Babbage | Innovation

Difference Engine: Pilgrim's progress

A Silicon Valley veteran is turning university researchers into entrepreneurs


ANYONE who has tried a hand at starting a high-tech business—seeking to turn a clever research idea into something customers will pay good money for—quickly learns that everything taught in business school is next to useless. The mistake is to think of start-ups as just smaller versions of established businesses. They are nothing of the sort.

Existing enterprises, even so-called SMEs (small-to-medium establishments), usually have no shortage of marketing and financial data. Their success depends on how well they execute their data-driven plans. Start-ups, by contrast, are faith-based organisations that survive on passion and belief—with nothing to go on but a bunch of hunches. To them, a business plan and a five-year forecast are largely irrelevant. As those who have done it will attest, no start-up’s business plan survives contact with the first customer.

The pilgrimage from garage to marketplace is a chaotic journey fraught with false starts, dead ends, redesigns, changes of heart, moments of elation punctuated by sloughs of despair. The path frequently doubles back on itself, disappears in thickets of regulation, gets stumped by internal doubts and disagreements. No surprise that, for every new venture that manages to turn an invention into a profitable innovation, hundreds of others fall by the wayside. Even then, only three out of 20 of those successful enough to attract angel or venture-capital investors make it beyond five years. The rest go bust, get sold or simply fade away.

There ought to be a better way of turning all that effort and passion into lasting value. Serial entrepreneur Steve Blank thinks there is. Mr Blank has spent the past 34 years in Silicon Valley, getting no fewer than eight start-ups off the ground. Over the past dozen years or so, he has also taught entrepreneurship at Stanford University, University of California at Berkeley and Columbia University. Lately, his Lean LaunchPad course at Stanford has been the model for an intriguing pilot programme called Innovation Corps (or I-Corps for short) which seeks to turn the traditional Silicon Valley start-up model on its head, and thereby reduce the woeful failure rate of new ventures.

With funding from the National Science Foundation (NSF) as well as the Kauffman Foundation of Kansas City and the Deshpande Foundation of India, Mr Blank has designed I-Corps as a way of converting the most promising science and engineering projects in American universities into start-ups. The I-Corps teams, selected from science and engineering applicants who are current or former NSF grantees, comprise just a principal investigator (usually a tenured professor), a younger entrepreneurial lead (undergraduate, graduate or post-doctoral student) and an experienced entrepreneur or venture capitalist as a mentor. Each of the 100 or so teams has received a $50,000 to cover a crash course on how to avoid the pitfalls common to all new ventures.

What distinguishes an I-Corps start-up from a typical university spin-out is the way it forces researchers to stop fixating on the technology they have developed. New ventures, they are taught, are all about finding customers, what distribution channels to adopt, how to price the product, who to partner with, and more. From day one, the mantra is “get out of the lab”. Participating academics have to make countless cold calls to potential customers—something few research scientists and engineers have ever done in their professional lives and most initially find awkward.


As the architect of the I-Corps programme, Mr Blank’s blueprint draws on two complementary techniques—“business-model design” and “customer-development process”. The first uses a technique pioneered by the authors Alexander Osterwalder and Yves Pigneur in their book “Business Model Generation”.This provides a handy graphical template (called a "canvas") that helps fledgling start-up teams envisage their most likely customers. With the canvas' nine separate blocks covering such things as resources, value propositions, customer relations, cost structure and revenue streams, it captures the complete essence of a business plan. By filling in the individual blocks, the hopeful entrepreneurs are forced into the sort of business brainstorming many are unfamiliar with.

Customer-development process, meanwhile, provides a real-world way of testing the business plan's various hypotheses, as written in the canvas' nine blocks. The testing is done by getting potential customers, suppliers, partners and channel operators to challenge the assumptions. If invalidated, the I-Corps team has to pivot, and revise the entry in that particular block of the canvas. The process is repeated until all reiterations, in all nine blocks, are finally exhausted and the business plan emerges robust enough to be realistic.

The I-Corps curriculum emphasises that failures which force participants to pivot and change their assumptions are an integral part of the learning process. That can mean rethinking the market, changing the price, even altering the product itself. During the eight-week programme, I-Corps teams repaint their business-model canvases literally dozens of times. The average team confronts 100 or more potential customers while honing its business plan and tweaking its product.

Recently, the I-Corps programme at Stanford celebrated its first year of coaching. Altogether, around 100 academic teams have completed the course. Some have gone on to receive Small Business Innovation Research grants from the NSF to develop their ideas further. Others have chosen to license their technology. Still others have attracted private investment.

Looking back, the organisers reckon success comes easier when the mature researcher and student work together as a team, sharing responsibilities. Projects fail when the principal investigator behaves as a boss, and the student merely a gopher. Teams that make the most progress are those with a clear idea about where the technology derived from their academic research could be most usefully deployed.

The NSF organisers are so pleased with the I-Corps’ first year at Stanford that they have now added two further nodes—one at Georgia Institute of Technology and the other at the University of Michigan. They are also soliciting proposals from other universities wishing to join the programme. The number of teams selected for the coming year will double to 200 or so.

In the past, universities have had a mixed record of transferring technology developed in their labs to the marketplace. The Bayh-Dole Act of 1980, along with subsequent amendments, spurred academic institutions to exploit their inventions and discoveries. Assigning ownership of the intellectual property from the funding agency to the institutions and researchers doing the actual work gave academics a powerful incentive to exploit their findings.

To help matters, a numer of universities established technology-transfer offices on campus, with professional staff to identify business partners, negotiate licences, and even assist academics in launching their own start-ups. The process, it was assumed, would create a fat new revenue stream for the university. That has proved not to be the case. Licensing revenues have rarely exceeded the costs involved. A number of tech-transfer offices have since closed. Lacking prototype development facilities, the technology they offered tended to be too immature for commercial exploitation.

It is too early to say whether the I-Corps way of breeding entrepreneurs will prove more successful than the technology-transfer approach. The test will be how many new-style academic ventures make it beyond five years. It is not as though the money will be wasted. In fact, having already been funded by taxpayers, the NSF research involved would have zero return if it were simply left on the shelf.

Given that I-Corps participants have been coached by experienced entrepreneurs and encouraged to focus their technology on customer needs, they should at least have a better than Silicon Valley’s three out of 20 chance of hitting the jackpot. For that, America, along with its new breed of academic entrepreneurs, can thank Mr Blank's painstaking pilgrimage.

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