The CEO problem 

Bridging the Valley is a series recording a shared exploration of the potholes in the road of hardware technology development between lab research and implementation. These obstacles to development often prevent the productization of new technologies, causing a phenomenon called the “Valley of Death.” In this and future articles, the author will dive deeper into the causes of the Valley of Death that we hypothesized in the introduction to the series, and provide more information on various areas of the technology development ecosystem.Turning a technology into a startup requires someone to be a charismatic champion of the technology, a leader to provide a unifying vision and gather the necessary people around it. But is it possible to find a CEO among the researchers who created the technology in an academic lab? It’s often not, resulting in “the CEO problem.” In this installment of Bridging the Valley, we unpack why researchers don’t normally want to be CEOs, and what can be done about it.

Conflicts in time scarcity 

In a lab group, time is a scarce resource. The vast majority of university-based startup founders are graduate students.  Graduate students are extremely busy, with most working 40–60 hours per week on their studies and research, and likely aren’t prepared for a startup that consumes an enormous amount of time. Y-Combinator, one of the most respected startup accelerators in the world, advises that it’s simply not possible to found a growth-oriented startup while pursuing an academic career.  

It’s difficult to pursue two very different commitments, such as academic studies and entrepreneurship, because their goals tend to conflict. We’ve discussed this before in previous articles; graduate programs are optimized toward preparing PhD candidates for very limited tenure track professorship opportunities, and entrepreneurial attempts suffer because of this. For example, there are case studies about how academic advisors end up having conflicts of interest with their PhD candidates because they try to found a startup together. In many cases, entrepreneurship is discouraged or looked down upon, as it can conflict with academic responsibilities and take time away from publishing. The typical university incentive structure only rewards publication, not commercialization.What drives a startup?

The motivations of a CEO have a critical impact on the success of the business as well. If someone is more motivated by creating a new technology than they are by financial gain, they’re less likely to pursue what it takes to get a startup off the ground.  On the surface, research and development might seem aligned with financial gain, but that’s not always the case with a growth-oriented startup. It’s not uncommon for academic startups to be created to access government funding for further research — or as a platform for consulting rather than commercialization — and not end up growing.

If a CEO is particularly financially motivated, they might end up being recruited by top companies in the industry. In the course of developing their technologies into products, the CEO will be networking with companies that end up being prospective employers. This sometimes results in the abandonment of productization with the technology champion moving to a more stable and high paying job.How can we get out of the lab and into the market? 

With all of these barriers, how can universities create a culture of entrepreneurship? Universities like MIT and Stanford have done so, which means it’s possible.]  Universities that produce few startup spinoffs who are looking to change their culture into a more entrepreneurial one could consider some of these solutions:

Expose potential CEOs to successful entrepreneurs: Culture is determined by the personalities of the people involved and influenced by the structures and policies of the surroundings. That’s why providing networking opportunities with successful entrepreneurs can measurably motivate would-be founders. These entrepreneurs don’t need to be part of the university; they can be part of the surrounding community, which could be mutually beneficial to other startups, as well as research. 

Funding has successfully been used as a carrot to encourage engagement with entrepreneurial advisory groups so universities with a budget dedicated toward creating a more entrepreneurially oriented culture might leverage this strategy. A more aggressive tack is embedding entrepreneurs-in-residence in the labs, although this needs to be done strategically, after the perception of entrepreneurship has been warmed up to somewhat.

Incentives for successful startup companies: University incentives can be altered to better enable commercialization.  For example, modifying graduation or tenure track requirements to recognize commercialization as progress would be a significant step in this direction. A particularly interesting example of this is a dedicated coterminal master’s degree for would-be founders – a concept that could potentially be adapted for graduate students active in labs.  It’s also been shown that other adjustments to university policy are effective as well.  For example, reducing the inventor’s share of royalties by 10% is correlated to a 20% increase in the annual startup founding rate.

These approaches can help improve commercialization, but I’m certain there are other effective solutions as well.  I’m interested to hear your thoughts on how the startup spinoff rate can be improved at academic labs, so make your opinion heard in our Discord!  Improving the startup rate is a good first step, but there’s plenty more to do. In our next article, we’ll talk about ways to improve the success rate of academic-based startups.

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