Good Intentions

Today’s announcement of a new university accelerator program at the University of Southern California (USC) should have elicited celebration. The appropriate feel good PR boxes were checked with the inclusion of tier one VC firm Kleiner Perkins Caufield Byers (KCPB) and Hollywood mega-agency United Talent Agency (UTA), each announced as partners.

But underneath the delicious frosting, this cake is the same crusty, dry, and tasteless one served at other universities. Unfortunately, USC has repeated many of the same conceptual failures and feats of poor execution which have always handicapped similar programs. Much like big corporations that covet “innovation” and “disruption,” but spend more time talking about these concepts than fostering them, most universities seem unwilling to really push the envelope.

The first error USC and its partners made was one of exclusion. The Viterbi Startup Garage, named for its affiliation with the university’s Viterbi School of Engineering, mandates that at least one member of every founding team be a current student or an alumnus of the Viterbi School. Engineering is just one of USC’s many highly ranked departments, which also include medicine, business, and film, among others.

To exclude students from these various other schools from participating in the the accelerator – without recruiting a Viterbi co-founder – is irrational and contrary to the program’s mission: “to facilitate the growth of the Los Angeles technology marketplace, as well as encourage the best and brightest engineers to not only remain in Southern California.” Notice this doesn’t say help the 1,800 undergraduate and 3,800 graduate Viterbi engineers flourish and stay in SoCal.

The second major blunder in today’s announcement was the failure to mention buy in and participation from the university’s distinguished alumni entrepreneurs. A cursory list of notable recent USC alumni includes Box founder Aaron Levie, Salesforce founder Marc Benioff, MySpace founders Chris DeWolfe, Josh Berman, and Collin Digiaro, Riot Games founder Brandon Beck, and Mobile Roadie founder Michael Schneider, among others (many of which did not major in engineering at USC). The Startup Garage program would have had significantly more substance with public backing from, and the subsequent ongoing participation of a few of these industry leaders.

Another issue with the Startup Garage is the fundamental disconnect between for-profit academic institutions and entrepreneurial endeavors. That is, schools are in the business of collecting tuition from their students – and eventually donations from alumni. Startups, on the other hand, are all-consuming endeavors that often lead to founders dropping out of school, quitting comfortable jobs, or otherwise reorganizing their lives.

USC’s accelerator makes no provision whatsoever for students that decide to pursue their venture full time. This may seem trivial, given that the participants will all be adults capable of making their own education and career decisions. But the across town example offered by UCLA’s summer accelerator indicates that far fewer student founders will carry on beyond the conclusion of such a program than do non-student founders in traditional accelerators.

If USC, Kleiner Perkins, and UTA genuinely want to create sustainable ventures that have a genuine impact on LA and the broader startup ecosystem, then they should have outlined a clear, no questions asked, penalty-free path toward pausing or reconfiguring one’s education. This is not a problem unique to USC, but is one that weighs down the model nonetheless.

Finally, USC chose to forgo one of the few strategic advantages typically offered by university accelerators. Specifically, nearly all of these programs – Stanford’s and UCLA’s included – give participating startups cash and resources without taking any equity or debt in exchange. (The average private accelerator takes 5 to 10 percent equity in exchange for $20,000 to $50,000.) These “grants” make the university programs attractive to founders who wish to retain more control of their business.

For some inexplicable reason, USC has chosen to take 4 percent equity in exchange for $20,000 invested in its startups. This decision places the Viterbi Startup Garage in direct competition with the best non-university-affiliated accelerators like Santa Monica’s Launchpad LA, MuckerLab, Amplify, and StartEngine, or Y-Combinator and TechStars elsewhere. That’s a battle it will be hard pressed to win.

“I agree with your general thrust that university run accelerators don’t tend to have a high record of success,” says one well-known LA investor speaking on the condition of anonymity. “They don’t bring in outside DNA in terms of entrepreneurs, mentors, et al. But I don’t begrudge the effort as it might lead to more students getting a nudge toward an entrepreneurship track.”

The best example of a university accelerator done right is undoubtedly Stanford’s StartX program. The program is “built and run by Stanford founders,” according to its website. StartX’s only requirement is that at least one founder, holding material equity stake in the business, has been enrolled or held a faculty or postdoctoral position at the university within the previous four years. In other words, everyone’s welcome so long as you bleed Cardinal red.

Further, among StartX’s several hundred mentors and advisors are Palantir founder Joe Lonsdale, LinkedIn co-founder Konstantin Guericke, and Xfire founder Mike Cassidy, as well as other prominent founders and investors. It’s not surprising then that in a little over two years, the program has accepted 90 companies, and graduated 60 – comprised of 210 founders. Of these graduates, 85 percent received funding – more than $100 million total – and are still growing.

When done right, university accelerator programs have number of advantages and opportunities to differentiate themselves from their private counterparts. Beyond the typical favorable equity arrangements, as part of some of the world’s best technical and business universities, participants have an enormous advantage in terms of access to talent and physical infrastructure like labs and workshops.

But, despite these many advantages, most universities not named Stanford have rolled out underwhelming accelerators, or failed to form them all together. Given that competitive landscape, USC deserves a modicum of credit for at least trying. And bringing in the outside muscle of Kleiner Perkins and UTA was a wise move. But this is actually USC’s second encounter with startup building, having operated the EC2 “high-tech incubator and media research facility” from 1995 to 2006, so it’s hard to be terribly forgiving.

While the university seems to recognize the opportunity at hand and its role in fostering the local entrepreneurial ecosystem, the final product was full of unnecessary compromises. The good news is that this is just version one, and the university has every opportunity to adjust its model. A sterling example is available just a few hundred miles up the coast.