It Takes $50 Million to Create One Startup

Chart-1.jpg

THE NORTHWEST FLORIDA ENTREPRENEURIAL ECOSYSTEM SUFFERS FROM THE LACK OF A RESEARCH UNIVERSITY.

It is generally accepted that the presence of a research university stimulates the entrepreneur ecosystem.  The Carnegie Classification of Institutions of Higher Education defines universities in the United States that engage in extensive research activity as Research Universities as those that:

  • Offer a full range of baccalaureate programs;
  • Are committed to graduate education through the doctorate;
  • Give high priority to research;
  • Award 50 or more doctoral degrees each year; and
  • Receive annually $40 million or more in federal support.

By this definition Florida has six state Universities that are Research Universities (highlighted in yellow on Chart 2).  Notably absent from the Research list is the panhandle of Florida partially explaining the weakness of the entrepreneurial ecosystem in that area.

Chart-2.png

Chart 2

If Research Universities are vital to a vibrant entrepreneurial ecosystem there should then to be a link between research dollar and startups.  Based on a review of the Florida University system, which is made up of 11 Universities, from 2010-2016 using published accountability reports, indeed there is a strong correlation between R&D expenditures and the number of university sponsored startups.  Four schools, all with low research dollar, had no attributed startups.  This suggests there is a minimum level of sustained $40-50 million of annual R&D necessary to trigger startups (Charts 3 and 4).  The “Number of Start-up Companies” are those that were dependent upon the licensing of University technology for initiation – as reported on the Association of University Technology Managers Annual Licensing Survey

Chart-3-1.jpg

Chart 3

SUSTAINED INNOVATION REQUIRES $150 MILLION A YEAR IN TOTAL R&D FUNDING INCLUDING $7 MILLION A YEAR FROM THE PRIVATE SECTOR.

Looking beyond start-ups to a broader measure of innovation such as patents issued and disclosures filed, a picture emerges (Chart 4) that sustained innovation requires at least $150 million a year of R&D funding.  To initiate innovation at least $30 million of R&D funding per year.

CHart-4.png

Chart 4

The author can be contacted through his website or his blog.