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Can startups be founded in academia?



EURAXESS Startup digital toolkit

Can startups be founded in academia?

Scientific startup entrepreneurship is a career path in which a scientific finding (as a result of PhD, postdoc, or research in later career stages, in any area) is transformed into an innovative product or service, validated and improved by early adopters, brought to market and continuously scaled up, in terms of product/service quality and coverage.

Find out here about how different are the worlds of academic researchers and startup entrepreneurs, what is a university spin-off and how spin-offs work with the dark corners of financial management, what kind of specialised infrastructures for supporting scientific entrepreneurship exist.


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Are academic researchers and startup entrepreneurs two different worlds?

At first glance, the academic world and the world of startup entrepreneurship seem to be completely different. In academia everything moves slowly, the duration of each stage of your career is pre-set (bachelor's is 4 years, postdocs 1-3 years, etc.), so working hard will probably get you another qualification or accelerate the process of becoming a professor by a few years. It is often the case that academia chooses to save money over saving time, which is totally different when compared with startups, where speed is essential. In academia, titles are of great importance and can disguise incompetents, but not in the world of startups, because while one incompetent professor will not destroy a university, an incompetent executive will destroy a startup. Researchers and PhDs are often protected from the money-driven ideas of the “real world”, but when initiating a startup, one of the first steps is to raise the funds for the work that needs to be done.

All of this makes a divide between the world of academia and the world of startups seem insurmountable, but it is not quite as it appears. Both worlds are full of young and ambitious people, who are creatively driven, innovative, and willing to learn and implement their skills to achieve their goals. Both are based on the same principle of work: form a good idea, prepare and execute experiments to validate it, and then publish the results, if you are in academia, or sell the validated idea, if you are a startup entrepreneur.

Researchers and PhD students are in an excellent position to thrive in the world of startups - they have a good perception of the future technology trends in specific sectors because academia is always in the lead in the development of new technologies and innovations.

With this knowledge, in addition to their global network of professors and colleagues (who they have met at dozens of international conferences, projects, meetings, etc.), academics can have great success in the startup world.

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What is a university spin-off?

Many results of the research processes in one university are likely to remain unexploited. There are a plethora of possible reasons for this and this is not necessarily bad. Even if one research project does not deliver innovation, it can inspire, push, support another, which perhaps will succeed. Even if innovation is not delivered - the performance of the scientific research is NOT measured by the potential of its results to mature into innovation, but by the novelty, contribution to the state of the art, soundness, and credibility of the methodology. Yet, sometimes, the outcomes of the scientific process do manage to attract the attention of the market.

University spin-offs are companies that are founded around technological inventions or products/services with high market potential which are developed by the university research.

Typically, universities claim IP rights on technologies developed by research that took place in their laboratories.

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Specialised infrastructures for supporting scientific entrepreneurship

University Business Incubators (UBIs) may propose services relevant in an entrepreneurial journey upfront of the above mentioned.

Some incubators provide help with writing a business plan, developing a Minimum Viable Product (MVP) or obtaining the address needed to register the company through office space made available. In certain UBIs only students, researchers and staff of the host university are eligible to benefit from the service offer. Lately, UBIs have been found to become more supportive for entrepreneurs than other types of incubators [229].

Embedded in an environment conducive to growth, University Science Park Incubators (USIs) foster partnerships between high-technology-based firms and other external parties (government support agencies, funders), and in this manner, facilitate technology transfer from universities to the economy [230].

Another option is for researchers to start their venture in Science Incubators - specialised business incubators enabling scientific teams to explore innovative, potentially risk-entailing ideas, which require expertise and investment. They are not necessarily linked to universities. These incubators are focused on supporting the development of science-based businesses and early-stage technologies. It has been found that with the help of science incubators, science startups have a better chance of securing funding from grant reviewers and funding agencies [231].

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Spin-offs and financial management

The research about financial management in spin-off companies that was carried out in 2018 in the University of Pisa has highlighted several weaknesses [298].

While all spin-off companies consider planning as important, scientific know-how is valued much more. Only about half of them recognize its strategic importance for decision-making purposes and progressively update the forecasts. On average, spin-off founders have poor managerial culture, especially in financial planning, and do not prefer to delegate or to involve managerial professionals.

When funding is considered, most of the spin-off companies were found to prefer to use their own resources, typically friends and family funding or often research funding, especially of European nature, thus conditioning development skills. They were found to prefer traditional debt. Short-time bank debt prevailed in the financial structure, with more than 75%. Only a few investments are made in the first 3-5 years, mainly to maintain research vision.

Only when researchers adopt a cultural shift, refocusing from the scientific innovation to an actual growth, fertilizing an entrepreneurial mind-set, academic startups will become real businesses.

Universities can help in making this happen. A university could become an essential partner for an academic startup with a different role - for example, by providing managerial and financial support in the seed and early stage. In collaboration with banks and equity players it could also develop and maintain funding programmes, with different financing models, by mixing revolving funds, traditional equity and debt, according to the specific market and activity of the new firms.

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