Beyond the Breakthrough: The key ingredients of successful spinout teams

A PhD student who sets up a spinout and becomes its CEO is 21% better at returning an investor’s money than a serial founder would be if installed in the same spinout. Even more impressively, a PhD student turned chief executive is 46% better at making a venture capital fund money than a former CEO from a large company would be.

That phenomenal stat comes from Nii Dodoo-Amoo, an investor with Osage University Partners, a US venture capital firm that backs university spinouts. But Dodoo-Amoo isn’t the only one who’s found this to be true: Herman Verrelst, founding partner of healthtech-focused investor Heran Partners agrees that what he’s dubbed the Pipi Longstocking approach — “I’ve never done this before so I think I can do it” — is helpful when it comes to spinouts, which are often businesses with a cutting-edge technology that requires a novel business approach.

Verrelst and Dodoo-Amoo are two of the panellists discussing how to build successful startup teams together with Anne Dobrée, director of programming for Founders at the University of Cambridge (a programmatic approach to building startup founding teams), and Rayner Lim, innovation lead for investment readiness at the British national innovation agency Innovate UK.

The discussion is led by Simon Hepworth, director of enterprise at Imperial College London, and was recorded in partnership with international tech transfer collaboration TenU. It is the first part of a mini-series and will continue with a focus on diversity next month.

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Transcript

Please note that the introduction and end credits have been omitted.

Simon Hepworth: Welcome, everybody, to this first episode in our TenU Hosts miniseries, looking at what makes an ideal startup team. My name is Simon Hepworth, and I’m your host for today. My day job is director of enterprise at Imperial College London, and I’m also TenU president.

We’ve got a great set of panelists here today, and I’m going to ask them to introduce themselves shortly. The topic today is skills, so we’re thinking about how we can build great spinout companies from universities, and I think this is really a super hard challenge. We know starting any kind of business is tricky. There’s lots to think about, whether that’s finding people to join the team, whether that’s pulling the business plan together, whether that’s creating the technology. When it comes to spinouts coming out of universities, it’s typically deep technologies, so it could be battery technologies for the next electric vehicles. It could be a new cell therapy to combat cancer, so these are really tricky challenges in health and sustainability, and I think make it a really difficult problem to actually create the right spinout, so what better way to explore that than to think about skills and how those are developed in those spinouts.

We also heard from the UK government Spinout Review last year around the confluence that we see in the technical and commercial skills that are needed in these kinds of spinouts, and we’ll explore that a bit today as well.

So, without further ado, I’d like to introduce our panelists, and first up is Anne. Would you like to introduce yourself?

Anne Dobrée: I’m Anne Dobrée. I’m from Cambridge Enterprise at the University of Cambridge. I previously have spent 15 years heading up the Seed Funds team here, investing in and starting new companies from university knowledge, I’m now involved with starting up our first programmatic approach to that called Founders at the University of Cambridge.

Simon Hepworth: Thank you, Anne. And Herman, would you like to go next?

Herman Verrelst: Thank you, Simon. I’m Herman, Herman Verrelst. I have an engineering background, studied electrical engineering at KU Leuven. Spent some time, ’96 to ’99, PhD research in artificial intelligence, one of the first generations of AI, way, way back. Started my own spinoff company based on that research, and that’s the first part of my career. I have started and managed three spinoffs from KU Leuven. Next part of my career was more in larger enterprises. My last company got acquired by Agilent and spent two years living and working in the US. Then I came back to Belgium to become CEO of a larger molecular diagnostics company until a year ago, and the last phase of my career moved really to the dark side. I’m a founding partner of a VC firm specialised in earlier stage, so seed and series A, some series B, investments in healthtech and medtech.

I’m a founding partner, but I’m not really managing the fund itself. I’m more, again, on the entrepreneuring side. I’m an operating partner, spending a lot of time with the CEOs, the founding teams, helping them clarify their business strategies, business plans, et cetera. So we’re more hands-on with the teams itself. Pleasure to be joining today.

Simon Hepworth: Thank you, Herman. There’s no dark side here. We’re all players in the same ecosystem, trying to bring technologies to market. Nii, would you like to go next?

Nii Dodoo-Amoo: My name’s Nii Dodoo-Amoo. My background is in electrical engineering. I have a PhD in physics. I started out my career as an academic at the University of Cambridge, mostly doing device physics and some condensed matter physics stuff. After that, I sort of moved it into the industry, working in the semiconductor world for a while, first with KLA-Tencor, which is out in the US, and then returned back to Europe to work for ASML. And for both these companies, I worked with the likes of Intel, Samsung, and TSMC on their next node chip manufacturing. After an MBA, I thought I’d try my hands out at investing, and I’ve been investing for about the past seven years or so.

Simon Hepworth: And finally, Rayner.

Rayner Lim: I’m Rayner Lim. I’m currently the innovation lead for investment readiness at Innovate UK Business Growth. I basically lead the investment readiness piece to help innovative businesses with great potential to grow at pace and meet their ambition.

Previously, I was the programme manager as well as the interim lead of ICURe, which is the leading pre-accelerator that helps academics explore the commercial application and potential of UK research. To date, it’s one of the leading pre-accelerator that most academics use that has driven impact of more than 600 teams going through and created more than 200 spinouts, as well as people using it for licensing and stuff to find the most appropriate vehicle for commercialisation.

Simon Hepworth: We’re big fans of ICURe at Imperial, certainly. It’s a great transition for some of our people. So great programme. Okay, thanks for the introductions.

The first question then, when we think about skills, is what are the most important skills that our spinout founders need? And I’d like to start with Herman and to hear your views on this, please.

Herman Verrelst: Thank you, Simon. Yeah, indeed. We all know that starting teams have to acquire a lot of new skills as they really start and move into a company setting. And in fact, it’s part of a broader challenge. In fact, every spinoff company from university, I think, starts with intrinsic handicap. That all of the initiatives are in the end technology push. That’s how research is done. You have a concept and you develop it further until it’s ready to hit the market. But in fact, that’s what textbooks say is a total wrong way of approaching business. You have to approach it from a customer perspective, from a market perspective. So yeah, the teams typically start with that handicap from where they start from, the corner they start from, obviously, but also that translates in their skills.

Typically, they’re trained from a technical perspective and they have skill gaps in terms of commercialisation, in terms of communication, strategy, thinking, market analysis, et cetera. And that’s the origins of where skills gaps are coming from and the problem that needs to be addressed here. We count a lot on these founding teams to train themselves, to learn as they go. A lot of initiatives, and I think there’s great value there, is by providing them training, either incubation phase or during a startup phase to continue the formal training. That’s very valuable, of course, that people acquire skills and textbook training or masterclasses or exposing to people’s experiences, of course, a great source of acquiring those skills.

But entrepreneurship nowadays is so interdisciplinary that it’s very difficult for a founding team or founding CEO to acquire all those skills themselves. And that’s why I think the first thing that any starting team should learn or starting CEO should learn is to recruit the skills into the company. And I think that’s a very good way of also making sure that an organisation can bootstrap itself. So that’s where I think a lot of help can be provided is by not giving them fish, but learning how to fish and provide assistance on that key skill. I think that’s for a starting company, for a founding CEO, very important. And in my career, I’ve seen also managers in larger organisations have always rated the ability to recruit as a critical skill, both in a startup as in a large organisation. So I think a lot of attention can be put on that.

Simon Hepworth: One of the challenges, if you’re a first-time founder, it’s just how do you go about that recruitment when perhaps you don’t know so well what good looks like for a particular role that you’re hiring if you’ve not done that before? So have you got any thoughts or advice on how to handle that conundrum?

Herman Verrelst: Recruitment itself is also a skill you can learn. There’s ways to approach. You have to be explicit about what you expect of an individual coming to the organisation. And there’s vocabulary for that.

There’s a way to do assessments when you interview people, et cetera — probe for hard skills, probe for actual experience, for soft skills, cultural fit, et cetera. And then how to match that up with the requirements that you have. So it’s a technique that you can learn as well. So there’s formal training for that. And the way that I try to approach it is also doing it by example, doing the first recruitments with the teams I kind of mentor, do them as jointly basically as well. Do the interviews yourself while the CEO sits in and asks questions, et cetera. It’s also a way to kind of safeguard and do a sanity check on the first hires that happen in an organisation. So it’s a great way to get the fingers to the pulse there as well. But then let go of that and have the CEO do the interviews themselves. So that’s the way we typically approach it is by approaching this as a critical skill to be learned and to help on the job in the first recruits in an organisation.

Simon Hepworth: That’s really useful. Rayner, I’d like to come to you with the same question. What are the most important skills that we need to see in founders? And what’s your experience from ICURe on that?

Rayner Lim: I think I’ll build upon actually what Herman said is that these founders are amazing in technical skills already. So as a whole, the advantage or rather as from a deep tech perspective is that they have a solid technical understanding of what their product is. Where I see the most important skills or rather the barriers to these startups, spinouts trying to be successful is trying to know what their product is and what their value proposition is. Most importantly, trying to communicate this to the right stakeholders. So every time I’ve seen most or quite often is that the academics in a way say we speak a different language because every time someone asks tell me about your product or tell me about your technology, they just go into the nitty gritty and stuff. Whereas when you go out and you interact with stakeholders as business leaders and stuff, they’ll be interested of what’s the benefit that your product can bring to them as opposed to just what the technology is behind the product.

So I think one of the challenge and most important skills for a founder to learn is definitely trying to speak the industrial language, knowing when to be technical and when to understand the language and speaking the industrial language to be able to the right stakeholder and move on to the business development composition. Just as Herman say, I think recruitment is a skill, same business development is also a skill. And for me, commercialisation is not a solo activity, ultimately it’s a team sport. So it really depends on how you want to segregate these team skills appropriately to find the right person for each skills because as much as you want to be the jack of all trades, usually one person specialises in one stuff.

Simon Hepworth: Rayner, I like the point there of language and the different language required across say an academic domain and business domain. I think we see that quite often.

Rayner Lim: Yeah.

Simon Hepworth: And Anne, I’m going to come to you, same question. What are the most important skills that we are seeking to build in our spinout founders?

Anne Dobrée: Well, I think I’m going with what Herman said about building out the team. These skills can’t all sit in one person because the spinout needs so many different skills. It needs to be visionary, but it also needs to be operations.

So I think there’s two things which the academic founder needs to embrace on top of what Herman said about formal recruitment, one of which is this ability to share, to self-analyse, to recognise what skills they have, what skills they need to bring in and to truly embrace that. And then the other thing I think is really helpful at that stage is to work out what their own values are for the business and be very clear when they’re recruiting, what is the journey they are taking their potential co-founder on, what are their values on that journey and helping to make sure everyone’s aligned from the start.

Simon Hepworth: Some very nice points on values as a north star these days, the importance of mission. Thank you. And Nii, same question to you. In what you see, what are the skills that you’re looking for that impress you in founders?

Nii Dodoo-Amoo: So, I’m an investor at a firm that essentially invests in university spinouts. That tends to be early-stage stuff, but we also do quite a lot of later stage stuff. So when I’m thinking of the skill a founder needs to have, it’s sort of skill depending on stage for a multi-stage fund like us. So all the skills are more or less true for all stages, but some are emphasised at early stage and some are sort of de-emphasised and others are emphasised at a later stage.

So for seed and series A founders that we’re looking at, the biggest thing that I’m looking at is the capacity to grow and learn. So these are typically folks who are doing something that’s either never been done before, at least they haven’t done it before. So them having the capacity to be able to grow and learn very quickly and get up to speed is very important. It’s important that they’re able to exponentially get better year on year and sort of compound the lessons that they’re learning and the mistakes that they’re making in order to convert that into growth as a leader.

The second biggest thing I’d say, you know, perhaps along the lines of what others have said is being a good recruiter. So essentially being a good leader who knows what you don’t have and know what you have to sort of bring in and surrounding yourself with the best people that you can. And although, you know, recruiting is a skill — and it’s a skill that people starting out companies, especially for the first time, don’t have — I think the biggest component of that skill is being open to having smarter people around you, right? So you don’t have a big ego, you want the best and the brightest in your team. And just having that openness to working with the best and brightest people opens the door to being able to recruit them. It’s the biggest starting point when it comes to recruitment because you will potentially have a board and some advisers and some mentors who will be able to help you recruit, but you have to be open to have those kinds of people in your company.

We also look for people with a little bit of an instinct on product and customer and a bit on market. So you don’t tend to find these in super first time founders, but some of them are super technical and not so good on the market side, but just an inkling, just an instinct that they can go out there and take data and be able to convert that data into a product that the market will accept is a skill that we’re trying to tease out. It’s more of an art really, because it’s not really there at the beginning. And then the last I will say for early stage is the skill of will. So tenacity, right? So starting a startup is very, very hard. Typically with highly technical founders, you have lots of personalities that think, “oh yeah, I’ll just try this for a while because lots of people are doing it. I have a good idea. And if it doesn’t work out, I’ll sort of either get a day job or go back to academia.”

So you typically, or at least we’re typically looking for people who have the tenacity and the will and the determination to sort of stick with it for the long haul. So yeah, that’s what we’re looking at for early stage.

I think for later stage, we’re sort of looking at focus, some skills in sales and business dev and being able to sort of build the right team, which is different from what you need at early stage.

Simon Hepworth: Thanks for that, Nii. Very nice there, thinking about skills and mindsets, and then also how you combine those. We’ll come onto that in a little while. So we’ve had a reflection here on what are the most important skills.

I guess the next thing is how do we impart those skills to our founders? And we’ve got perspectives here from the universities, from investors, from government, and I’d just like to sort of tease those out now, starting with Anne, who has been launching a brand new programme called Founders. And if you’re on LinkedIn, you can’t fail to have missed it with all of her fantastic posts on the programme. So Anne, over to you. Tell us about Founders and what’s special about it in terms of imparting skills to founders.

Anne Dobrée: Yeah, so I found a whole new career in gift posting on LinkedIn, but I’m not sure it pays really. Yeah, before I tell you about Founders, I’m just going to spend a couple of seconds setting the scene on what we used to do historically in terms of building out our teams, which I’m sure many of you do anyway.

So historically, basically, we did a lot of frog kissing. You know, we either had senior academics looking for a more commercial frog, and we would send them out to find the right frog and kiss, or we had early career postdocs, along with a senior academic, but the postdocs were the entrepreneurial people who had time and energy and interest. But then we needed to find them a slightly more experienced frog to guide them on their journey from tadpole to fully grown frog, if I can stretch that analogy. And we did that with lots of serendipity and go and talk to this person and that person, but it can take a while because there is a lot of just human connection that has to happen, I think, in that first team and skills build out.

So with Founders, we’re trying to do that in a more programmatic way, rather than the kind of ad hoc frog kissing we were doing, and kiss multiple frogs at once, if that’s possible. So Founders is a new initiative of the University of Cambridge to try and speed up some of these early parts of the spinout journey for academic founders coming out of the university, whether they’re staff, students or dropouts. A 12-week pre-seed accelerated programme that aims to get people from the stage where they’ve started their company and they’re thinking about raising money but are not ready yet to get them to be ready with a credible plan and starting to build out a team that they can take to investors and say, “yeah, please invest in my seed round.”

And obviously a big part of that is this skills in the business, team skills, not only of the founders themselves, but also of the team among them. So within the programme, we’re matching them with entrepreneurs and many mentors to really bring day-to-day experience alongside those entrepreneurs, the median age of which is 28 in the programme. So they’re mostly early-career researchers. There may be more senior academics behind them, but they’re mostly early-career researchers. It’s not an educational program in lectures. It’s about getting them linked up with people who can help them and guide them. So they’re kind of slightly wiser frogs.

But having that programmatic system also allows us to have touch points where we can bring in other sets of frogs. So we can bring in MBA student frogs, where nowadays in Cambridge, your MBA student is less the large corporate middle manager of the 80s and more of the, “what am I doing next in my career? I want to do something entrepreneurial,” kind of early career person also. So they can be a good match of bringing in a kind of equal character, I guess, to your early career academic, but with the commercial skills to pair up alongside them. And then we’ve got some other pairing up we’re going to do as well with people from our global community and mentors around Cambridge and more nationally.

So that allows us many touch points to bring, to basically just this thing of bringing frogs together and seeing who the princes are.

Simon Hepworth: The design theory and very interesting on your comments on the MBA students as well and their change in outlook and how that’s driving their interest in spinouts. Very nice.

Anne Dobrée: I don’t know if that’s a particularly Cambridge thing because of the ecosystem here and whether that attracts the more entrepreneurial MBAs, but I imagine that most major business schools nowadays do have a kind of entrepreneurial programme as part of their mix. So I would imagine you can find them other places too.

Simon Hepworth: I heard from New York University a couple of weeks ago how they are actively using their equivalent program as a marketing tool on their MBA programme, really as a way of those MBA students being able to pivot their career into tech. So yeah, I think it’s happening in more than one place. Exciting.

Rayner, I’d like to come to you. So as you say, you had significant experience with the ICURe programme and we also note certainly from the government Spinout Review, you’re very strong interest now in providing every PhD student with some form of entrepreneurial training. Any PhD student that wants it, making that provision available. That was one of the recommendations from the government Spinout Review last year. So I wonder what your thoughts are on what ICURe does to impart the skills in early career researchers and PhD students.

Rayner Lim: Yeah, absolutely. I think right at the top, my perspective is that the government really plays a critical role bridging this gap between academia and industry. And to enable entrepreneur skills is really a key component of it. We are ranked in the world for our research of which 41% are world leading, yet only 0.03% are considered spinouts at the moment. So I think if we were to make UK a science global superpower, that we need to be able to bridge the gap. And exactly as you mentioned, Simon, the Spinout Review recommends that founders and of course UKRI to provide entrepreneurial training and support for students and spin outs. In ICURe in particular, we have rebranded as of 2023 into four distinct offerings known as ICURe Engage, Discover, Explore and Exploit.

The purpose of rebranding into it is to ensure that every academic, regardless of which level of commercialisation they are at, receives a level of certain awareness of what entrepreneurship as well as commercialisation is within their context. So in your context of questions of what are we doing to allow PhDs engaged in the right at the early stage, even the first and second years or even the masters research student, what we want them to make them aware of how their research idea can create impact in society as a whole. And of course, if they are interested in commercialisation down the line, they are aware of such a programme that exists as well as tools that can help them commercialise their product and stuff.

Going down, of course, the main core component or the key core program of ICURe, which is ICURe Explore, has always been to help academics explore and see the potential of their UK research. In terms of skills, they sit through a five-day intensive bootcamp because what we recognise at that stage is that the academics, as I mentioned earlier, one of the barriers is definitely commercial skills, which was one of the reasons why ICURe was formed after the innovation policy was launched in 2013, which recognised that academics lacked commercial skills. So it definitely is in terms of upscaling them to a certain extent of how to be able to not translate, but rather say their idea in a succinct manner that really benefits both the stakeholder that they are speaking to, which are mostly business leaders, and as well as knowing when to stop at the nitty gritty of details.

At the same time, the skills that they learn through the bootcamp uses value propositions such as the strategisers to enable them to really understand what their value proposition is to be able to get the point across succinctly and correctly and accurately, because that’s one of the very key skills that you need at the end of the day because when you go into investment readiness or even you start going into the investment, what you say in your pitch all really matters because you only have, I say, 30 seconds to a minute to get your point across until they shut down and the next. So this is really what we are doing in terms of skills or upscaling PhD as a whole across the ecosystem from master’s research all the way to early-career researchers who already has an idea, who wants to commercialise them and to ensure there’s offering for each of them, regardless of which level of commercialisation they’re at.

Simon Hepworth: Yeah, I really get the need there, the simplicity to get the simple messages across in the very short attention spans that you have sometimes with investors and funders. Let’s hear from the investor perspective here. Nii or Herman, if you’d like to come in here, we talked about programmes to import skills perhaps at the very start of people’s journeys, but once they’re invested in to some extent, what are the kind of mechanisms that investors then use to keep that skills journey going?

Nii Dodoo-Amoo: Investors typically lend the lessons of their experience to entrepreneurs. They’ve seen what the entrepreneur has done many times in terms of someone starting up a company. Of course, the exact DNA of the company is different. I’m of the school of thought that an investor can amplify the skills of a founder or an entrepreneur, but really can’t bend the curve there, right?

So, as an investor, I want to be a sounding board, an advisor, and to some extent a confidant for a founder. I’m trying to unlock the potential that they already have within themselves. That’s typically how I approach it. I don’t think investors really can bend the curve significantly there. I think if the entrepreneur is going to succeed, they would already have it within them and they need some coaching to get to that point. It’s typically something that the entrepreneur already has within themselves.

Simon Hepworth: I like the expression there, bending the curve. Herman, anything to add from your experience?

Herman Verrelst: I’m a believer in training. I think there’s a lot of value in programmes that universities or governments organised before the startup actually started. It’s all about, it was mentioned before, knowing the unknowns. As a technical person, you don’t know what a sales and marketing plan is and getting some elementary vocabulary at least is pretty useful.

It’s all about being able to describe the problem to yourself as well. So I think there’s great value from getting that formal training. There’s a generic, what’s finance, what’s sales and marketing, you train that. There’s also the specific. In the niche I’m involved in, in healthtech and medtech companies, there’s a lot of gaps that are very specific to our industry. Often technology comes about in university, the engineer finds the clinician, physician, biologist with whom they work together, and there’s already a feeling of integrity, a validation. They’ve applied the technology and they think that it’s a validated technology, and then the company started, but then the whole concept of validation suddenly becomes very different. Before you can launch a product in a clinical field, there’s a lot of barriers to overcome. You have to redo technical validation, clinical validation, the whole regulatory approach, and there’s not sufficient awareness in incubation phase of all these challenges.

I also would argue that if people would be aware of the challenges, they would do the research, fundamentally different sometimes as well, because often a lot of work has to be done, and that to specific companies that that can be given as well.

Then afterwards, as an investor, I also think there is value of continuing to push trainings to masterclasses, for example. That’s what we’ve done. We’ve taken the hook of strategy. It’s a very catchy thing. All CEOs want to think about their strategy, so they’re attracted into our masterclasses. But in the end, it boils down to what is your financing strategy, what is your product strategy, what is your clinical strategy, and so on. It’s a hook. We challenge them to try and formulate what they encounter as issues and problems in the vocabulary they’ve learned, and it’s also interactive in teams, et cetera. They learn a lot from each other, and basically, again, just learn vocabulary to describe the issue they have in front of them. Then they learn that there’s ways to approach that.

So I think there’s room for learning — bending the curve, I’m not sure — but you can seed the process, I believe, and that’s what we try and do through these masterclass programmes.

I don’t think that you should advise too much, though. I believe that indeed the discovery process has to be there. It has to be owned by the team, by the CEO, so that’s what I agree with. You need that in the end. You can only give them a nudge, but it has to be owned. You cannot push it all too much, but there are ways to seek that process, I believe, and that’s what we try and do in this masterclass.

Simon Hepworth: I can really see the value of that. As you say, there are lots of specialist areas. Some might not be relevant to all the spinouts that we see. I know we’ve seen some work at Imperial on quality management systems and having teams understand that much more early and their design documentation aligned to a system much earlier.

Herman Verrelst: Perhaps you cannot speed the learning process, but you can have the company save a lot of time of redoing work by putting them in contact with the right experts early enough so they set up systems and processes appropriately for the industry in which they’re active. I do think that adds a lot of value to the spinoff company.

Simon Hepworth: Thank you. Let’s shift a little bit from skills to mindsets then. We’ve already touched on this somewhat as well, and we’ve got this debate now about whether we can bend the curve or not on individuals. Nii, I know you’ve had some experience as well on what you call archetypes of founders and just what success you’ve seen over the many investments that OUP have made over the years. Did you want to just comment on the kind of archetypes that you see and sort of traits and mindsets that they themselves evoke?

Nii Dodoo-Amoo: In terms of mindset, as I sort of previewed before, we’re typically looking for someone who’s highly capable and crucially has the capacity to grow. So there’s lots of headroom ahead of them to be able to grow within the organisation that they’re building, because they’re typically doing something that’s never been done before.

So there’s a lot of new learning that’s required, whether you’re an experienced founder or not. And within the space that we invest in, we are looking for very specific mindsets.

We do invest quite broadly, but a few archetypal founders that can be found in that space, and we classify them into four main groups. So you have your graduate student CEO, and this is essentially a graduating PhD student that is starting a new company straight out of university. Then we have the repeat entrepreneur. So this is someone who’s done it before and is doing it again, perhaps licensing some technology from a university. Similarly, we have an archetype, which is a C-suite CEO. So this is an experienced manager who’s previously held some high-management position in a big corporate firm where they’ve succeeded, and now they want to try their hands at a startup. And then finally, the professor-turned-CEO. So this is a professor who perhaps has a very compelling piece of research, who then takes a sabbatical in order to start a company. Sometimes they return back to the university, or sometimes they just run with the company.

So we’ve invested in all these types of people in sort of the university spinout ecosystem, and we went back and looked at our portfolio and wanted to know which archetype was the best for us in terms of return on the capital that we’ve invested. And what we found was that the best person to entrust your capital with was a graduate CEO. So a CEO that’s just finishing their PhD, they’re commercialising some piece of their research or some piece of research that they’ve worked on with a professor, and has this skillset of someone who is raw, yes, but is very highly capable. They’re not very experienced, but they do have the capacity to grow. They’re very determined. They’re very motivated. And we found that they’re 21% better than the repeat entrepreneur, and about 46% better than a C-suite CEO, and 3x better than a professor, in terms of the capital they’re able to return to as an investor. So the gap grows between the master and the student.

So that’s sort of what we found, and that’s also what we’ve sort of experienced with our investing. So we like to find these graduate students who we think have high potential and invest in them.

Simon Hepworth: That’s fascinating, and especially now you’ve got the kind of metrics around it on the different levels of success. I know, Herman, you also have a view that graduate founders that come in, they’re not scared. Do you want to just comment on your findings there?

Herman Verrelst: Yeah, exactly. You’re looking for that raw enthusiasm. I like an approach that’s very much like Pipi Longstocking. I’ve never done this before, so I think I can do it. That’s the approach that you want in people. And again, not to an extent naively, but to that extent openly approaching problems. That’s also what Nii’s referring to. Often a repeat entrepreneur or C-suite manager comes in with a set of solutions that he already has. He has a set of hammers, so he’s looking for a set of nails. Where definitely in a lot of the new industries that we’re looking into, I mean, it’s completely new technology, it’s completely new environments, and the old solutions just don’t apply anymore. You want people to come up with novel solutions, novel business models. And I think there’s a great value of that unhindered approach to things.

There’s always a balance you need to strike, of course. I mean, you do hope they know how to make a quotation to a customer, to put a price right and to apply VAT. That, of course, is a constant, but that’s hygiene factors. I fundamentally agree with Nii that a founder inventing his business as he goes, unhindered by prior knowledge, is adding a lot of value in that approach, so I fully agree there.

Simon Hepworth: So we’ve talked about building the skills of individuals. When it comes to a startup, Rayner talked earlier about it’s been a team-based thought. We’ve just heard from Nii that graduate students play a key role in that. I wonder, from the university perspective, Anne, what you see in terms of trends, in terms of academics stepping out into businesses versus perhaps postdocs or students taking all those businesses. Do you see any directions of travel there?

Anne Dobrée: I think we definitely feel there’s a kind of standard model of the graduate student or the early career research often being the driving force. I mean, I think the university, probably not just here but elsewhere, has done a lot of awareness raising that I think something like one in a hundred PhDs will become a professor, the other 99 have to find another career, whilst back in my day, those choices were just publishing or commercial research. I think nowadays there’s much more choice and entrepreneurship is a real option.

So that combo of the early career researcher who is more commercially minded, who’s done ICURe or some other training and is now looking to take that step, is probably the main kind of team that we see or the team nexus that we see.

We do still get some senior professors who are the founders themselves and Cambridge is very flexible with its staff in that way and we’ve got serial professors who have got four or five spinouts from the university, but there they tend to take the CTO role and maybe it’s someone coming in, not necessarily someone from the lab, but it might be someone completely external into being CEO.

Then we have a few, but less common, who have completely left academia and gone into a spinout and then to venture.

Simon Hepworth: So still various different models out there. The final point then is just how teams evolve over time and I want to come back to Nii on this one just to explore that a little bit. So the day one team of a spinout might be suitable for that time in the business, but could you just give us your views on how that might change over the course of investments?

Nii Dodoo-Amoo: Day one, in terms of a make-up of team, a typical make-up of team that we see and also that we see succeeding is to have a graduate student that spins out a company with a professor. So there you sort of have the CEO, CTO role sort of baked in and typically the professor is not full-time, they’re essentially a technological advisor helping guide that sort of early research and trying to help iron out a few more of the kinks on the research side, whereas a graduate is more on the market-facing end of things, trying to convert that research into a product, trying to talk to customers and trying to get some traction for that piece of technology. That’s what we typically see, or at least like to see, and that we think works very well as as a starting point.

The next step from that, which in terms of a wish list of next steps, is the graduate CEO starts to hire in people and of course you’re hiring in lower-level folks, but what’s more important is who you’re bringing into the leadership side of the company to help you run the company. And there, that’s where we really like to see this low-ego CEO that has the raw talent and capacity but also knows they don’t know everything and is willing to learn. And there we’re looking for the CEO to pair themselves with perhaps a more experienced hand, maybe someone who has been around in the industry and can be a guardrail, of course allow them to flourish but check some of the really bad ideas that perhaps have been tried a million times in the industry and haven’t worked. So more adult-ish supervision, if you like.

And there, what you typically find is if the graduate CEO has the capacity, they very soon grow to the level of the experienced guy that they hired in, right? So that’s what we typically like to see.

And then moving forward, if the graduate student is really, really capable, that level of growth just continues to grow and they continue to modify their team to make sure that they have the right mix of people they need, especially people who can supplement their deficiencies. Or the graduate student sort of plateaus, and this is the furthest they can take the company. And at a certain point, maybe keeping them in the CEO role is harming the company because the company is a bit of a rocket ship and they just don’t know how to steer it. And there, we might look to encourage the company and the founder to maybe take a different role and bring in some more experienced management that can guide the company on to the final stages of the startup. So by looking at series B and C side of things where you’re becoming a mature company and if the CEO can’t keep up, you really need an experienced hand to carry it forward.

Anne Dobrée: We’ve got some favourite exec chair types that we bring in to be both guardrails and we find a really good exec chair who’s not afraid to get their hands dirty when needed, but will also step back and lead, if they’re not treading on the CEO’s toes too much, I think gives you that really nice pairing.

Simon Hepworth: Good to hear the kind of concept there that what’s there on day one is fluid and there needs to be a reflection on that as the company grows.

Anne Dobrée: If you think about it, they’re very different companies, aren’t they? A company of growing from nought to 10 is a whole different skill set than a company that’s like a 100 people and 150 developers a week. So in any normal career, you wouldn’t expect to have a career that’s being CEO of Procter Gamble and also CEO of a corner shop kind of thing, would you? So it’s just natural as companies go to different formats that actually different skills are needed.

Simon Hepworth: It makes absolute sense. Very well described, Anne, there. And I think let’s move to Q&A. Let’s go to Polana‘s question first of all. So Polana, you’ve asked: we have seen quite a few attempts at matchmaking academic and business founders. Most of them are limited to one country. Should there be Europe-wide matchmaking and who could initialise it?

Anne Dobrée: The problem with matchmaking of a broader terms is that you increase the number of variables involved in what is already quite a difficult match. Like I talked about front kissing, but it’s quite serendipitous finding the right partners at the early stage and you need the fewest hurdles. So whilst everyone can work remotely at this stage, actually if you’re in separate countries like in the start, you’re probably putting other hurdles in the way. That’s what I would say.

Nii Dodoo-Amoo: I definitely second that. I think matchmaking should be as organic as possible, you would say, right? And putting people in a room where they don’t know each other is, I mean, not super organic, but at least you’re trying to allow them to find each other as it were, right? If you scale it, I think it sort of loses that organic magic.

And yeah, I don’t think it works at super scale.

Anne Dobrée: I’m a fan of trying to advertise for a co-founder on LinkedIn. I’m increasingly seeing people doing that and I’d be very curious as to how that works,or not.

Herman Verrelst: I was going to add that proximity is important here as well, specifically in the context of an executive chair, what Ann was mentioning there, to be readily available is very important. And if the relationship has grown, then it can be sustained over a distance, but it has to grow first. So proximity is so important. I have very bad experience with attracting the best imaginable exec chair for a startup company, but the person sits in the US and yeah, just didn’t work. So I think that’s kind of a counter example to that idea. Proximity and that personal relationship is so important.

Simon Hepworth: I’m going to challenge you, panellists, are you set in your ways here because surely in a digital remote world, everybody is proximate?

Anne Dobrée: Yeah, but you don’t have relationship and ownership, do you? I think like Herman just said, I think I’ve seen this even recently where boards only meet virtually rather than in real life. You do lose something of that sense of ownership of everyone owning a problem.

Nii Dodoo-Amoo: Being able to be in the same place as often as possible is important, especially in the early days of the relationship. Even though we are, of course, increasingly moving into a remote world, perhaps we haven’t quite figured out how to gain that same level of intimacy over Zoom. But as it stands, it’s way better to sort of meet in person, you know, you’re having a drink with a person, you’re learning about their life, they’re learning about yours, you find out you have, you know, similar temperaments where you compliment each other and you know, yeah, it’s just better in person, I think. That’s where the magic happens, I think, yeah.

Rayner Lim: I think there’s a really fine balance within this too. Yes, I agree that the proximity is definitely one of the most important criteria when a company spin out because ideally you want a CEO and founder to have their hands on, I guess, with that spinout. I think the idea of matchmaking can be tweaked. It’s not in terms of business founder academics, but it’s more of, say, board of directors and expertise. A very good example is, I think I saw one of a project in ICURe where he managed to find one of the advisers from the U.S. who was obviously leading in this field to be able to advise him. And of course, when he spun out at that point of time, that person moves towards the position of a board of director, noting that CEO is not going to be doable given that the proximity issue as everyone mentioned here. So I think there was a great suggestion in terms of matchmaking, but I think it’s tweaking it of not being a CEO, but rather what expertise you can give within the skill gaps that helps traject the company forward, if that makes sense.

Simon Hepworth: Rayner, thank you. Okay. We’ve got a question from Rosalind here directly to Anne on serial professor founders often taking CTO roles. What support mechanisms are in place at Cambridge to allow time for academics to work on spinouts?

Anne Dobrée: There’s no limit on Cambridge academics how much time they spend doing with a job or doing other things. Their contracts just say that they have to perform their research duties. So as long as their department head is happy with them, they could spend five days a week on this, unlike other universities where you can only say spend one day a week. Some of them do take sabbaticals, but mostly I just think they don’t sleep.

Simon Hepworth: Excellent answer. But then you’re very dependent on your head of department as well and what their sentiment is towards this. So I guess having some kind of formal structure is helpful as well.

Anne Dobrée: You have to remember that Cambridge is a community of scholars, even the heads of department have no power really over anywhere else.

Simon Hepworth: Thank you. Let’s go to a question from Edwin. So Edwin, you’re interested from Nii and Herman as to what extent an investment decision, when you make that, do you consider the makeup of the founding management team versus the technology and its market potential? So technology versus team, I guess, what are your thoughts on that?

Herman Verrelst: The only good answer is it’s both. Yes. You need to meet the barrier on both criteria. You need to have unique products, unique markets, unique team, et cetera, et cetera, et cetera. It’s more than negative if there’s not the right team, you just don’t engage. I saw the question here and do we intervene? Oh yes, very much. If you think there’s a great start of a team, but they don’t have the roles defined between them correctly, you have the conversation at all. If you think that the founding CEO is a good founding CEO, but you fear that it might not have the mileage for the full role, you tell them upfront and you still explain it can be a great journey for him, a learning journey for the first four or five years, and then he moves into a CTO role. You have the conversation upfront.

So we very much have that conversation about teams, roles, right expectations on that, very upfront. And you often lose deals because of that, but that’s the price you pay. You put a very high barrier on that.

Nii Dodoo-Amoo: I’d second that. The combo is very important. In our firm, we do both life science and deep tech investing. We find that on the life science side, we might maybe back the technology a little bit more than the team, ever so slightly. So the team is still important, but if the technology is so compelling, you kind of scratch your head a little bit and try and figure out, as Herman’s saying, you could wiggle things around to have the best team around.

On the deep tech side, in our experience, the team matters so much. It almost doesn’t matter how compelling the technology is. A bad team can bury a good technology very easily. So, yeah.

Simon Hepworth: We’ve got a question from Christopher on recruitment selection and team building. What is the panel’s view on psychometric profiling, such as Insights Discovery, or BELBIN, which look at team roles rather than individual profiles?

Nii Dodoo-Amoo: I don’t know. I feel like that, it depends on who you’re hiring for it, if you’re hiring sort of low level folks, perhaps, but the type of person I want you to hire would not take that test. I want you to be aiming to hire the best of the best and someone who’s obviously a great fit for your company and someone who’s obviously more experienced and is making your team better in a very obvious way. Those sorts of people don’t tend to take these tests, so it’s a different way to think about it. But if you’re hiring for a high, sort of a supporting role and engineer and stuff like that, perhaps that could be helpful.

Simon Hepworth: Thank you very much to our panellists for your insights today. I think we’ve covered a lot of ground thinking about what are the most important skills that founders need? What are the ways in which we can impart those skills and build up the individuals? How do we create the right mindset as well as skills? And then finally, how do we create those combinations together and then how do those teams grow over time?

Thank you, Anne. Thank you, Rayner. Thank you, Nii. And goodbye to everyone. Thank you.