University Spin-Offs (4): Professor as CEO?

This is part of my Series on University Entrepreneurship.

 A question that comes up often at various conferences is whether the inventor/professor should leave the university to launch the start-up as the CEO. Whereas in extraordinary situations this may be appropriate, for the most part, it is not a good idea for a number of reasons.

Ideally, a university spin-off, (like any other start-up), should be run by an experienced and talented entrepreneur with a deep network of contacts. It’s just a fact that most professors are not in this category. Most investors can regale you with a few unfortunate tales of woe in which they violated this maxim and backed a CEO professor who left the university to spin-off a company. There are less such cautionary tales of late because most experienced investors just won’t do this again. The investment community has learned from its mistakes over the last 10-15 years.

The other reason it’s not such a good idea is that the inventor/professor can be incredibly valuable to the spin-off without leaving the academy. He or she can keep working in the lab, keep teaching students and at the same time serve as a Chief Scientific Advisor and shareholder in the company. Most schools allow a professor to hold equity in a spin-off so long as the spin-off does not fund research in the professor’s academic lab.

The last major reason the professor should stay put is that often, one can achieve a  very effective ‘technology transfer’ simply by hiring a graduating PhD student from the professor’s lab. This is often a terrific way for the start-up to benefit on an ongoing basis from the human/technical expertise/know-how that is so critical to the future development of the ultimate product.  

 

For Part Five in this Series, click here

Comments

[Stephen Fleming]

Can't agree more. There are the occasional superhuman individuals who can be CEO and professor at the same time. They're vanishingly rare, so don't build your policies around them... treat them as the exceptions they are.

In general, fitting a professor into the CEO role is like teaching a cat to swim. It can be done. They'll never be very good at it. You will lose blood. And the cat will wind up hating you.

[Steve Kubisen]

I would agree that the percentage of faculty that can run a successful start-up business is very low. It requires different skills and background to navigate a successful business venture vs. a successful university research lab.

It is critical to have the inventor connected to the venture in the early stages, since for breakthrough technology they are the technology experts. So chemistry and respect between the faculty inventor and business entrepreneur are key to success of the venture.

[Andrew McColm]

The scary ones are those who appear to "get it" but never really believe it in their heart and soul. They will agree on the need for seasoned management and nod attentively when discussing the need for product development and marketing plans and then suddenly pull back as soon as someone makes a decision without asking them first.

It is always best to test these relationships in controlled settings before assuming that everyone really is on the same page.

[Christian Schwarzkopf]

In addition, for the university-business ecosystem it is better that the professors in general do not jump off for financial etc. reasons in order to become part of a management team, because universities should remain a non profit oriented zone with people working there that do not have such profit oriented intentions. If they do, their institutes might become a simple plattform for a new career step and not a longterm research and education base. Certainly, if the inventor/ professor really feels the desire to give up his save haven and start a company, he should. However, haven't many start-ups failed with a scientist on board, who just didn't understand the laws and moves of the markets, blocking and slowing down the other managers and directors of the company? Isn't there the saying "never have a scientist on the board" :-)