Those who can, must do so

George Bernard Shaw’s comment about teachers was: "Those who can, do; those who can’t, teach."

And it certainly seems most universities are better at teaching people how to be entrepreneurs than in supporting and funding them once they leave the faculty or student ranks.

Universities provide "negligible" impact when it comes to trying to help turn these ideas into entrepreneurial businesses through providing venture capital, according to an extensive survey for the European Commission.

The European Union-funded Vico Project found public sector-backed venture capital (VC) funds, of which universities were a subset, made up 19% of investments* in the 759 venture capital-backed companies in the study of 8,370 European high-tech entrepreneurial firms.

The report from the research, Venture capital: Policy lessons from the Vico project, said this university funding added little to entrepreneurs: "University VC in­vestments appeared to have a negligible impact regardless of the age of recipient firms.

"In other words, public sector VC plays a significant financing role for very young firms – those aged less than five years, when it is provided from government funds as contrasted to university funds. This re­sult questions the creation of a large number of university VC funds in Europe in the last decade."

However, the report has yet to slow the creation of university venturing programmes, with two Welsh universities launching a £2m ($3m) fund in July to support local start-ups.

The same plethora of university venture funds have also been started in the US, from Case University’s Case Technology Ventures to The Arthur Rock Center for Entrepreneurship at Harvard Business School moving from pilot to full implementation of its Minimum Viable Product Fund, which offers $100,000 to student entrepreneurs to develop their business ideas.

Most of the programmes provide relative little follow-up capital and have limited teams, although a few have turned to public markets to help and an increasing number are developing sophisticated programmes. Last year, Imperial Innovations, which was formed to help incubate and support entrepreneurs from the Imperial College, London, raised $140m on the public stock market and now has 50 people looking at businesses developed from four UK universities from the early to later stages of development.

Though Imperial Innovations’ successes are notable, such as the initial public offering of renewable fuel cell developer Ceres Power, they have yet to match the scale of US peers at Stanford, which made a reported $336m from the flotation of search engine Google in 2005, or the Massachusetts Institute of Technology.

But to see the true potential of the role of universities in supporting entrepreneurs you have to turn to China.

According to Atsushi Sunami, a Fellow at the Research Institute of Economy Trade & Industry, in an article in 2002: "China has a long history of university-affiliated enterprises (xiaoban enterprises), dating back to the ‘qingong jianxue’ philosophy in the 1950s that called for studying while working…. Then, in the 1980s, following the government’s launch of reform policy, a number of university-affiliated enterprises began to sprout. Facing dire fiscal straits, universities wanted to pull themselves away from budgetary difficulties and improve the poor living conditions of professors and university staff by commercializing research and development achievements."

By 2000, 364 universities – dominated by Peking and Tsinghua around the capital, Beijing – operated 2,097 high-tech enterprises to earn three-quarters of their total revenues, employing 230,000 employees and with a further 780,000 students engaged in research activities in those enterprises, Sunami said. A decade later and at least 40 university-owned enterprises were listed in China from a pool of more than 5,000 profitable businesses backed by the institutions, according to the China Papers series.

However, part of the reason for universities’ importance in China was the under-developed state of research and development at companies, which has been gradually changing as state-owned and private enterprises continue to expand.

But what China’s experience and the best examples from Europe and the US all have in common are a sizeable commitment, support at the highest levels and talented teams of people that are able to identify how to best help portfolio companies in a way appropriate for the market conditions they face.

It is this potential others are seeking to emulate, with one eye on the consequences for budgets and resources if they fail. In a globalised world for capital and people, innovation is a comparative advantage.

Universities – whether through faculty or students – are one of the two primary sources of business innovation, the other being companies themselves. Applying a successful university venturing programme, therefore, offers them money to support budgets under pressure from falling public funding and often-capped tuition fees. It also offers better links to business with the insights from technology back to research and jobs and work experience for graduates that helps attract the brightest minds.

To re-work Bernard Shaw for the new world, perhaps we can say: "Those who can, must teach as well they do."

It is to better understand these issues and help share the best practices around the world that Global University Venturing was set up to complement the existing title, Global Corporate Venturing. I welcome all feedback and support at the start of this course – please email me at jmawson@globaluniversityventuring.com.

*There were a total of 3,475 investments – events in which one VC invests in one company in a given point in time – in these 759 VC-backed companies. For example, a syndicate of three VC investors involved in two rounds of financing generates six investments.