Rice Alliance: A Success Story

The Rice Alliance for Technology and Entrepreneurship is an initiative by Rice University, a private research university. It is devoted to the support of technology commercialisation, entrepreneurship education, as well as the launch of technology companies. It was formed in 2000 as a strategic alliance of three schools, in collaboration with the vice-provost and the Office of Research: the George Brown School of Engineering, the Wiess School of Natural Sciences and the Jesse Jones Graduate School of Business. 

Rice Alliance has received countless recognitions over the years, such as receiving five stars across the board in University Business Index’s (UBI) Global Benchmark Report 2013, taking the number one spot both globally and in the Americas, beating over 150 other university incubators, including Oxford University’s. It has helped launch more than 250 startups, which have raised a combined $2.7bn. Rice Alliance also runs the Rice University Business Plan Competition, which is the world’s richest and largest, awarding more than $1.3m in prizes. The competition has seen 138 past competitors become full-fledged businesses, of which 129 are operational and nine have made successful exits. Combined, they have raised in excess of $600m.

So what is it that makes Rice Alliance so successful? For one, its business model is surprisingly different from other incubators. It does not take any equity, nor does it charge clients or have an endowment. A total of 90% of its funds come from corporate sponsorship, strategic investors and grants, while 10% come from Rice University. Rice Alliance has built an ecosystem of corporations and individuals around its incubator and entrepreneurship programmes who are open to new ideas and have a deep sense of involvement. Investors spread across all levels, from angel investors to venture capitalists to private equity and corporate technology development investors. In addition to funding, they help entrepreneurs network and provide mentorship.

Rice Alliance is also not concerned with having a physical facility for its incubator, as it aims to stay away from the danger of turning itself into a real estate company whose sole focus is maximising occupancy. Instead, Rice Alliance concentrates on keeping its startups lean and efficient, and ensures that corporate sponsors stay engaged by creating mutual benefits and accomplishments. To keep track of it all, Rice Alliance has a dedicated venture capital database for each industry it focuses on.

Mary Lynn Fenau, Rice Alliance’s director of marketing, also notes that an incubator should be run like a startup, and huge sums of money should not simply be handed out to it. Instead, incubator managers should have to work hard for the funding, and that they “need to have that mindset and try not to live off subsidies and endowments. They need to be efficient, be able to provide value, focus on outcomes and feel comfortable to go ask corporations and individuals for money. Incubation managers need to demonstrate the value that can be gained by everyone involved. One of the biggest roadblocks for incubator managers is that they have not sold anything in their life and that is the missing piece.”

In keeping with that observation, Rice Alliance allocates 50% of its budget towards staffing and HR costs – to be successful, the key is hiring great people. Rice Alliance practices what it preaches, as it tells its startups that the first five employees will make or break the company. The rest of its budget breakdown is 30% global intercollegiate business plan competition, 10% on events – it hosts three venture capital conferences, one each in IT, energy and clean energy, and life sciences, which have been attended by more than 26,000 people –, 5% on marketing – their newsletter counts more than 27,000 subscribers – and 5% on administration costs.

Hiring great people, however, is not enough: they also need to stay at the top of their game and deliver relevant skills. That means Rice Alliance is constantly asking its entrepreneurs what they need, and adapts its education programmes based on their feedback. To attract these entrepreneurs, Rice Alliance uses its huge email newsletter and its database with international university contacts counting more than 9,000 people. Once an entrepreneur has joined the incubator, they are entered into a database of startups to ensure Rice Alliance can stay in touch long after they have graduated.

Finally, Rice Alliance selects startups for its incubator that it would itself invest in, and involves investors in its screening process. Its selection process is efficient and agile, as it considers time crucial when dealing with early-stage companies. This also links back to its aim to act like a startup itself: Rice Alliance understands how important it is to quickly adapt and best serve its customers.

In conclusion, Rice Alliance’s success stems from its ability to act like a startup that can quickly adapt to its customers – in this case both the investors and the entrepreneurs – and is focused on building a great ecosystem that benefits all participants. Dhruv Bhatli, co-founder of the UBI Index, described the incubator thus: “Other university incubators could learn from Rice Alliance’s humility and desire to continually improve itself. Even though the incubator has enjoyed stunning success, they constantly ask entrepreneurs and corporate partners what they need and how they can do better.”