November 26, 2012
Is your university on the money?
By Michelle Hammond
Monday, 26 November 2012
It’s well known that some universities have a heavier focus on entrepreneurship than others. But when it comes to funding prospects for student start-ups, does the university make a difference?
It does in the United States, according to CB Insights’ University Entrepreneurship Report, which tracks and measures the entrepreneurship activity of top US universities.
Specifically, the report tracks the companies founded by or led by the universities’ alumni, and the venture capital or angel financing they have raised.
The six universities that were analysed are Stanford University; Harvard University; University of California, Berkeley; New York University; University of Pennsylvania; and Massachusetts Institute of Technology.
It should come as no real surprise to learn Stanford University was the clear winner.
Between 2007 and 2011, Stanford alumni companies raised $4.1 billion across 203 financings, beating all the other universities in terms of deal activity. Harvard University came second.
Unfortunately, there are no hard and fast figures with regard to the entrepreneurship activity of Australian universities.
However, StartupSmart has outlined the viewpoints of three different organisations to determine whether certain universities are looked upon favourably with regard to student start-up funding:
1. Starfish Ventures
Melbourne-based venture capital firm Starfish Ventures recently invested in MetaCDN, a web start-up born out of the University of Melbourne.
“MetaCDN is a great example of a university spinout,” says Starfish Ventures co-founder John Dyson.
“Quite a few of our investments have been companies spun out of universities – MetaCDN and NeuProtect have come from the University of Melbourne, Mimetica and Protagonist from University of Queensland, Audinate and Scalify from NICTA, and Ofidium from Monash.”
“Our ties to the universities go back to the start of Starfish itself, with our Pre-Seed Fund, which focused specifically on promising technologies out of Australia’s universities and research labs.”
“Do we have a preference for university spinouts? It’s hard to say. We look at so many factors when deciding to invest in a company.”
“Technology isn’t limited to universities and students – nowadays we see interesting prospects from the ‘garage’ start-ups as much as the universities.”
Funded by the University of Sydney Union, Incubate is a start-up development program, launched earlier this year. It aims to identify high-potential start-ups.
Incubate was started by James Alexander, an engineering student at the university, and student union board director Mina Nada.
“Having friends who have gone out and received funding at various stages, from seed to Series A investment, I believe that having gone to uni, and specifically Sydney Uni, has been very favourable,” Alexander says.
“When you go to an investor as a student, it’s often seen as a very positive thing – you’ve just finished a degree or you’re still undergoing a degree, but you’re already thinking about starting your own business.”
“It shows they’ve done a lot of things on their own without any funding whatsoever.”
“That’s a huge advantage over someone who perhaps has been working for 10 years and then decided to start their own company.”
Alexander believes start-ups from bigger universities are better placed with regard to funding prospects.
“On the one hand, they have more of a prestigious reputation for various reasons… and that always helps,” he says. “On the other hand, with universities like UNSW and Sydney and Melbourne, they’re more recognised internationally.”
Alexander points out the alumni of a particular university can also help start-ups secure funding, using University of Sydney alumnus Ryan Junee as an example.
“Ryan Junee is very closely tied with Stanford University’s incubator, which is StartX, as well as Y Combinator,” he says.
“With any Sydney University students who apply to Y Combinator, I always refer them to Ryan Junee. From that perspective, the alumni of the university are very powerful.”
Established by the University of Queensland in 1984, UniQuest is widely recognised as one of Australia’s largest and most successful commercialisation groups.
Since 2000, UniQuest and its start-ups have raised more than $450 million to take university technologies to market.
UniQuest managing director David Henderson says investors are looking for two things, regardless of whether or not the start-up is university-based.
“One is good technology. The second thing they’re looking for is reducing their risk that things could go wrong,” Henderson says.
“If you present a proposition that’s well prepared, looks at the market well and they’re confident it has done all the due diligence… naturally they’re going to be more inclined to invest in that.”
But Henderson believes the resources within a university can also play a part.
“I think it’s a question of the amount of resources at the university. Some have very few resources and others have a lot,” he says.
“At UQ, we have quite a considerable amount of resources to fund technologies and package them up, and that’s why we get up half a dozen start-ups a year.”
“[Investors] know we will have done a thorough job on due diligence, checking everything out.”
“The second thing is we’ve done deals with most of the VCs in the country. You’re naturally inclined to work with the people you know and have been successful in the past.”