|Technology Innovation Management Review, August 2015|
This is the fourth and final post in the series on bridging the Valley of Death – the chasm between university-generated innovations and real-world products/services. Prior posts have focused on incentives, skills development, and university technology transfer practices. In this post, we explore how connecting to a thriving business ecosystem can enhance research commercialization success.
What is a business ecosystem, anyway?
In biology, an ecosystem is a community of living organisms in conjunction with the nonliving components of their environment (things like air, water and mineral soil), interacting as a system. Applying the term to businesses recognizes the interconnectedness of ventures with their surroundings. Business ecosystems can be defined in terms of geography, or industry, or activity (e.g. entrepreneurship), or some combination of the three. For instance, the Twin Cities are known as a strong ecosystem for medical device startups (geography-industry-activity). Strategy as Ecology, a seminal article in the March 2004 Harvard Business Review defines a business ecosystem as “loose networks—of suppliers, distributors, outsourcing firms, makers of related products or services, technology providers, and a host of other organizations—affect, and are affected by, the creation and delivery of a company’s own offerings.”
The big question is what defines an ecosystem that nurtures entrepreneurship, especially for new ventures that become “gazelles” (high-growth companies, which generate high employment and wealth). A startup ecosystem contains the following components. The trick is to get them to play well together.
Daniel Isenberg of the Babson Entrepreneurship Ecosystem Project has argued that communities can start an entrepreneurial revolution with 9 policies and practices that involve government-private sector partnerships to break down barriers and shape the ecosystem around local conditions (i.e., build on strengths). The Kauffman Foundation sponsors a lot of research on entrepreneurship and entrepreneurial ecosystems, but even they are still are at stage of proposing regional measures. In fact, published rankings tend to be highly subjective and unscientific.
Still generally, speaking, having a great world-class research university is a great place to start. In a recent Kauffmann Foundation posting, Paul Graham, the cofounder of Y Combinator, was quoted saying that “there are no technology hubs without first rate universities…if you want to make a Silicon Valley, you not only need a university, but one of the top handful in the world.” Probably the two most famous university centers of startup ecosystems are MIT and Stanford. MIT’s ecosystem of multiple entrepreneurial programs has been credited with generating ventures that created hundreds of billions of dollars in revenue and hundreds of thousands of jobs. Stanford is the intellectual hub of Silicon Valley, spawning graduates who founded a wide range of companies, including Hewlett Packard, Google, Tesla and Instagram, to name just a few.
Where does the Twin Cities region stand? Sometimes, we come up high on entrepreneurship rankings and other times low, but goes to show how subjective they can be. So, following are a couple of facts and several hypotheses about what generates innovation and entrepreneurship at the regional, national and international levels.
Fact #1: The Twin Cities has a highly educated workforce, which is one element that comes up again and again in those suspect rankings (e.g. Minnesota as top-rated state for business) and education is associated with high-potential startups.
- Total Research Expenditures -- 8th (rank among public research universities)
- Federal Research Expenditures -- 9th
- Doctoral Degrees Awarded -- 10th
- Post-doctoral Appointees -- 11th
Hypotheses: Several years ago, my colleague John Stavig and entrepreneur Scott Litman wrote an article proposing several strategies to promote entrepreneurship in Minnesota, including:
- Create an end-to-end ecosystem that inspires, educates and supports entrepreneurs
- Create a framework that incents formation and job creation
- Provide experiential entrepreneurship education at the University of Minnesota
- Keep entrepreneurs in Minnesota
- Celebrate our successes
Many of their proposals have come to pass and/or grown, such as the Minnesota Angel Tax Credit program and the MIN-Corps Lean LaunchPad educational programs. We also have been blessed with strong industry associations (e.g. Medical Alley), more angel investing groups (e.g. Gopher Angels, Sofia Fund, Twin Cities Angels), a very dynamic meet-up group (Minne*), and multiple incubators/accelerators (e.g. Treehouse Health, The Seed Partners, University Enterprise Labs).
Other mechanisms to connect business ecosystems with university innovators:
- The UMN Office for Technology Commercialization Venture Center Business Advisory Group of tech entrepreneurs and executives helping to vet the commercialization potential of University innovations
- MIN-Corps mentors advising students and faculty on their business concepts
- MnDRIVE – Minnesota’s Discovery, Research, and Innovation Economy initiatives for research that results in regional economic growth
- “Ecosystem events” such as Founders Day to showcase program participant ventures and technologies
- The Office of University Economic Development, which helps external partners to connect with the resources, services and expertise at the university and its system campuses
- The Minnesota Cup, the largest state-wide venture competition in the U.S.