Posts tagged visionary
(Note: This post also appears on AlohaStartups.com under a less yinzer title…)
In the many calls and conversations I’ve had with accelerator execs from across the country, many of those in “off-market” areas (i.e. not Silicon Valley) have frequently mentioned the support and involvement of their local universities. Alpha Lab, in Pittsburgh, has a very tight relationship with local universities, and that has been a boon to their accelerator program, allowing them to pull educated entrepreneurs and technical expertise, cutting-edge research, and mostly-baked intellectual property and ideas into their accelerator program.
In Hawaii, I’ve heard much admittedly second-hand talk about University of Hawaii’s lack of visible involvement in the startup ecosystem, the extreme difficulty in extracting IP and research from UH, and a “me first” approach to business relationships by their researchers and grad students. While I hope to gain more insight from the stakeholders at UH (I’m meeting with Peter Quigley next week, who’s heading up UH’s Innovation Initiative and aims to create $1B research industry in Hawaii), I came across a recent article related to Carnegie Mellon University’s approach to technology transfer and their innovative model for accelerating startup creation (disclosure: I’m a CMU grad).
One push has been to get researchers to take a market-focused approach to research, so that fewer end up with a solution searching for a problem. A second, more critical push has been to ease the actual privatization process – the uncomfortable negotiations to determine who gets what and how much stake the university retains (and at what terms). Aptly-named the “Five Percent, Go in Peace” program, here’s the crux:
- The university limits its equity to 5%.
- There are clear royalty guidelines.
- There is a three-year delay in payments to allow incubation time.
- There is no university interference in the operation of the company.
The article begins on page 10, but here are the key sections that describe the program (with my highlights in red):
“Most universities view start-ups primarily as money-makers,” Arthur A. Boni, director of the Don Jones Center and the John R. Thorne Chair of Entrepreneurship, explains. “It is very difficult to put a value on an early-stage technology. And that leads to an incredibly tense environment where, every time a faculty member or student wants to spin off a company or commercialize a technology, they have to negotiate against their own university. Who owns what, how do royalties shake out, which rights revert to whom, and so on.”
Or, as Joel Adams, Carnegie Mellon Trustee and prominent venture capitalist, explains, “At most other universities, the number of strings attached to any start-up makes the investment not worth it. It’s just too painful and hard to unwind.”
So, in 2004, the university implemented a policy it called “Five Percent, Go in Peace.” Under this approach, the university expressed a greater interest in fostering start-ups generally, rather than profiting off any one individually, and in providing faculty, students and investors with clear, consistent guidelines and an environment of unconditional encouragement. The university would limit its equity in any for-profit endeavor to 5 percent capped at $2 million (far below any peer institutions), with clear royalty guidelines, a three-year delay in payments to allow incubation time, and virtually no university interference in operations.
“The goal of Five Percent, Go In Peace is to create a transparent, expedient and easy-to-understand process that minimizes extensive negotiations,” said Carnegie Mellon Provost and Executive Vice President Mark Kamlet. ”We have simplified our approach to free entrepreneurs so they can do what they do best.”
The results were nearly instantaneous. Since the policy was implemented, the rate of university spin-offs doubled, increasing from 15 or so companies a year to almost two new patentable ideas every week. This Five Percent, Go in Peace policy rapidly became a national model. McCullough was asked to testify before a U.S. House of Representatives Subcommittee on Technology and Innovation to explain its enormous impact, and, with a measure of irony, it has itself been called one of Carnegie Mellon’s great inventions.
From 15 spin-offs per year to 100! I don’t have a calculator handy, but those are amazing results.
Carnegie Mellon further provides support through various other initiatives which, for example, assess an idea’s potential business and commercialization opportunities, match entrepreneurs with investors, mentors, grants and incubation space, and connects entrepreneurs with a fund which provides early-stage capital.
Back to Hawaii, UH’s Innovation Council’s recommendations report includes great steps for improving the situation, but doesn’t mention anything related to easing the commercialization process, royalties, revenues, equity, or related “privatization” issues.
If innovative research is being produced at an accelerated rate and with a large influx of research investment, and students are being educated in entrepreneurship, yet UH forces complex, archaic, selfish limitations on the act of creating a private entity or licensing the IP, then what’s the use?
I’ll be totally honest: I wasn’t a huge fan of Basecamp before this week. Sure, it’s a fine tool for sharing files and managing project-based communications, but it’s not really all that intuitive and it lacks anything more than simple, limited functionality. We use it at my current company to manage all of our new customer projects, our internal product management and technical release milestones, and even as a repository for our marketing collateral and sales tools. But other than a central location for messages and file revision management, I just don’t see any compelling value above and beyond existing tools.
I recently watched an interview with Jason Fried, CEO of 37signals and creator of Basecamp and other collaboration and team management tools. Fried absolutely changed my mindset about what Basecamp is, where its value lies, and why it is an amazing tool perfectly designed to solve a single, simple problem. Furthermore, he demonstrated the immense value of marketing via thought leadership and by framing the conversation around a much larger issue, in this case the transformation of the workplace.
I’ve embedded the video below, but you can view all of HP’s Input|Output interviews here. It is well worth the 60-minute investment, and Fried has incredible insights on the evolution of the workplace and how today’s workplace norms are actually counter-productive. But even more, he has fantastic insights on start-ups, marketing, and how to build a sustainable business. Here are just a few interesting tidbits:
- When asked about how his products stack up against the competition, he answers with, “Our products do less than the competition.” That sounds like a tough sell until you hear him explain that they purposefully design simple products that do a limited number of things really well.
- On why a bootstrapped company has an advantage over a venture-backed one, his concept is that “a venture-backed company has to spend money from day one” while a bootstrapped company has to make money from day one. An entrepreneur is better off focusing on making money, not spending it.
- On modeling your company or team after Google or Apple or Amazon, he thinks that just because they exploded doesn’t make it a good model for you. Those companies, and other super-successful companies, are anomalies. Model yours after companies in your same space, realm, universe.
- Working alone, or working remotely, is much more effective than today’s standard of cubes and team workspaces. On one hand, your biggest interruptions are caused by others talking to or around you. On the other hand, he thinks that, if you’re denied daily face-to-face interactions, your creativity and productivity skyrockets when you do finally get together.
- If they need a new tool, they build it. And, if they needed it, others probably do too, so they sell it. Obvious, but this is almost a lost art in Silicon Valley – selling a software solution that people already need.
One area where I do disagree with Fried is around marketing in general, which he gets to at the end (around the 57-minute mark). 37signals doesn’t have a marketing person and they don’t believe in the concept of a “marketing department.” Their website reflects that as a run-on mishmash of text, images, videos, quotes, and colors. He estimated that they have spent less than $20k on marketing over the past 5+ years, which is appalling to me. Yes, they are profitable, but they could be so much more so with a focused market strategy.
I do, however, totally agree with his point that everyone within an organization should have a marketing mindset. That marketing should permeate every aspect of the business – in the error message, in support, in the product’s button text, etc. – and that marketing is everyone’s responsibility.
If you do watch the entire video, definitely stay to the very end to hear their “commercial.” It’s very realistic, and effective!
Bottom line: With marketing as a recognized part of everyone’s role, 37signals has done a great job of succeeding without a dedicated marketing role. By focusing on the bigger issue (workplace effectiveness), they have elevated the conversation to an intellectual level, well beyond just selling software. That’s really where Fried shine: as a visionary. Someone who I’d want to work with, and someone who can very effectively articulate the bigger picture that drives the success of their product.
Fried did absolutely zero promotion of 37signals during the interview, and that was the best selling tactic he could have used!