What is the role of the Researcher Founder in creating a successful start-up commercialisation?

The role of a Researcher - Founder in creating a successful spin-off company from their University-based research developments is super complex and not for the ill-prepared.

It must be carefully managed, curated and assisted in achieving the sought-after critical commercial success.

You may ask - who better to lead the company to success - than the original Inventor and innovator? As natural a choice as this may seem, the multiple layers of a successful business venture dictate this is the one person who should not have the role for long (if at all). Transitioning to experienced mature business leaders is central to future success.

Are there lessons to learn from where this dual Researcher / Founder role may go off the rails?

This paper will look at this situation where the start-up's success is hindered by the individual who has driven the new technology. So let's first assess how this can break down.

When the critical Researcher is also the Founder of a start-up spinning out research, several significant challenges and potential breakdowns can occur, impacting both the University and the start-up.

Some of these challenges include:

1. Conflict of interest: The Researcher's dual roles may lead to conflicts of interest as they balance their responsibilities and obligations towards the University and their start-up. This can create tensions and raises ethical concerns, potentially affecting commercialisation. The standard practice of having a conflict of interest policy COI means very little when this is not actively monitored and audited by the Researcher and the University independently. To leave this in the hands of the Researcher alone is highly short-sighted and possibly open to misuse.
2. Time management: Balancing the demands of academic research, academic teaching and running a start-up can be challenging for the researcher-founder, leading to inefficiencies in both roles and possibly hampering the progress of the spin-off company, particularly if the Researcher continues to have a full-time (or close to) appointment at the University.
3. Intellectual property (IP) issues: Negotiating IP ownership and licensing agreements between the University and the start-up can be complex and contentious. Mismanaged IP rights can lead to legal disputes or hinder the commercialisation of research. This also applies to licenced term sheets from the University to the start-up. How this can function with ongoing good governance and absent COI is perplexing. Once again, who is responsible for monitoring this?
4. Funding and resources: The researcher-founder may face challenges securing funding and resources for their academic research and the start-up. This could lead to delays or a lack of commercialisation progress. The Researcher may be "ethically caught" between developing the licenced products in the start-up and applying for funding grants through the University. They are trying to please too many masters. In some cases, this could lead to criticism of undertaking asset diversion. That is taking products from the start-up back to the University labs where their activities are not supervised. There may be no checks or mechanisms for auditing these potentially harmful practices.

5. University support/supervision: The University's support and overview level, including access to infrastructure, technology transfer offices, and administrative assistance, can significantly impact the success of the spin-off. Inadequate support, inadequate supervision, and a lack of appropriate auditing can contribute to breaking the commercialisation process.

   • Who should be the responsible party in this challenging situation? For example, there may be an environment where the Researcher / Founder running the start-up is also running the University lab without supervision or oversight.
   • The University may lack the skillset or the inclination for responsible governance. The University may also be reluctant to hinder what they see as "extremely beneficial research" (for its reputation).

6. Knowledge transfer: Ensuring effective knowledge transfer between the University and the start-up can be challenging as the researcher-founder navigates the different ethical cultures, business and research governance expectations, and priorities of academia and entrepreneurship.
7. Skills gap: The researcher-founder may lack the business and managerial skills to successfully commercialise their research and run the start-up, resulting in stalled or failed ventures.
8. Equity and incentives: Negotiating equity distribution and incentive structures for the researcher-founder, other university researchers and the start-up's team can be complex, and disagreements or misaligned incentives can impede commercialisation. The Researcher / Founder is, in effect, caught between the potential royalties they will receive as the Inventor and the financial success of the start-up, which they share with stakeholders.

To mitigate these challenges and prevent commercialisation breakdown, the University and the researcher-founder should establish clear (independent) communication channels

For example, the University should provide adequate support, supervision and resources to the Researcher-founder and the early start-up team. This seems essential for the University as they own the IP. In contrast, the researcher-founder should be transparent about their commitments and work to balance their dual roles effectively.

Parties should define roles and responsibilities and develop a mutually beneficial partnership for all entities.

Additionally, both parties should seek legal and professional advice when negotiating IP agreements, equity distribution, and other critical aspects of the spin-off process.

It can be advantageous for the key academic Researcher not to take on the lead director role in the start-up. This is for several reasons:

Perhaps the critically placed academic Researcher should avoid being the Board chairman or lead Director of the start-up.

1. Time commitment: Running a start-up as a lead director requires significant time and effort, which may conflict with the Researcher's academic responsibilities. By not taking on this role, the Researcher can better manage their time and continue to focus on research and teaching.
2. Skillset: The skills required for academic research and start-up management can differ significantly. The Researcher may excel academically but not possess the managerial, financial, or business skills to lead the start-up successfully.
3. Objectivity and decision-making: By not being the lead Director, the Researcher can maintain objectivity and contribute to the start-up as an advisor or board member without being directly involved in day-to-day decision-making. This can help the start-up to make well-informed and balanced decisions.
4. Conflict of interest: The Researcher's dual roles as an academic and lead director of a start-up can create significant conflicts of interest, potentially affecting both the University and the start-up. By not taking on the lead director role, the Researcher can minimise such conflicts and better manage their obligations to both parties. Independent Directors should be brought into the start-up Board room.
5. Broadening expertise: By bringing in an experienced business professional as the lead Director or Board Chairman, the start-up can benefit from diverse skills and expertise, complementing the Researcher's domain knowledge and contributing to the start-up's success.
6. Scaling the start-up: As a start-up grows and evolves, the demands and complexity of the lead director role may increase. An experienced business professional may be better suited to navigate these challenges and drive the start-up's growth.

While there are advantages to having the academic Researcher not serve as the lead Director of the start-up, one does need to consider the specific context and needs of the start-up and the Researcher.

For example, if the Researcher is passionate about leading the start-up and possesses the necessary skills and operational time, they may still succeed. However, in many cases, the Researcher may be more effective in a supporting role, such as a technical advisor- Chief Scientist / CTO or board member, allowing them to contribute their expertise without the burden of day-to-day management responsibilities.

Sometimes, a lead Academic Researcher-Founder may believe they have all the skills but lack business understanding.

This can contribute to severe hindrances in the start-up's success, as self-awareness is critical to any effective business leader.

While the lead academic Researcher may be an expert in their field, lacking business acumen can hinder the start-up's success.

Some potential issues that may arise due to this include:

1. Ineffective business strategy: The Researcher may not have the necessary experience or knowledge to develop a sound business strategy, leading to poor decision-making and hindering the start-up's growth and profitability.
2. Financial management challenges: The Researcher may lack the skills to manage the start-up's finances effectively, leading to inefficiencies, cash flow issues, or even insolvency.
3. Marketing and sales struggles: Without a strong understanding of marketing and sales strategies, the Researcher may struggle to effectively promote the start-up's products or services, limiting its market penetration and revenue generation.
4. Scaling difficulties: The Researcher may not have the experience to manage the challenges of scaling the start-up, such as hiring, team management, and dealing with increased operational complexities.
5. Stakeholder management: The Researcher may lack the skills to manage relationships with investors, partners, and customers, potentially leading to lost opportunities and negatively impacting the start-up's reputation.
6. Legal and regulatory compliance: The Researcher may not be familiar with the legal and regulatory requirements relevant to the start-up, exposing the company to potential fines, penalties, or other legal issues.

To mitigate these risks and improve the chances of start-up success, the academic Researcher should consider the following strategies:

1. Bring in a Co-founder or develop executive team support: Partner with experienced entrepreneurs, business professionals, or industry experts who can complement the Researcher's skills and provide valuable business insight.
2. Mentorship and advisory support: Seek guidance from mentors and advisors with start-up and industry experience who can provide insights and advice on business strategy, management, and operations.
3. Training and education: Pursue relevant training- Directors courses, Good governance courses, or advanced strategic business workshops to develop the business skills and knowledge needed to manage a start-up successfully. *Delegating responsibilities: Recognise one's limitations and delegate business-related tasks to team members with relevant expertise, allowing the Researcher to focus on their area of expertise.
4. Networking outside the University: Actively network within the start-up and industry communities to learn from others' experiences and gain insights into best practices and potential pitfalls.

This paper aims to clarify the various roles required from a competent Researcher Founder to achieve commercial success in a University spinout.

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