Five major assumptions we started out with when setting up the science startup incubator VTT LaunchPad and what we have learned.

VTT LaunchPad, the science startup incubator, which I have founded and lead, has been in operation since the fore year of 2019. Our persistent target is to spin off high quality investable startups that build on VTT owned intellectual property. As you can imagine, setting up a science startup incubator does not yield quick results and cycles for collecting validated learnings on the incubator operations are long. With the below blog post, I’d like to share the key learnings on the fundamental assumptions we had when we started this incubator.

As a short background, VTT Research is a leading European technology research organization owned by Finnish state. We are chartered with the task to create an impact with our research that benefits society and industry at a large scale. One of the ways of achieving this grand impact is by spinning VTT owned technologies out as well funded high-quality startups. Learn more at https://www.vttresearch.com/en and https://www.vttresearch.com/en/vtt-launchpad.

The five major assumptions we founded our incubator on:

I. Survival of the fittest – take in as many teams as fit the criteria and the best ventures will secure the funding to launch on the international growth path.

II. Applying the Lean Startup based metered funding -methodology will assure that, on timely basis, teams do the right thing on their path to becoming a fundable startup.

III. VTT LaunchPad operates only in the final steps of the innovation process, supporting almost ready spin-off teams take the final steps.

IV. Science venture candidate teams will benefit from an additional member with proven business knowhow.

V. As the incubator itself, we will eat our own feed and apply the Lean Startup mentality to our own operations, always asking itself to either persevere, pivot or stop on our specific ways of working or offering.

This is what we have learned so far.

I. Yes, it has been a very wise decision to take in all the teams that pass the criteria.

This allows a team to prove itself with each step they take. I have always questioned the superpowers of juries, who equipped with superficial information and bent with individual historical biases, as well as, needs to conform to whatever draws them, are given the authority to decide over the future of driven individuals and their aspirations. What we have seen in our incubator, is that some teams that evoked the least support from the advisory jury members have proven most capable in the incubator environment. On the other hand, some cases teams endorsed by an advisory jury have stagnated despite of the promising technology, as the team has not been able to develop their proposition into a funded startup.

Learning:

Give the team a chance and let the market decide.

II. Metered funding - not attractive or difficult to understand?

As a career-long innovation professional, my greatest frustration has been the “open tap” projects that have supported “building things right” without stopping to check on timely basis, whether we are “building the right things”. Such slackness wastes resources and erodes morale. Hence, it is crucial to guide teams’ decision making and accelerate learning, for example, with metered funding that drives teams to compose articulated hypothesis and test this most critical assumption first, before doing anything else.

Applying the Lean Startup metered funding has proven to be surprisingly difficult for various reasons, some of which remain still uncovered.

Firstly, most of the incubator teams make their major development steps aided by Research to Business (R2B) grant, 70% of which is funded by Business Finland and complimented by 30% of VTT’s own funding. The R2B grant tends to cover the team’s near-fulltime work for 1 - 1 ? years and besides furthering the customer centered R&D work, at least 40% of the budget is allocated for commercialization activities. Now, as you can see, there is little lean about R2B that is planned six months prior to approval and start of the project, and is executed according to plan for the 12-18 months that follow. ?

Secondly, it appears that either the metered funding offered by our incubator is either not attractive or difficult to understand. Few teams opt to make use of it, even when it could accelerate their way out as a funded spin-off much faster than with the R2B grant. When the foundation work is done well – assumptions listed and iteratively ranked by priority –, we can make the funding decision within days, instead of waiting six months for the Business Finland grant decision.

One assumption for the unattractiveness of our metered funding may be its uncertainty. As technology consultants, the spin-off team members may find the uncertainty over continuity uncomfortable. What if the evidence gathered from the lean sprint proves their assumptions wrong and the project is stopped, as a consultant, what project will I write my hours on? In the spirit of “pivot, persevere or stop” it is a relevant question to ask, but not the most urgent, since persevere or pivot tend to be the most likely results after a sprint.

Additionally, growing used to the idea of leaving a secure payroll of the research organization behind to become an entrepreneur surrounded by uncertainty, may require a longer mental incubation time, which the length of a R2B project may be suitable for.

Learnings:

We need to be engaged with the teams well before they apply for the R2B funding to ensure the high ambition level for the project. If a long project turns in the wrong direction, the steering group needs to keep itself tightly informed and maintain a rigor in their commitment to stop and pause the project on timely basis to steer the team back on the track of “doing the right thing”.

Additionally, we need to reformulate the way of communicating the metered funding, seek to understand the spin-off candidate teams’ hesitations and tailor the offering better for their needs.

III. Against the initial assumption, VTT LaunchPad incubator has a role in the entire path from early stages in the lab to final steps of the spin-off process.

In the spring of 2019, when we started out with setting up the incubator, my more experienced colleague warned that in addition to setting up the incubator itself, we would need to also build the entire innovation pathway from lab to market by taking charge of the R2B application process. At that point, company-wide no one oversaw it. Otherwise, we would likely soon have a shortage of eligible teams to take into the incubator. We picked up on his advice and started to coordinate and facilitate the twice-a-year application process. Only that was not deep enough in the research labs.

The forewarning became very concrete to us in the beginning of 2021, when we did not have any up to par candidates for the incubation program. The bootcamp we had planned for screening and preparing the candidate teams for the incubator was quickly pivoted to a Commercialization Workshop -pilot targeted for earlier stages of innovation. Any VTT researcher curious about exploring the commercialization opportunities of the results of their research, were welcome to join.

The target of the Commercialization WS was to help the teams concentrate on identifying and quantifying the commercial opportunity related to their solution, defining what still needs to be done to mature the technology and what kind of commercialization steps need to be taken to bring it closer to the market. The pivot turned out a success. It emerged that while initially teams do not know how their research could be commercialized, as they work on identifying the market opportunities, they may also start warming up to the personal entrepreneurial possibilities.

Learnings:

We need to be present already in the research phases in order to offer researchers visibility on the future commercialization alternatives of research and tap into the early stage deal flow.

It is also highly beneficial to offer direction for high ambition level and vision of the long term global success. This helps the team to make bold plans and take the right early-stage commercialization steps on the spin-off path to achieve that grand impact with the fruits of their research.

IV. In some cases, the scientist can grow into a successful startup CEO, in other cases the team really benefits from the external commercialization knowhow. But why?

My observations on success have been so far related to the business relevant network. The broader the team’s industry related, global network is, the better are also their prospects of success. And if the research team does not have this network, they need to accept their shortcoming and take it on board as soon as possible from outside. Of course, this may lead to dilution of stake in the potential startup or even harder discussions on who is really needed onboard at all.

Another surprising observation I have made has been on the unpredictable usefulness, or even harmfulness, of incubator team members’ prior entrepreneurial experience. In general, VTT internal teams with most entrepreneurial experience have been the least willing to adapt with the emergence of new evidence and have persevered on a chosen track much longer than would be of benefit. I have grown curious, whether this phenomenon is caused by hypothetical cognitive bias. Also known as, The Dunning–Kruger effect, the hypothetical cognitive bias states that people with low ability at a task overestimate their own ability, and that people with high ability at a task underestimate their own ability. It may well be that some experience in one type of entrepreneurship does not mean an individual is an expert at another kind of entrepreneurship.

Learnings:

We need to be bolder with the way we steer the incubator teams’ composition and growth in the very beginning of the incubator path. It serves no-one that teams are left to struggle when they lack the required competence. This will not be as easy to do as it is to write, so we need to also learn the right ways of doing this with love and care.

(Tips on this from the reader are warmly welcome!)

V. I feel we have been able to apply the persevere, pivot or stop -decision making in the incubator operations fairly – but not perfectly.

Our challenges have been related to gathering enough of reliable data on our service delivery. Prior to the Covid-time, we collected feedback from our colleagues at the end of each session by handing out a feedback form and collecting it at the door upon exit. If a colleague had not filled it in, shame and name was a very effective way of fixing that quickly. With the remote work that we have been in with a good part of two years, the amount of feedback we have received through the digital channels has diminished to the level that we do not even bother to ask for it anymore. This is very sad, as without the feedback it is very difficult to improve systematically.

On the other hand, with the emergence of new information, we have been able to make timely changes to our offering, as with the afore mentioned pivot of the Bootcamp turned Commercialization Workshop and persevere with other parts that have proven valuable. One of later is the annual Meet and Greet -event, where our teams present their latest developments to investors. What comes to stopping activities, we have dropped trainings that have not delivered the value for our teams.

Learnings:

We need to be more rigorous at collecting that data and coming up with inventive ways on how to collect it even in this digital era or disconnectedness, to make informed and timely decision on improving our services.

(Once again, tips on this from the reader are warmly welcome!)

Final reflections

I believe, our lean operations have been possible due to three elements and some personal attributes.

Firstly, I have had a clear target from day one: Create high quality fundable spin-off startups that are built on VTT owned IPR. I have had the freedom to do my job well and I have been accountable for getting it done. Also, I have not asked for permissions and apologized when need be. It is always easy to get a no, and finding the individual, who has the power to say yes costs time and resources.

Secondly, we have had sufficient resources for getting the job done (– although just right now we are suffering from growth pains and are terribly underresourced).

Thirdly, we are surrounded by great VTT colleagues with a shared mission to create impact and willingness to help.

Finally, I suspect humility might just be a superpower and applying it to my everyday work has given us the inner strength to stay curious and open minded to learn more with every step we take and be willing to change our minds as we learn.

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