As scientists and particularly as professors, we aim to do big things. We aim to discover new insights, create new tools, and further the scientific endeavor. And occasionally, out of our academic research may come a project or an idea that has the potential to do something really big, as a product.
Now the question becomes: do I leave my academic career to start this company and launch this product? The most tantalizing option is to have it both ways: to maintain your academic position and deputize someone else, be it a grad student, a postdoc, or a VC, to take the idea and create the company. But, I believe that this option — for most — represents a huge lost opportunity.
While appealing on the surface, the approach of remaining in academia and spinning off multiple companies ignores the fact that the success of a startup is governed by a power law distribution. In any given field, the most successful company will have a huge impact and accordingly huge outcome, the second will have often a ~10x lower outcome, and the third will be barely known. Think Google versus Yahoo versus … you get the idea.
So wouldn’t that mean that, as an academic founder, you should spin out as many companies as you can to have the greatest number of chances of building a Google? No — having lots of third best (or worse) companies in a given field is far less than the sum of the parts. Making a single company stronger can push it from third to second or even from third to second to first, leading to a dramatic increase in outcome.
Beyond the arguments of the power law, there are other reasons for going all in to a single company. First, if you are still in the lab, then you are already splitting your personal and mental resources between your lab and this company. If you have multiple companies, you are splitting your resources even further, risking not giving enough for any of these ventures to succeed. The companies may also end up competing against each other. In addition to fighting for your time, there might be overlap in their go-to-market and customer base. Optics will also be an issue, as while all parents claim not to have a favorite child, any discrepancy in treatment will appear as favoritism.
So you have to go all in. But what does that mean, specifically?
First, you need to go all in on intellectual property (IP). Distributing your IP across multiple companies can lead to legal problems and the type of competition I mentioned above. For any startup to succeed, it needs to be thinking about IP generation in an intensely focused manner. IP should be propelling a single venture forward and creating wide moats to distinguish your product or process from competitors. Does this include future IP? I would argue yes — per the power law, the goal is to maximize aggregate value, not purely the optionality that one gets by putting IP (even future IP) into multiple companies.
Second, you need to go all in on the use of your time. Dividing one’s time between academia and a startup limits both. If this is an idea that you believe in and that has exceptional potential, you should strongly consider leaving your academic position. Otherwise, it’s adverse selection for your team (i.e. if this idea and startup is so great, why aren’t you joining?). There is also an underappreciated aspect of success to consider: tough moments make for the most creative solutions. If you have the cushy safety net of your academic position, there is an option to fail, and given how demanding startups are, there are going to be do or die moments that require everything you’ve got. You have to be willing to give that.
The third aspect you need to go all in on is your network. For a startup to succeed, its founder needs to leverage every ounce of effort and call in every favor from their network. If the founder is trying to do this for multiple companies, then there will be drastically diminishing returns. You need your employees, your co-founders, your investors, and your partners to all be entirely bought in. If you are entirely in, and everyone else is in, that’s the best possible chance you can have for success. And from the investor perspective, it’s heartbreaking to see brilliant academic professors pitching an idea but with nobody in place to carry that passion forward full time.
Lastly, if you feel like you aren’t ready to put all your IP and network and career eggs in the startup basket, then don’t. Don’t start that company. It isn’t ready. You aren’t ready. The power law could work against you! It can take a decade or more for the stars (your technology, the market, the investors) to align. You’ll know when you are ready when your whole network, employees, investors, partners, and YOU are ready go in 100% — that’s the strongest signal for success.
Now, like any rule, there are exceptions. To determine whether this advice applies to you, look critically at the role you play in your lab and in your field. And do be honest. Are you the visionary, idea generator, explorer? Do you have a long and substantial history of successful (and critically, distinct and differentiated) ideas? Or, are you more of an operator, helping your lab flourish and your team do their very best work? Do your ideas flow from each other in a manner that means they are all interconnected? I’d argue most academics are the latter, and that is a good thing! Those are the most important skills needed to lead a company. In the former, rarer, case, it may be wise to stay in academia and continue to spin out companies, but you must be particularly aware of the power law effect in terms of everything else I’ve covered (time, network, IP, etc).
Building a great company is one of the hardest tasks a person can undertake. But, at the same time, it is one of the most rewarding and impactful for the world at large. By thoughtful architecture of your research, your lab, your IP, your network, and frankly your dreams — putting the power law on the forefront of your thinking — you can leverage your academic life into the initial seed of a truly great company.