Columbia University Director Dave Lerner Offers Insight Into University Spin-off Investing

This week, Venture Hype caught up with Dave Lerner, a New York-based serial entrepreneur, angel investor, blogger, and board member of New York Tech Meetup, who’s been named as one of the top 100 most influential New Yorkers in the digital business community by Silicon Alley Insider. He’s also the director of the Venture Lab at Columbia University Science & Technology Ventures, which spins-off 10-12 startups per year based on university intellectual property.

Lerner shares his experience as an entrepreneur, mentor and investor; inviting us inside the world of university spin-off investing while offering sound advice for those considering the world of angel investing.

* Edited interview

VH: How did you get your start as an entrepreneur?

DL: I actually got my start just out of law school. After passing the Bar exam, I got into business right away by helping my father take a healthcare startup to the next level. Within a year’s time I was opening healthcare facilities up and down the East Coast, from Florida to Boston in what felt like non-stop, pedal to the metal action for seven years. In the process, we helped thousands of patients and trained hundreds of therapists. I was hooked.

VH: What part of business startup do you find the most exciting?

DL: I am what they call a “zero to one” guy, meaning I’m all about the vision, the strategy, assembling the team and raising the capital we need. I put all the pieces together and get ready for the siege. It’s all I know – but I love it.

VH: Much of your work is in university spin-offs – how did you get started in this area?

DL: I liken the experience to Mad Max walking into Thunderdome. We had sold the healthcare company some years before and I had started launching new companies and getting into angel investing in a big way. At one point I connected with an entrepreneur/investor involved in doing spin-offs for Columbia University. I was completely amazed by this incredible world of combining academia with startups.

Soon after I became the most active angel/entrepreneur around the university startups program and also got heavily involved as a mentor and judge to the Columbia Business School Entrepreneurship Center and Lang Fund Programs. A few years later, this same colleague of mine left the university to run a venture fund and I ended up coming on board to take his place and run the same program.

It’s a great program and we spin-off 10-12 companies a year based on university intellectual property. We’ve spun-off over 100 companies historically, over 30 have been venture-backed at some point in their life-cycle and over 20 have either been sold or gone public. Our companies have created in excess of 1,500 jobs.

VH: Do the majority of university spin-offs emerge already funded?

DL: It’s actually a common misconception that university spin-offs emerge from the academy with venture-backing. Despite an enormous amount of bluster and braggadocio in the industry, this is actually the exception as opposed to the rule. The overwhelming majority of university spin-offs emerge from the academy with angel funding, if they actually have funding of any kind. It’s the hope that after a year or more of development, some percentage of such companies will be ready for a traditional institutional venture-round of financing.

VH: What do you believe are the most successful university spin-offs?

DL: The real key to launching any successful company is marrying good technology with a great managerial team. Throughout the years, this point has been driven home to me time and again. It’s really all about the talent and experience of the team. Without an “A team” in place, a company hardly stands a chance, no matter how good the technology.

VH: Are there areas that just never seem to work?

DL: Well, history has shown that it’s usually best for the chief executive of a university spin-off to be an experienced and talented entrepreneur with a very strong rolodex. If the person is a first-time entrepreneur, he or she will have to be self-aware enough to bring on some very experienced advisors. While it’s sometimes possible for professors/inventors to be involved in the management structure, a proven, effective model is for the inventor to remain at the university and serve as chief scientific advisor to the spin-off. I’ve seen this work extremely well.

VH: You do a lot of mentoring work inside and outside of the university space. Do you see trends emerging with new angels that you find exciting?

DL: The most noticeable trend I’ve seen is the ascendancy of the undergraduate entrepreneur. Mark Zuckerburg and his ilk have definitely set the example. Today we see a vibrant entrepreneurial culture on campus that’s no longer frowned upon. This is wonderful news for angel investors as it means more deal flow and a great opportunity to mentor young, first-time entrepreneurs with whom one can work and invest in for years to come.

VH: As an advisor and organizer for the Blue Venture Community, you must see all kinds of activity through the organization. Are there unique groups that tend to find significant success?

DL: Blue Venture Community has done more to cultivate the entrepreneurial community of the university than any official initiative I’ve seen. I give full credit to Mark Davis (now at Draper Gotham), for getting it off the ground. After just one year, we have a vibrant membership with a pitch event, incubation session or cocktail hour every month that creates perfect networking opportunities. It’s an incredibly supportive environment for entrepreneurs at every level.

VH: What areas of investing do you think offer the most promise for the coming year?

DL: I actually believe that now may be one of the best moments I’ve ever come across to invest in compelling businesses run by talented entrepreneurs. The media echo chamber has been sounding off for months about the death of venture capital and the flight of many of its practitioners to other fields. This is perfect. When everyone else is in fetal position; it’s time for angels who still have some dry-powder and the handful of truly ‘early-stage’ VC’s to make their bets.

VH: Any advice you give an up and coming angel?

DL: If you’re just getting into angel investing, definitely talk to people with a lot of experience doing this first. If possible, try to hook-up with one of the reputable angel groups in your city. It’s such a high-risk activity that going it alone could be looked upon by some as sheer madness. You should also pay a visit to your local university tech transfer office and speak to the director of the startup program there. You may find some remarkable opportunities.

Link:

• Dave’s Blog