How to spin your scientific research out of a university and into a startup

https://blog.ycombinator.com/how-to-spin-your-scientific-research-out-of-a-university-and-into-a-startup/

by todsacerdoti • 6 years ago

102 39 6 years ago

blog.ycombinator.com

This is advice for people who have done scientific research at a university and are considering starting a company to commercialize it.

Socialism for the rich, capitalism for the poor?

chrisseaton3• 6 years ago

What do you mean by this snark?

That the research is the property of the state because they paid for the PhD?

First, many research universities are private, so aren't funded by the state.

Second, most research projects are funded by grants not from the state - it comes from industry and places like that.

Third, even if they are funding it, why isn't funding the creation of companies (employers!) a good thing for the state?

luckylion• 6 years ago

That the research is the property of the state because they paid for the PhD?

And the research, presumably.

First, many research universities are private, so aren't funded by the state.

They don't get funding from the state, even if they are private entities? Are you absolutely sure?

Second, most research projects are funded by grants not from the state - it comes from industry and places like that.

Again: 100% sure, your "most" applies?

Third, even if they are funding it, why isn't funding the creation of companies (employers!) a good thing for the state?

It might be, it might not be. The company may generate lots of taxes, the company also may just move to a tax haven and tell society to screw off.

bergstromm4662• 6 years ago

(employers!)

Oh please.

"In the movie Steve Jobs, a character asks, “So how come 10 times in a day I read ‘Steve Jobs is a genius?’” The great man reputation that envelops Jobs is just part of a larger mythology of the role that Silicon Valley, and indeed the entire U.S. private sector, has played in technology innovation. We idolize tech entrepreneurs like Jobs, and credit them for most of the growth in our economy. But University of Sussex economist Mariana Mazzucato, who has just published a new U.S. edition of her book, The Entrepreneurial State: Debunking Public vs. Private Sector Myths, makes a timely argument that it is the government, not venture capitalists and tech visionaries, that have been heroic.

“Every major technological change in recent years traces most of its funding back to the state,” says Mazzucato. Even “early stage” private-sector VCs come in much later, after the big breakthroughs have been made. For example, she notes, “The National Institutes of Health have spent almost a trillions dollars since their founding on the research that created both the pharmaceutical and the biotech sectors–with venture capitalists only entering biotech once the red carpet was laid down in the 1980s. We pretend that the government was at best just in the background creating the basic conditions (skills, infrastructure, basic science). But the truth is that the involvement required massive risk taking along the entire innovation chain: basic research, applied research and early stage financing of companies themselves.” The Silicon Valley VC model, which has typically dictated that financiers exit within 5 years or so, simply isn’t patient enough to create game changing innovation."

Source: https://time.com/4089171/mariana-mazzucato/

_Wintermute• 6 years ago

You can't cure people with Nature papers. You need some way of getting ideas from academia into the hands of people who would benefit from them, and this requires things that academia doesn't have or doesn't care about.

DrAwdeOccarim6• 6 years ago

I was recently learning about a biotech company for a possible job opportunity that spun out of a university. The CEO and CSO were recent PhD graduates. Even though both are obviously smart, and they had a large venture fund behind them (I was speaking to the fund about the opportunity) I just couldn't shake the fact that two recent PhD grads were running the company. I was a "recent PhD grad" about a decade ago and I didn't know shit about running a company as a CEO or CSO. Those jobs are so much more about leadership than technical chops. Maybe having the large venture co behind them would help, but the board wasn't made up of a ton of leadership expertise either. I felt bad pointing that out. Like, "yea, the tech is cool but I don't have faith in such inexperienced leadership".

So this article I think should have one extra point--you should hire a CEO that you report to as the president or CSO of the company. That CEO doesn't need to be fantastic, they just need to have been in leadership roles for sometime in industry. This way you get the organization and management expertise only gained through years of work, and you as president and scientific expert do the leg work around selling the science to potential investors and pushing the research forward.

nickik2• 6 years ago

Given how many company have been started by people who left university and didn't get a CEO, I'm not sure that advice is all that great, just because those people finished their PhD.

I guess one could make the argument that all startups should do that, but it seems the most successful ones usually don't.

DrAwdeOccarim6• 6 years ago

I have been thinking about this all morning, and I really can't come up with a single biotech that has been started by people who left university. Do you have any examples? (Not being rude, just ignorant)

hergin• 6 years ago

You look like having the misconception #2.

Misconception 2. You should find a CEO to run the company

At early stages, no brilliant CEOs will agree to that and you don't want to do business with mediocre CEOs.

pcrh• 6 years ago

It's possible to have good CEO talent at hand without a full-time CEO. It's one of the better things a VC can help deliver (apart from cash).

DrAwdeOccarim6• 6 years ago

No, I am disagreeing with "misconception #2".

hobofan3• 6 years ago

Every CEO was a CEO for the first time at some point.

Of course it's better if someone has had the chance to gain leadership experience prior to that, but there are also a big chunk of responsibilities in a CEO role that other mid-level management positions won't prepare you for either. Given that (at least im my field) a PhD graduate usually had leadership over a bunch of Master/Bachelor students for the duration of their PhD, there is usually at least some experience to build on.

curiousllama• 6 years ago

Every engineer printed hello world for the first time at some point, but that point isn’t the time you should put them in charge of a mission-critical codebase.

It’s not that they’ll never be good leaders, it’s that it’ll take a while to get there, and that timeframe might be measured in failed startups.

hobofan3• 6 years ago

That sounds like good advice overall, but Misconception #3, and it's dismissiveness towards business people seems a little too much.

Of course you don't _need_ a business person in the team, but recommending to go without one is basically playing the game in hard mode (and exactly the opposite advice you would give a normal tech company). I'd even rate it as more important in a biotech setting to have a good business person on board where the funding power dynamics are stacked even more against you than in normal tech.

stanrivers• 6 years ago

I would say the business person is way more important than suggested (caveat, I’m a VC investor with a business background)

A lot of time the business person on the team brings two things - 1) translates the tech into “business person speak” which is actually important for raising money AND getting customers excited and 2) they bring a completely different set of relationships that can help commercialize the product.

Also important are translating the business speak back to the startup - how do fund raising processes work? What do all these documents actually mean? Why do these terms in the contracts with customers matter?

This all matters and a single person on the team playing that roll at an early stage can impact things. Just make sure it’s a business person with lots of relationships and experience doing similar things... “business” is general, so make sure it’s the right kind.

tetris11• 6 years ago

Its unfortunate that the actual technicians get underpaid in comparison to the business people who essentially summarise the work to non-techies.

I get that communication and networking are important skills, but I wish the business-speak people were valued either equal to or lower than the actual techies, given the respective hours and efforts to the product.

perpetualpatzer• 6 years ago

I don't claim expertise on this topic, but it's worth noting that on this point, a VC's incentives are potentially misaligned with the founder's.

In funding rounds, VC's themselves have enough experience to avoid accepting unreasonable terms, so a portfolio founding team with no background in business is not a problem for the VC and means one less name on the cap table and/or less burn. The same cannot be said of a technical founder, for whom a a business-savvy adviser (either as a cofounder or adviser) may be the thing that prevents them from getting fleeced by an early investor who is unscrupulous or undervalues the business.

None of this is to say the advice is given maliciously. Just that it should be taken with caution normally due to financial advice from parties with financial interests in your behavior.

refurb• 6 years ago

I kind of agree with #3 only because the focus is on “early on”. I would agree that there isn’t a ton of need for a business person when you’re just trying to figure out if the science works.

That said, there is some business work to be done - determining if you have a viable business. Cool science is a great and all, but it’s not a business if people won’t pony up the dollars for it.

And once you know the science works there is a ton of business work to be done, especially with medical products where reimbursement can be really complex and require a year or more of work to get ready for launch. And reimbursement can make or break a product.

jrubinovitz• 6 years ago

It's very helpful to know you can negotiate with tech transfer offices. I always assumed their (not-go-great) terms were non-negotiable and was super dissuaded against starting something while a researcher at a university.

probst• 6 years ago

You _can_ negotiate with tech transfer offices, but it might not lead to much.

We have been fighting with ours for ~8 years now. The terms keep getting worse. I think all told, and if I were to repeat it, I would certainly scrap the IP I made in those early days and start fresh when starting the company. Like they mention in the article, chances are you'll pivot a number of times anyway, making the IP largely irrelevant, but you'll still have given up significant equity for it, and likely have a difficult shareholder onboard for life.

(edit: at least this is my anecdotal evidence, and what I gather from some other people having interacted with my particular tech transfer office...)

deeeeplearning• 6 years ago

Misconception 4: You should raise money first, then leave the university
In the meantime, they sustain themselves by self-funding from their savings, getting government research grants, raising a small amount from friends and family, or raising a small “pre-seed” round from angel investors, accelerators, or seed funds.

I always find this incredibly obnoxious. So the expectation is get a Seed round or have a rich family? Blatantly classist.

How to spin your scientific research out of a university and into a startup

Related Stories