Back to School

By Shomit Ghose, Guest Author

[I just wrote a critical piece on VCs regurgitating the same ol’ words as their fund strategy, and I went to check my editorial console to find this wonderful new piece by my dear friend Shomit Ghose at Onset Ventures. Very original, and I am glad to see someone doing some heavylifting, rather than sitting and enjoying that unearned million dollar salary.]

Enterprise software is dead. Web 2.0 seems hot but, personally, it’s tough to tell the difference between The Next Big Thing and The Next Big Ding. So where can you find a veritable cornucopia of interesting projects featuring breakthrough technology produced by world-class engineers and many millions of dollars in R&D funding? At your local research university, of course.

In the US, many tens of billions of research dollars are collectively spent each year by major universities. Sums in excess of $600-$700 million in annual research spending are common at top-tier institutions such as UC Berkeley, the University of Wisconsin, and the University of Washington. Despite this, the halls of academia aren’t exactly teeming with prospective investors seeking out their next big deal. This is a lost opportunity.

It’s actually a long and difficult process to develop new ventures from the university setting, and perhaps this explains the paucity of investors walking the halls. It’s not sufficient to attend a few faculty mixers and hope to find a hot, ready-to-go start-up. Generally, it takes a lot of hard work – many months, if not more than a year – to cultivate opportunities; the opportunities are very raw. But if you’re willing to commit your time there’re definitely exciting deals to be found. Otherwise, don’t bother.

While universities have vast amounts of very interesting thinking going on continuously – nearly all of it provocative – not all can be the foundation for good companies. You need business and the technical wherewithal to separate what’s purely theoretical research from what’s compelling commercially. You also need to know in advance just what you’re looking for in a business and have the ability and willingness to work hand-in-hand with the faculty member to build a fundable business plan.

The long-and-drawn-out-but-definitely-necessary four-step program for successful university-based deal generation is:

• Study the opportunities in depth, seeing where there is clear convergence between “white space” – i.e., developing markets and industries that are unaddressed by current offerings – and “executability”;

• Focus on key professors in key disciplines;

• Build close, ongoing relationships with professors and their graduate students through a program of continuous outreach; and

• Nurture those ideas with good potential by working with the stakeholders to create viable, milestone-based business plans.

University thinkers are often not burdened with biases formed from business experience –they may not have preconceived notions of what they should or shouldn’t do. Not being saddled with “conventional wisdom” is an invitation to great innovation. So if you find yourself looking for that next cool deal, my advice is to head straight back to school.