University Start-ups: A Better Business Model

Abstract:

Many universities look to start-up companies as a way to attract faculty, supporting research and students as traditional federal sources become harder to come by. University affiliated start-up companies can apply for a broader suite of grants, as well as market their services to a broad customer base. Often university administrators see this as a potential panacea, but national statistics show this is not the case. Rarely do universities profit significantly from their start-ups. With a success rates of around 20%, most start-ups end up costing the university money as well as faculty-time. For the faculty, assuming they want to continue in academia, a start-up is often unattractive because it commonly leads out of academia. Running a successful business as well as maintaining a strong teaching and research load is almost impossible to do at the same time. Most business models and business professionals work outside of academia, and the models taught in business schools do not merge well in a university environment. To mitigate this a new business model is proposed where university start-ups are aligned with the academic and research missions of the university. A university start-up must work within the university, directly support research and students, and the work done maintaining the business be recognized as part of the faculty member’s university obligations. This requires a complex conflict of interest management plan and for the companies to be non-profit in order to not jeopardize the university’s status. This approach may not work well for all universities, but would be ideal for many to conserve resources and ensure a harmonious relationship with their start-ups and faculty.