For decades, professors have had a lasting impact on the economic development surrounding the colleges and universities where they work. Startup ecosystems in Silicon Valley and Boston were built, in part, by professors there who were able to help launch successful startups that attracted talent and capital.
So if city leaders want to bring in fast-growing companies that attract capital and reward investors by going public, they should pay attention to what professors at local colleges and universities do outside the classroom. If professors spend time gathering data and writing research papers, the city may never become a startup city. However, if those professors start companies to commercialize their intellectual property, odds increase that their efforts will result in successful startups which will create a demonstration effect that draws more talent and capital to the city.
Making a Difference in Silicon Valley
A professor made a big difference in turning Palo Alto and environs from fruit orchards to the hub of the startup universe. As I explained in a December 5 presentation to about 140 members of the Worcester, Massachusetts, Economic Club, Silicon Valley's journey to the top startup region began with Frederick Terman's arrival in Palo Alto after he received his PhD from MIT in 1924, according to PBS. MIT encouraged professors to supplement their salaries by consulting to industry, according to MIT Sloan School professor, Ed Roberts. (Many universities discourage faculty from sullying themselves with business.)
This inspired Terman, who became a professor at Stanford University, to push two of his students -- William Hewlett and David Packard -- to start Hewlett Packard in 1939. He helped HP win Defense Department contracts which boosted its growth, according to the Stanford Daily.
HP was Silicon Valley's first pillar company -- it supplied talent for startups (for example, Apple co-founder Steve Wozniak was an HP engineer). HP also encouraged engineers to become entrepreneurs within HP. When a division reached 1,000 people, the company spawned a new division built around a new product, according to Remade in America.
According to PBS, Terman also persuaded William Shockley, the Nobel prize winning inventor of the semiconductor, to locate his company near Stanford. Shockley's eight best engineers quit that company to start Fairchild Semiconductor, and some of Fairchild's best quit to start Intel.
Another professor, Harvard Business School's Georges Doriot, helped turn Boston and Cambridge into startup cities. According to MIT, in 1946 Doriot founded American Research & Development (ARD), the first publicly-traded venture capital firm. ARD invested $70,000 in Digital Equipment Corporation, founded in 1957 by MIT graduate Ken Olson. Doriot's investment soared to $355 million at DEC's 1968 IPO. DEC peaked in 1990 -- employing 120,000 and generating $14 billion in revenue, according to Britannica.
Worcester as an Aspiring Startup City
Palo Alto and Boston are great examples of cities that started with universities and become startup hubs. Others can do it as well, but it's not easy. Worcester, Massachusetts, for example, has the universities and it even hosts a very successful high tech startup that went public -- but it's not enough.
Worcester hosts 11 institutions of higher learning -- including Worcester Polytechnic Institute (WPI) and University of Massachusetts Medical Center. It's also home to Polar Beverages (depicted above), a family-founded and led seltzer maker.
IPG Photonics, a leading maker of so-called fiber lasers, headquartered itself in nearby Oxford, Mass after receiving local tax breaks. In 1990, Valentin Gapontsev, then a 51 year old PhD from Moscow Institute of Physics and Technology, founded IPG. After raising $100 million in venture capital, IPG went public in 2006, according to the Worcester Telegram & Gazette. Sadly, IPG Photonics has not supplied capital and talent to local startups. In short, it is not a pillar company like HP.
Like Stanford, WPI is a source of startup talent. For example, WPI alum, Jeremy Hitchcock, started Dyn, a domain name register. But he moved to Manchester, NH, raised millions in venture capital, grew the company and in 2016, Oracle acquired it for $600 million, according to the Worcester Telegram & Gazette.
What is Worcester's missing ingredient? I think it's creating the incentive for professors to start companies as they do at MIT and Stanford. A professor I interviewed forStartup Cities told me that WPI favors academic publication over entrepreneurship in its tenure decisions.
For Worcester, and other cities in similar situations, this needs to change. That's because professors are role models to students -- those who start companies, influence students to follow suit. Moreover, as MIT and Stanford have proven, professors' companies provide career opportunities that keep students nearby after they graduate.
By counting entrepreneurship in professors tenure evaluations, university leaders can help turn their locations into thriving startup cities. It would take time to pay off -- but as Silicon Valley and Boston/Cambridge demonstrate, it could turn more cities like Worcester into thriving startup hubs.