University Spin-Offs (4): Professor as CEO?

This is part of my Series on University Entrepreneurship.

 A question that comes up often at various conferences is whether the inventor/professor should leave the university to launch the start-up as the CEO. Whereas in extraordinary situations this may be appropriate, for the most part, it is not a good idea for a number of reasons.

Ideally, a university spin-off, (like any other start-up), should be run by an experienced and talented entrepreneur with a deep network of contacts. It’s just a fact that most professors are not in this category. Most investors can regale you with a few unfortunate tales of woe in which they violated this maxim and backed a CEO professor who left the university to spin-off a company. There are less such cautionary tales of late because most experienced investors just won’t do this again. The investment community has learned from its mistakes over the last 10-15 years.

The other reason it’s not such a good idea is that the inventor/professor can be incredibly valuable to the spin-off without leaving the academy. He or she can keep working in the lab, keep teaching students and at the same time serve as a Chief Scientific Advisor and shareholder in the company. Most schools allow a professor to hold equity in a spin-off so long as the spin-off does not fund research in the professor’s academic lab.

The last major reason the professor should stay put is that often, one can achieve a  very effective ‘technology transfer’ simply by hiring a graduating PhD student from the professor’s lab. This is often a terrific way for the start-up to benefit on an ongoing basis from the human/technical expertise/know-how that is so critical to the future development of the ultimate product.  

For Part Five in this Series, click here