What Science Entrepreneurs Need to Know
Science-based entrepreneurs can find the help they
need to succeed from “behind the scenes” intermediary organizations (Clayton,
Feldman & Lowe, 2018). For instance, the authors said intermediaries
can help science entrepreneurs with:
- intellectual
property protection
- navigation
of clinical trials
- negotiation
of technical standards for information, Internet, and equipment
technologies
- refining
ideas and business plans, reducing the transaction costs of
commercialization
- financing,
either directly through subsidies, or indirectly by making introductions
to other sources
- coordinating
networks and partnerships
- providing
introductions to more established and influential business leaders,
mentors, or partners
“A successful theater performance requires a large
support cast working behind the scenes, without which the show would not go on.
Just as the audience focuses their attention on the dramatic action happening
on stage, the commercialization of science tends to orient its gaze toward the
innovative technology and its enabling star, the entrepreneur” (Clayton et al.,
2018). “But as with theater, diverse entities work behind the scenes to support
the necessary processes of founding, managing, and scaling a new scientific
venture. In the commercialization of science, the least visible players are
intermediary organizations—entities that operate in the void between the
scientific discovery and the ultimate realization of value from
commercialization, providing specialized services and access to equipment and
resources beyond the reach of startup firms.”
Paige Clayton, Maryann Feldman and Nichola Lowe,
all of University of North Carolina, in their paper “Behind the scenes:
Intermediary organisations that facilitate science commercialisation through
entrepreneurship,” describe the five intermediary types in three broad
categories as follows:
Services
1.
University technology transfer offices
2. Professional service firms, including legal, accounting, and real estate
3. Networking, connecting, and assisting organizations
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Physical space
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4.
Incubators, accelerators, and coworking spaces
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Financing
|
5.
Venture capital firms, angel investors, public funding programs, and
crowdfunding platforms
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Intermediaries “are critical for launching
entrepreneurial firms,” Feldman said. Intermediaries are available around the
world, but usually work in specific regions. “As people become more interested
in entrepreneurship, we’ve seen these intermediary organizations proliferate.”
“It’s important for entrepreneurs who are
commercializing science to consider the full menu of their options. There is no
correct recipe. It’s a matter of being creative with local ingredients,” she
added.
Here are the basics:
University technology transfer offices
(TTOs)
- Engage
faculty in the development process
- Work
with businesses to license technology
- Provide
incentives for invention disclosure
“Private universities tend to be more efficient in
licensing than public universities, while universities with a medical school
are less efficient in licensing,” the authors noted.
Professional service firms (PSFs)
- Give
advice about intellectual property and business formation strategy
- Act
as dealmakers
- Reduce
transaction costs
PSFs vet proposals for new companies and connect
founders to resources and networks in entrepreneurial communities, which can
help cut transaction and search costs. PSFs, according to Clayton and Colleagues
(2018), “are especially important to academic entrepreneurs as they provide
information related to law and accounting, as well as services such as product
testing that might not be accessible to them through their established academic
networks,” The authors further said that “Local attorneys provide initial
advice on patent protections and scope affecting the decision to start a
company. Accountants and investment bankers provide a similar function reducing
the impact of information market failures on startups. … Real estate brokers
and managers familiar with equity investing also reduce transaction costs of
obtaining finance. Accountants and investment bankers provide a similar
function reducing the impact of market failures on startups.”
Networking, connecting, and assisting
organizations
- Facilitate
networking and mentoring
- Influence
policy through agenda setting
These organizations “serve networking support roles
for entrepreneurs, coordinating local organizations and programs by bringing
together public and private entities, and serve agenda-setting roles for policy
and practice. Motivated to serve a public purpose, these organizations exist to
address network failures.”
“One example of such an organization is the North
Carolina Biotechnology Center, established by the North Carolina legislature in
1981 as a nonprofit 501c3. … Another example of a successful quasi-public,
coordinating, and networking program is the San Diego CONNECT program. This
intermediary was founded in 1985 as a bottom-up effort of entrepreneurs,
supported by economic development officials, to connect industry to academia
and advance local entrepreneurship and the commercialization of academic
science. … Not-for-profit organizations with more limited government
involvement also offer a portfolio of topical programs to respond to local
needs and contribute to the commercialization of science through
entrepreneurship. One example is the nonprofit Council for Entrepreneurial
Development (CED), one of the nation’s first membership organizations dedicated
to new firm support by providing networking assistance, mentorship,
entrepreneurial education and training, and identification of capital sources.
“Both nonprofit and quasi-public programs can
operate at multiple scales. Nonprofits, such as SCORE and America’s Small
Business Development Centers (SBDC), have a national reach and receive federal
funding from the Small Business Administration (SBA),Clayton and his colleagues
noted. Both SCORE and SBDC offer training and mentoring.
Incubators, accelerators and coworking
spaces
“Commercialization of science requires physical
workspace, laboratory space, clean rooms, and advanced equipment. Incubators, accelerators,
and coworking spaces provide entrepreneurs access to physical
facilities at below market rates, and with preferential terms,” according to
Clayton and Colleagues (2018). “The co-location of physical facilities allows
for the circulation of ideas. Incubators, accelerators, and coworking spaces
may be affiliated with universities or alternatively operate as public,
for-profit, or nonprofit entities.”
Incubators
- Offer
affordable space
- Provide
support services
- Generate
revenue for incumbent firms
“First-generation incubators focused only on
offering affordable space, while second-generation incubators added
knowledge-based business support services. Third-generation incubators began to
add networking support and serve earlier-stage companies, focusing more on
selection and quicker tenant turnover, in an effort to make profits,” the
authors noted. “While the earliest incubators were publicly financed,
for-profit and corporate incubators emerged.”
Accelerators
- Offer
intensive programming
- Accelerate
milestones
- Invest
in exchange for equity
“Although accelerators have been described as a
‘new generation incubator model,’ they differ from incubators on a number of
variables including duration, business model, selection, and mentorship,” said
the authors. “Firms are typically provided with a small investment in return
for an equity share. Selection into accelerators is highly competitive, which
sends a quality signal to outside investors. Accelerators make extensive use of
seminars for education about entrepreneurship. Furthermore, mentorship is
intense in accelerators and a multitude of relationships can exist between the
accelerator and the startup, including direct investment, help with finding
additional investment, and partnering in pilot production and distribution.
Accelerators also stress finding the value proposition for the customer, which
can be especially beneficial for scientists-turned-entrepreneurs, who tend to
focus on the scientific aspects of their firm.
“Accelerator funders are more like venture
capitalists in that they invest in a group of firms, while only expecting to
receive large returns on just a few ventures. Therefore, they will accept
earlier investments overall, which is important for commercializing science.”
Coworking spaces
- Provide
flexible, less-structured programming
- Offer
space for social interaction
- Facilitate
networking and peer mentoring
“Coworking spaces—a low-rent, alternative workspace
purported to offer a fun and informal atmosphere—are another new phenomenon in
the workspace intermediary field. Coworking spaces are distinguished from
earlier shared office facilities by their emphasis on social interactions,
aesthetic design and management by cashed out entrepreneurs and potential investors.
They are found in hotspots of activity and range from small operations to
national organizations such as WeWork, and large firms, such as Microsoft and
Google,” the authors observed. “There are three types of coworking space
users: freelancers, microbusinesses, and people working for themselves or for
companies external to the space. Knowledge exchange through collaborative
relationships only occurs when the coworking organization encourages such
collaboration—co-location alone does not foster collaborative relationships.”
Venture capital (VC) firms
- Provide
multistage, benchmarked financing
- Are
motivated to increase firm performance
VCs “operate as partnerships that raise money from
institutional and individual investors. They may be corporate, bank-owned,
private, or government-sponsored. Private-sponsored VC is less common in
European countries than in the U.S. In Asian countries, however, VCs do not
have the same relationships with universities as in the U.S., and VCs often
invest in earlier stages in Asia than in the U.S.”
“Venture capitalists use a multistage financing
approach that provides funding in [stages]. This allows VC to stop funding if
specific benchmarks are not met, or if it becomes apparent that the firm is not
going to succeed,” Clayton and colleagues (2018) noted. Venture capitalists and
angel investors with expert technological skills may act as intermediaries that
provide access to both customers and suppliers.
Angel investors
- Provide
early stage funding
- Offer
business advice and mentoring
Angel investors “are individual investors who
invest in smaller amounts and at an earlier, riskier stage of startup
development, which helps to provide proof of concept for scientific
discoveries. The total amount of startup financing provided by angels is
greater than the amount provided by VCs,” the authors explained. “Angels
are often experienced entrepreneurs with technology expertise, and offer advice
and mentoring for an indefinite amount of time. Beneficial for commercializing
science, angels also have much longer time horizons than VC as they do not have
to exit at some point on behalf of other investors, yet like VC they prefer to
be located close to startups in which they invest.”
Public funding programs
- Offer
long-term support
- Signal
quality for private financing
Government has taken an active role in supporting
science and innovation for over half a century, though direct public support
for entrepreneurship is more recent (Clayton et al.,2018). Public funding
programs, “such as the U.S. Small Business Innovation Research (SBIR) program,
which provides highly competitive grants to develop technology for federal
agencies, have operated since the 1980s. Such programs operate outside the
U.S., as well.”
Crowdfunding platforms
- Are
recession-proof
- Enable
inventors to gain immediate product feedback
- Support
idea-sharing
Crowdfunding platforms are “the newest – and least
understood – practice in entrepreneurial finance,” the authors noted. Crowdfunding
emerged after the 2008 recession, when bank finance became less available and
has become more structured with time, though equity crowdfunding standards are
slow to develop in many countries.
“Crowdfunding platforms allow individual or pooled
investments in firms or projects, usually called campaigns. The use of
web-based platforms offers an opportunity to describe the science underlying a
project and to reach a larger set of potential investors than possible through
the angel-funding model. Crowdfunding models also differ in how funders receive
compensation. Donation models do not provide compensation for investors and
usually benefit nonprofits or charities. Reward models offer gifts in return
for investment. Pre-purchase models provide investors with the product in which
they invested. In lending models, investors receive returns following typical
borrow-lender relationships. Finally, equity models offer shares in profit, or
ownership.”
I am thankful to our Mother Mary for her life. I thank you, dear Mother for your openness and submission and for your “fiat” (YES). I thank you for the way you raised Jesus to be so full of compassion and to be a friend of sinners, like me. I thank you for your comforting presence to the Apostles in the early days of waiting for the coming of the Holy Spirit. Most of all, I thank you for all the inspiration and witness that you have given me and the rest of mankind in our walk towards our true home with the Father. Thank you …. Thank you for always being there for us as our Mother who intercedes for her children. Thank you for everything that our words and our hearts could hardly express.
Dr. Remy Nyukorong 