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***For Immediate Release***
Venture Capital – University Cooperation Critical; But Can't Be A "One Night Stand"
Ongoing Process is Key to Progress in Innovation, Says ONSET Ventures Partner
MENLO PARK, CA – SEPTEMBER 28, 2006 – There's a rich vein of innovation at the nation's universities and research labs that must be tapped into by the venture capital community, says a partner at ONSET Ventures. But mining that vein takes work, care, and time; lots of time.
"In the U.S.," said Shomit Ghose, venture partner at ONSET Ventures in Menlo Park, California, "Tens of billions of dollars are spent annually on research and development by universities and affiliated labs. Clearly, when you combine that level of research funding with the intellectual efforts of world-class scientists and engineers, you end up with a tremendous amount of technology innovation."
The problem, says Ghose, is that if you, as a venture capitalist, turn up at your favorite research university and expect to see a lot of ready-to-go deals that can be cultivated in a few days to a few weeks, you'll be sorely disappointed. The opportunities are simply too raw. Instead, it will actually take you from several months to as much as a year to develop the most interesting opportunities. "If you're prepared to make this kind of commitment," he says, "Then there are definitely exciting deals to be found. Otherwise, forget it."
Faculty Mixers Won't Work
Ghose, who has worked with numerous universities over the years to find key opportunities for ONSET, reports that a significant number of investors, in his experience, believe that the way you effect outreach to the research community is by hosting a faculty mixer every now and then. But it doesn't work. "It takes time, insight, and patience to discover new opportunities, and to build substantive relationships with researchers at universities and national labs," he asserts.
Ghose also reports that while universities have vast amounts of very interesting thinking going on continuously – and nearly all of it is provocative – not all can be the foundation for good companies. "As an investor, you need to have the business understanding and technical wherewithal to be able to separate what's purely theoretical research from what is compelling from a commercial standpoint," he says. "Additionally, you need to know in advance just what you're looking for [in a business], and have the ability and willingness to work hand-in-hand with the researcher to build a fundable business plan."
ONSET has an active and ongoing program for partnering with universities throughout the United States. Some of the strategies employed are:
Of the university-based deals that ONSET has completed in the last year, Ghose estimates he has spent about two-thirds of his working hours making them happen. Moreover, additional time was invested studying other research that didn't, ultimately, "have the bones" for a good business. But all time spent was of tremendous value, he believes.
"This is an exciting domain for a venture capitalist," says Ghose. "University thinkers are often not burdened with biases formed from business experience. That means they often don't have preconceived ideas of what they should and shouldn't do. Not being saddled with 'conventional wisdom' is an invitation to great innovation." For an investor, as well, believes Ghose.
About Onset Ventures
ONSET Ventures specializes in providing "venture craftsmanship" — an ideal mix of start-up, follow-on, and intellectual capital to entrepreneurs and early-stage technology ventures, to help transform world-class ideas into sustainable and valuable businesses. The firm has backed over 100 companies since 1984 and now has more than $700 million under management.
ONSET pioneered, and has refined over 20 years, a highly-optimized tool set for risk and capital management, and a "shirt-sleeves style" of active collaboration with entrepreneurs that leverages the firm's substantial operating experience. That collaboration frequently begins before the closing of any financing, and typically continues throughout the life of the venture. The combined process, which has become the hallmark of the firm, has resulted in ventures that have consistently met their operational and financing milestones. In addition, it has resulted in a franchise that not only brings successful, serial entrepreneurs back to ONSET Ventures time and again, but also attracts investors who want the increasingly rare opportunity to participate in very early stage venture investing.
ONSET Ventures focuses exclusively on information and medical technology-based start-ups, and has a long history of successful ventures in each of these sectors.