Analogues between Academia and Venture Capital
Over time, I just couldn’t stop myself from noticing the similarities between academia and venture capital, having dipped my feet in both. Almost to the point where I strongly believe, in similar lines to Clarke’s Third Law, that
Any sufficiently long-term venture bet is indistinguishable from academia
Both fields involve working on things that have long time horizons. The subtle differences are in the form of a feedback loop that is faster and distributed across people in the case of startups. Validating your idea is an important part of both worlds. Feedback in the case of startups comes from “everyone” as opposed to reviewers/committees, which can be better because it is impersonal. A large set of customers could be more objective than a handful of experts. There are stronger market forces in the case of products, whereas peer review runs on good faith.
There are many other analogies that I’ve noticed and would like to summarize them here:
Mentorship
Both worlds function heavily based on mentorship. Academia centres on the student-advisor relationship, with a committee that steps in later. Evaluators involved are required to have gone through the graduate school experience in the case of academia, whereas mentorship in startups can come from industry veterans as well, not just previous entrepreneurs. This again might be more objective as mentors are more distributed and are less likely to collude. However, there is no barrier to entry and this might not always be suitable. Note that mentors in both cases are humans and might not be serving best interests, whether by ignorance or malice.
Networking
Finding the next opportunity involves networking in both situations. Whether it be finding the next academic position or collaborators, academia thrives on networking and conferences play a major role. Similarly, meeting prospective venture partners or initial investment and recruitment happens via friends and family in startups. There are many events such as conferences and meetups that facilitate the exchange of ideas and foster collaboration here as well.
Exit Timelines
Exit timelines are crucial in both academia and venture capital. In academia, researchers set timelines for doctoral degrees or achieving tenure, both of which are roughly around five years. In venture capital, exit timelines refer to the expected timeframe for achieving returns on investments in startups, typically through IPOs, acquisitions, or mergers, and have surprisingly similar timelines.
Intellectual Property
Intellectual property (IP) is significant in academia and venture capital, and forms the “moat” in both situations. In academia, researchers generate IP through discoveries, inventions, or creative works, governed by institutional policies and legal frameworks. In venture capital, IP revolves around startups’ innovations and proprietary assets, such as patents or trademarks. Protecting and leveraging IP is essential for competitive advantage and value creation in both spheres.
Continuous Learning
This is fundamental in academia and venture capital. In academia, scholars engage in research and scholarly activities to advance knowledge and expertise. In venture capital, stakeholders must stay updated on market trends and technologies to make informed decisions. Embracing lifelong learning fosters innovation, resilience, and adaptability in both academia and venture capital.
At the end of the day, both endeavours contribute significantly to economic development and should encourage cross-hiring, particularly in the case of academia, where there might not be enough positions for graduates in current markets. The fundamental difference lies in the fact that research, for the most part, consumes grants and produces knowledge, whereas startups consume investments and produce profits, which in turn can be invested back.
