A recent study from researchers at the University of South Florida (USF) finds that “seed capital” for university start-ups may be especially beneficial if the funding comes from within the universities themselves.
According to the paper’s lead author Donna L. Herber, the benefits of university-based funding for start-ups include “expanded funding opportunities, hiring and retention of top entrepreneurial faculty, goal setting, entrepreneur development, economic development and university engagement.”
While university start-ups are generally more risky than other start-ups due to the experimental and time-consuming nature of the technologies they are trying to commercialize, investments from the university can offset the level of risk to outside investors.
“Getting that first dollar is a huge challenge,” says Herber. “Seed loans — along with founder money and sweat equity — can provide those crucial first dollars. Where no matching [funds] programs exist, the university program can be used as a catalyst to bring partners to the table with matching money.”
For example, the USF Research Foundation’s Seed Capital Accelerator Program supports and provides up to $50,000 each for start-ups based on USF technologies. The study also examined similar programs at schools including Purdue, the University of Texas, the University of Chicago, Georgia Institute of Technology and Washington State University.
“The objective is to help companies reach specific goals in one year or less, allowing start-ups to achieve critical development milestones and get to market more quickly,” says Herber.
The study measures the success of university funding programs based on factors such as equity payout rates, numbers of license agreements executed, start-ups formed, jobs created, sponsored research conducted and products launched.
“Programs based at the university are uniquely poised to bridge the gap between academic research and commercialization, as they are housed at the very institution that spawned the technology,” the study reads. “In essence, there is a sense of ownership that strives for, and drives toward, a company’s success. The company’s success is then the university’s success.”