rather than a set of standard criteria, it is clear that distortions of capital allocation will cause frictions, send the wrong signals to investors and put the company at risk. In parallel, proper vesting rules are to be put in place.
Balancing business stamina. Business-oriented thinking, market discovery and go-to-market roadmaps should be started as soon as possible. However, there is typically very little “business” to be done over the first couple of years, and academic founders are much more equipped that they think to pick those early business skills along the way, while the venture surely needs their scientific know-how. The key point here is to go further than the top scientist-top businessman association mantra. A common misconception is believing that the research efforts are done when spin-offing, and commercialization starts. It is almost never the case. Most probably research will continue to adapt the future products to the market. The academic founders can receive feedback and make adjustments; a top CEO will just be stuck. Don’t get us wrong, being exposed and integrating business codes as fast as possible is essential, but the need of elite scientists versus elite business people is a much more nuanced equation, especially at early stage. A flexible mix of junior and senior team members and supports going in and out along the way, driven by a strong leadership, will be closer to truth.