Investing in disruption

Universities are facing increasing pressure to show successes in their research, education and local economic impact – and often all three – just as they face challenges from entrepreneurs and venture capitalists seeking to disrupt them.
One way for universities to deal with disruptive threats, and also win money to invest in their core roles, has been to set up or develop a venturing unit, encompassing equity as well as traditional licensing or research. Since the start of the year, more than 20 new funds have been raised to help spin out and support university ventures, according to Global University Venturing.
To give a sense of the scale of this activity, when researchers from Politecnico di Milano were preparing their paper – Venture capital enters academia: an analysis of university-managed funds, published in January – their trawl of the Thomson Reuters database found that since 1973, only 26 university funds had been active in Europe (15) and the US (11).
The reality has actually been one of a more active focus by universities to encourage and reap the rewards of the intellectual activity on their campuses. As Harvard University’s Prof Josh Lerner said in 2005: “The first modern venture capital firm, American Research and Development, was designed to focus on technology- based spin-outs from the Massachusetts Institute of Technology.
As envisioned by its founders, who included MIT president Karl Compton, Harvard Business School’s Prof Georges Doriot and Bostonarea business leaders, this novel structure would be best suited to commercialise the wealth of military technologies developed during World War II.”
And as the number of university venturing funds has probably been underrepresented, according to Global University Venturing research, so the level of portfolio company activity has been growing, often outside the public gaze. While Thomson Reuters showed 368 portfolio companies in venture funds, US organisations National Council of Entrepreneurial Tech Transfer (NCET2) and Association of University Technology Managers track more than 3,000 university-originated start-ups on their “university start-up map”.
Since the start of the year, Global University Venturing has also been tracking more than 100 entrepreneurial businesses that have raised money from a university venturing fund or have other ways of returning money to an academic institution. This is just a snapshot of the activity around the world from the top 150 universities, most of which now have venturing initiatives in place or under development, as identified by our global survey last month.
Despite the economic crisis, innovation is alive and well, according to the latest Global Innovation Index 2013. Research and development spending levels are surpassing those of 2008 in most countries, and local hubs are thriving and multiplying, according to a report on the index published by Insead and Cornell universities and the World Intellectual Property Organization.
In a speech at venture capital firm True Ventures’ university programme last month, Chris Hopkins, director of UK Trade & Industry’s venture capital unit, which encourages inward investment on behalf of the UK – up to third in this year’s index – said since 2000, 25 countries had created an innovation agency to try to create jobs and high-value industries.
But encouraging innovation can have the effect of undermining the institutions, whether academic or corporate, that are relied on as necessary for future innovation.
Venture capitalists and entrepreneurs are targeting both these sets of institutions by setting up competitors or trying new business models (see analysis on the venture university and Coursera).
Into such a febrile environment, we are delighted to host our inaugural Global University Venturing Summit on the theme of “investing in disruption” and in partnership with publisher Reed Elsevier and NCET2.
The summit, on October 16 in Brussels, Belgium, will look at the creation and launch of these venturing funds, connections to corporate partners and others in the venture and entrepreneurial ecosystem, and best practices from around the world. Please save the date and see the agenda here.