Why do university spin-offs attract more venture capitalists?

Abstract

This paper provides empirical evidence that young university spin-offs are more likely to receive venture capital than other technological start-ups. In addition, this fact is explained mainly by the lack of managerial skills among the founders of certain university spin-offs. The data used have been obtained from a questionnaire answered by 64 Spanish technological firms founded between the years 1993 and 2005. Forty of the firms are university spin-offs; the remainder are independent technology-based start-ups. The results support the complementary-assets view that academic entrepreneurs use venture capitalists as a means of gaining access to managerial skills. These results are maintained even when we control for financial constraints, levels of debt and intellectual property protection. Although these latter variables explain why certain high-tech firms are more likely to receive venture capital, we do not find statistical evidence that they explain the differences between university spin-offs and technological start-ups in terms of being backed by venture capitalists. The results therefore suggest that universities and policy makers can stimulate the creation and growth of university spin-offs by facilitating contact and trust between venture capitalists and academic entrepreneurs, mostly with respect to those cases in which there is a severe lack of managerial skills.