The Faculty Founder – Management Team Relationship

A university startup, in the early days, typically has a small team, usually one or more faculty who were involved in the founding of the company and several lead management and business people (President, CEO, CSO, VP Business Development or R&D) who may or may not have been involved in the founding of the company. Given the early stage of the company, team chemistry is paramount for the venture to be successful. Sometimes, however, the chemistry is less than optimal leading to conflicts which can then lead to a more serious problems of stagnation of company growth, splitting up the team, or folding of the company.  Let’s examine the elements of the relationships between the scientific founders and the startup management team.

I have seen both ends of the spectrum. At one end, I’ve experienced startups where the faculty founder and management team act as true partners, and it is a thing of beauty: each contributes in their own way, things get accomplished and the company moves along at a good clip. Several elements are important to a good scientific founder – management team relationship:

Knowing what you don’t know. Some university faculty are not good at saying these three words: “I don’t know”. Most of their career is built on their expertise and what they do know. Consequently, they don’t usually head into areas where they have no knowledge or experience. Successful faculty founders are good at knowing their limitations of knowledge and experience and relying on business people for that knowledge. In an opposite sense, entrepreneurs are generalists by nature. They have had to wear many hats and understand a little bit of a variety of subjects.  For them, getting in too deep with the science without having the faculty founder can be a problem, especially as it relates to investors or customers. Again, good management knows when to rely on the faculty founder for the science.

Defined Tasks. Growing out of knowing what one knows and  doesn’t know is the doing what you do know. Faculty founders should be writing the SBIR grant, except fo the commercialization section; management should write the business plan, except for the technology section. Both should be involved with fundraising.

Mutual Education. This relationship can work well if both are willing to teach the other. Most faculty are curious about how a startup works so management can educate him or her about the ins and outs of building the business. Management needs a good working understanding of the science to help translate the science to a non-technical people (e.g. investors). The faculty member can explain the technology to management in terms that are more easily digestible than a publication.

Respect and Trust. Aretha Franklin had it right, People just want  a little bit of respect. The management team needs to respect the intellectual contribution and years of effort that has typically gone into discovering and developing the core technology. By the same token, the faculty founder needs to have a level of respect for the business acumen and broad experience the business team brings to the table. Part and parcel with respect is trust. Trust manifests itself in the faculty trusting the CEO and others to make the right management decisions. Likewise, the team has to put a certain level of trust in the faculty that the technology is as robust/reproducible/safe/effective as advertised and that technical decisions to develop the technology won’t be another university science project. One area where trust and respect break down quickly is how the management team presents the technology. A business person, especially one with a background in business development or sales, will put a strong emphasis on positive aspects of the product or technology, often downplaying some of the weaknesses of the technology. For some faculty, this can be a serious problem and lead to many heated discussions. On a more subtle note, management may need to translate the complexity of a technology to where the average person (e.g. investor or customer) can understand it. The faculty founder may see this a dumbing down the technology, creating a rift in the relationship.

Black and White vs Shades of Gray. The world of the faculty member is built on data, results, and knowledge. As such, it tends to be a black and white world. The experiment worked or it didn’t. The hypothesis was proven or it wasn’t. The publication was accepted or not. In the business world, especially in the world of entrepreneurs, the world is much more subtle with lots of ambiguity, uncertainty, and risk. I remember as a recently minted PhD student, I sat in a room talking to an entrepreneur about a potential startup. I asked him, what I thought, was a pretty straightforward yes or no question. His response was “I’m open to that”. Thus began my exposure to the less than tidy world of entrepreneurs. More recently, a CEO of a university startup was frustrated with how little traction she was getting with investors. Her solution was to explore applications outside the current application. From her perspective, she was just exploring; from the faculty founder’s perspective, this was change in business strategy and created significant angst.

Taking these elements into consideration, the following tips are important in making the business-science relationship work:

  1. Date as long as possible. Founders and potential management need to test-drive the relationship through consulting or coaching interactions to see if the chemistry is right. It won’t uncover all the potential hazards but it will give a good idea if a more serious relationship needs to be consumated (e.g. sharing of equity).
  2. Check egos at the door. A good working relationship can’t survive people with big egos.
  3. Align incentives. If founders and management are working toward the same goal and are incentivized appropriately, great things can happen.

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