Research commercialisation, the process of transforming scientific breakthroughs into market-ready solutions, is a critical driver of innovation. However, despite significant university research activity worldwide, only a small fraction translates into new ventures, or spinouts. During the THINGS eXplore™ Venture Building event on November 21, 2024, Torkel Nord-Bjärneman, founder and CEO of Myrtleed Innovation, explored why this is the case and how the so-called Venture Builder or Venture Studio model could be applied to bridge the gap (click here for the full video). This blog post dives into key takeaways from the session.
Research Resulting in New Ventures Represents The Tip of the Iceberg
While academic research is often the foundation of innovation, only a fraction of all university results lead to successful spinouts. Some reasons include:
Reluctance to Become Entrepreneurs: Respectfully, many researchers prefer to continue focusing on their work within academia rather than taking on the quite different role of full-time entrepreneurs or CEOs.
Team Formation Challenges: Spinouts must have experienced entrepreneurs with the right combination of technical- and business acumen present from the start, which can be challenging to find. University- and incubator personnel, though supportive, usually can't take operational roles within the spinouts they support.
Intellectual Property (IP) Compensation: Aligning stakeholders—the inventors, the university, the founders, and possible external IP contributors—can be fraught with challenges. Discussions surrounding, for example, the value of past research performed versus future commercialisation efforts needed, sometimes result in deadlocks.
Furthermore, the spinouts that are actually formed risk being overly technology-focused, have lengthy cap tables, lack market validation and/or a full-time founding team, amongst other things – all of which might deter potential investors and lower chances of success.
A report by Planet A Ventures, Norrsken VC, and Speedinvest stated, “...they [investors] see two major shortcomings in climate hardware startups: Lack of commercial talent & lack of traction.” [1]
Similarly, Vinnova (The Swedish Innovation Agency) highlighted that deep tech ventures “often lack business expertise and networks.” [2]
The Venture Builder Model
The term "venture builder" or “venture building” has gained significant traction, sometimes used interchangeably as a term for business development professionals or entrepreneurs (i.e., sole individuals) or incubators/accelerators.
But, Venture Builders are actually defined as organisations that build companies using own or external ideas and internal resources, and are also known as Venture Studios or Startup Studios. Examples include Antler, Vargas Holding, or Hidden Dreams.
As described in a Global Startup Studio Network (GSSN) report, “...venture builders are company creators. They match business ideas with entrepreneurial talent to execute those ideas, back them with funding and resources to launch startups.” [3]
In contrast, BDC defines incubators as programs that “…gives early- stage companies access to mentorship, investment and other support to help them get established.” [4]
Key distinctions include:
Pre-incorporation Involvement: Venture Builders engage before the companies are formally established.
Role in Team Formation: Venture Builders match business ideas with entrepreneurial talent.
Operational Involvement: Venture Builders serve as institutional co-founders, with key personnel able to provide operational support to new ventures.
Equity Structure: Sometimes the Venture Builders are the initial equity holders of the ventures they launch, where the founding team vests shares over a period of time.
Why the Venture Builder Model Complements Research Commercialisation
Though not widely adopted yet, the Venture Builder model addresses many key challenges for research commercialisation. Some examples are:
Lowering Barriers for Researchers:
Researchers can remain in their academic roles, contributing part-time to the new spinout.
Entrepreneurs are integrated into the venture from day one, ensuring the necessary business driver is present.
Venture Builders provide operational support, serving as the backbone of the new venture.
Standardised Processes:
Venture Builders use repeatable processes for activities such as venture formation administration, agreements, banking, and other necessities.
Standardised equity and compensation packages reducing risk of conflicts surrounding IP owner compensation and team formation.
Increased Chance of Success:
Venture Builders perform their own due diligence prior to launching new ventures so that they are built from a market-driven perspective, targeting real-world problems. This approach could lower risk of premature launches.
Teams are robust, comprising of strategic seniority, technical expertise and entrepreneurial drive from the start.
Lastly, Venture Builders complement existing incubators and accelerators because the ventures created could better suit the criteria most incubators have to get admitted into their programs, such as an initial business model, some market validation, and a founding team, for example.
...and of course Venture Builders provide necessary starting capital.
Making the Venture Builder Model Work for Research Commercialisation
For the Venture Builder model to properly work for research commercialisation, several considerations must be addressed, including:
IP Compensation: Inventors and universities (if IP owner) could be compensated through structures like convertibles, royalty fees, or licensing deals. Convertibles are ideal for stakeholders contributing part-time to, or investing in, the venture, while royalties suit passive stakeholders to avoid dilution of equity or lengthy cap tables.
Team Compensation: Full-time founding teams should get sufficient long-term equity incentives since commercialising deep tech is a marathon and not a sprint. This is also critical for investors' confidence. Additionally, allocating stock option pools for future hires is important for scalability.
Attracting Entrepreneurial Talent: Venture Builders must cultivate networks of entrepreneurs with the right mix of technical- and business expertise and seniority level, ready to tackle the challenges of commercialising cutting-edge hardware technologies.
Building Trust with IP Owners: Venture Builders must demonstrate value and credibility, ensuring the inventors and owners “let go” of their IP and trust the Venture Builder to adopt it into their processes.
Research commercialisation remains a challenging but essential pathway for translating science-based inventions into real-world innovations. The venture builder model’s structured and repeatable approach offers a compelling solution, which can help unlock more of the vast potential hidden within university laboratories.
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Sources:
[1] BUILDING AND SCALING CLIMATE HARDWARE: A PLAYBOOK (accessed 2024/11/18) by Planet A Ventures, Norrsken VC, and Speedinvest
[2] ACCELERATING EUROPEAN DEEP TECH (October 2023) report by Vinnova (The Swedish Innovation Agency)
[3] DISRUPTING THE VENTURE LANDSCAPE (2020) report by GSSN
[4] https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/business-incubators (accessed 2024/11/18)