In previous posts we discussed the challenges facing startups seeking to commercialize science originating from universities and research institutes, and pointed to how local startup ecosystems can aid in this process. This recent Techcrunch article about startup activity in Seattle shows how the University of Washington and the City of Seattle are working together to make the city more attractive to those looking to launch their start-up. With the city’s Office of Economic Development (OED) taking the lead (and going so far as to purchase and run a startup hub website) the partnership is addressing several key issues: office space, zoning, and collaboration support.
This is a great start. The companies that will come out of this effort will likely span the gamut from out-licensed university discoveries to various software focused projects, and for those software-based start-ups the OED’s efforts will be especially helpful.
For the start-ups aiming to solve our most pressing and serious challenges – in healthcare, environment, agriculture, energy, materials, and so forth – assets like office space and collaboration infrastructure are important, but not as critically important as runway. Simply put: these companies require high-risk early stage capital.
We submit that a critical piece of the puzzle for places like Seattle and other aspiring entrepreneurial ecosystems will be their ability to attract and integrate non-traditional sources of capital. Our definition of non-traditional capital includes grants, venture philanthropy, sponsored research, crowdsourced and other forms perhaps not yet devised. This structurally less risk averse capital is critical to help important scientific discoveries get to “proof-of-concept” stage, and thus become more attractive to the slightly more risk averse traditional venture dollars.
We will discuss non-traditional capital and the various high-risk venture funding models for aspirational hard science start-ups in subsequent posts.