Viewpoint: Why family offices should look at universities for startups/entrepreneurs

Should investors be looking more at universities, or groups linked to universities, to find the next great startup? Yes, and there needs to be much more of a connection between investors, universities and startups. Investors like family offices can play a pivotal role in this process.

The role universities can play in the wider world can be pivotal to society. There’s an often-quoted figure about Stanford University and its contribution to the world economy, which is the fact that the university’s entrepreneurs have generated $2.7 trillion in annual revenue. This is equivalent to the 10th biggest economy in the world.

That’s a staggering amount of money, and I do look with envy at Stanford and its links to the wider business world, especially through Silicon Valley.  But, unfortunately, the relationship between universities, the business world, and investors in Europe has been less strong historically. Many universities are perceived as being too “ivory tower” and don’t engage proactively enough with the broader society around them. But perhaps a good way of improving this is through broader and deeper relationships between the business world, universities, and investors.

Investors, like family offices, need to realise that more and more exciting and innovative startups are linked to universities. The University of Southampton works with a startup incubator initiative, called Future Worlds, which links up students, members of the faculty of the university, and the business community. This has been hailed as one of the most successful startup incubator initiatives in the UK, and has gone on the mentor many successful startups since it was launched in September 2015. What Future Worlds has done very successfully is to engage people from the business world who are keen to help the next generation – and possibly back a lucrative startup at the same time.

The University of Southampton is particularly strong in engineering and computer science and many of the current startup ventures linked to the university have been in that area. More recently, there has been a particular focus on cultivating startups linked to our medical school. Now, some colleagues and I are working on a new initiative to develop university linked startups in the area of fintech, which aims to capitalise on the research expertise of the university’s Centre for Digital Finance.

The next step for us is to link it better to the investment world, and get investors like family offices to see the potential and to get involved in backing some of these initiatives.

But these types of initiatives are rare. For the most part, there are few links between the three communities. That’s a pity because there are waves of students coming through each year and it only takes one or two of them to have a creative and imaginative bent to create what could be the next world-beating product.

Of course, universities themselves need to do more to facilitate an environment that encourages entrepreneurs and startups. And this inevitably raises a bigger issue around the role of universities in society. A university is first and foremost a repository of scholars. But how can this scholarly expertise be tapped to the maximum benefit of society? – i.e. other than just through teaching?

If I’m meant to be an expert in computational finance, which I am, standing up and teaching from a textbook is not fully exploiting the commercial potential of my expertise. My relation with the business world can be much more than that, in my view. That’s why, I feel, universities need to have a conversation about how they contribute to society. And a big part of that contribution should be improving our links with the business and investor community.

All groups need to play a role in these efforts. But, it is my personal view, that universities, through corporate-sponsored research and initiatives like Future Worlds in Southampton, will become an increasingly valuable source for startups, which creates a more entrepreneurial ecosystem. This builds better links with the wider society around universities and helps everyone involved.

And perhaps one day if this happens, a European university might emulate the success that Stanford University has had in contributing to the world economy. And who knows – Europe’s first unicorn startup might just be born at a university – that should get a few investors more interested.

Frank McGroarty is Professor of Computational Finance and Investment Analytics at the University of Southampton Business School and is Director of the Centre for Digital Finance. Prior to becoming an academic, he worked as a quant fund manager in London