Amid the uncertain economic times of COVID-19, many startups are experiencing a stress test that may prove too challenging to overcome. A swath of entrepreneurial companies — small and large, new and established — are cutting jobs and pivoting their business models in the face of declining spending and funding. In fact, venture capital funding in the U.S. has been on the decline for three consecutive quarters, according to CB Insights.
But entrepreneurship doesn’t have to go on hold as the country slogs back toward normalcy. Universities can offer young entrepreneurs the funding, safety, and flexibility to dream big and create world-changing innovations.
‘Fail first’
Entrepreneurial education has been flourishing at colleges and universities around the country; degrees and diplomas in entrepreneurship have grown by five times since 1975, according to the Kauffman Foundation.
And you are more likely to find success as an entrepreneur if you start at one of the approximately 250 startup accelerator programs offered by U.S. universities. Notable programs exist at MIT, Stanford, UC Berkeley, Harvard, and Georgia Tech, for example. According to a study of more than 150 university incubators and almost 900 companies, businesses created and cultivated at higher education institutions generated more jobs and more sales than those incubated elsewhere.
At Georgia Tech, we’ve seen this to be true in practice as well as theory. CREATE-X, one of the university’s flagship entrepreneurial initiatives, has seen undergraduate students from more than 35 different academic majors create nearly 160 companies in the last five years. And they’re outperforming traditionally-funded startup success metrics. About 25% fail, 25% succeed, and the other 50% continue to percolate their ideas and often come back to them when market, personal, or social conditions are more favorable.
That middle 50% is somewhat unique to the university startup environment. Very capable and innovative students find themselves in a supportive ecosystem and campus environment where they have access to a vast amount of monetary, technological, and operational support that most other entrepreneurs can only dream of: fabrication labs, industry expert professors, VC funding, maker spaces, free accounting and legal services, and countless other resources.
And in contrast to the Peter Thiel model, university undergraduates don’t have to choose between an education and their entrepreneurial drive. At universities, you can have your proverbial cake and eat it, too. Whether these students succeed or fail — or something in between — they can stay in school, learn the ins and outs of business creation and ownership, and even intern at their own companies for college credit.
In the startup world, they say, “fail fast.” In a university setting, students can “fail first” while they are in a protected environment that is built for learning, trying, and doing. Universities are a natural safety net for building resiliency, helping individual entrepreneurs discover what matters most to them, and learning how to be adaptable.
Understanding the new normal
Naturally, student-led companies coming out of university environments are extremely early-stage businesses. University incubators aren’t competition for more traditional accelerators such as Techstars or Y Combinator but are more like a feeder team for the major leagues. Higher education entrepreneurship programs are a source of talent for large-scale accelerators, bringing them better-prepared students with more mature ideas and (sometimes) that first failure already under their belt.
Investing in startup ventures has surely changed recently, a trend that started before the COVID-19 shakeup. While investors and founders alike work together and separately to find out what the “new normal” will be over the next several years, universities can play a critical role supporting entrepreneurial students so they can still think big and learn the value of moxie and resilience during unpredictable times.
Steven W. McLaughlin is the Dean and Southern Company Chair of the College of Engineering at Georgia Tech.
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