Paul Kedrosky goes on a “VC Mini-Rant” about The Trouble with Commercialization Funds — that is, funds to commercialize university technologies:
Granted, I see the superficial attraction:
- There is lots of technology in universities.
- We all love the cheery stories about university-based technologies that made it big, i.e., Google
- Universities do a crummy job of turning technology into commercial companies.
- It doesn’t seemingly require a large fund, so you could get by with a seed-ish fund, which is easier to raise from friends and acquaintances and individuals.
The trouble is, it’s a sucker trap. Here’s why:
- University technologies are more nascent than naive investors think, so there is immense scientific risk.
- Technology is 5% of the story. Managers are 95%. And most sane managers won’t touch university startups with a pole-vaulting pole. Further, most qualified candidates don’t live anywhere near East Wherever University, Iowa, let alone in Peru, etc.
- Far more money is typically required than uninformed investors think, making a seed fund inappropriately-sized.
- There is a lot more technology available to be commercialized in any given area than you think, and most of it sucks.