the entrepreneurship and innovation track of the MBA program is by far the most over-subscribed.
Meanwhile, there started to be more student interest, more faculty interest. We got to know the venture capital community around town.
X: What time frame was this?
LN: The late ’80s, early ’90s. Most of the companies that were getting started, the capital was coming from California or New York.
And it wasn’t just MIT, but we were certainly, I think, an important part of it. New funds started forming here and some of the bigger funds elsewhere started putting offices in Boston and Cambridge.
And then [there were] various ways in which entrepreneurs in the region or in the university could get help. The [MIT] Enterprise Forum had been around, it must be 40 years old by now. … The student business plan contest must go back to the early ’90s, I think. We were one of the earliest.
And then other little things came up. There were more entrepreneurship courses in the Sloan School, and that of course led to the Entrepreneurship Center, which has now become the Martin Trust Center.
Typical MIT, things start experimentally. They don’t get planned from above for these kinds of activities; somebody gets an idea. Two alums went to the provost. These were two successful business people who were now at a stage where they were interested in giving back. They said, “We have an idea for this mentoring service.” I think Bob Brown—who is president of [Boston University] now—said, “OK, I’ll give you half a secretary and a cubicle. See what happens.” And now of course there’s 150 mentors [in the MIT Venture Mentoring Service], and it becomes an important part of the game. [The latest count is 230 mentors.—Eds.]
Now, we’ve got entrepreneurship courses, we’ve got networking [events], we’ve got the student business plan contest, the Venture Mentoring Service.
Then along came Desh Deshpande [who, along with his wife, seeded the Deshpande Center for Technological Innovation in 2002]. By now, the entrepreneurship virus was getting rather active and spreading around here. It just kept going.
X: What else was happening, culturally?
LN: There were clearly very important social and economic forces. What I consider the “social contract” was broken when the telephone company [Lucent/Bell Labs] and IBM did layoffs. Because [before that] the idea was join a big company, keep your nose clean, and you’ll have a job for the rest of your life. So, if you thought about it, why would an engineering graduate join a crazy, fragile, could-go-out-of-business startup when they would have this absolute security otherwise? Well, when that security went away, the relative risk of joining Blue Sky Biotech versus Merck [became] less of a difference.
So more and more, there was interest in new job creation from the government and the foundations, saying it’s coming from high-tech companies. And from individuals, it was, why not?
MIT’s always been a place where going and joining a crazy little company was not really considered risky. On the grounds that, hell, you’re good enough, you’re bright enough, you’re well-enough educated that if it doesn’t work, then you can join Merck or IBM or somebody.
The risk-taking because you can always do something else, was always there. Most of my friends back in the ’60s were joining little companies, because they were more fun. They were more interesting.
And now MIT, with its emphasis on innovation, is investing officially in training students in innovation and entrepreneurship, along with, not separate from, their intense technical educations. It’s not “you go and learn how to be an entrepreneur,” it’s you learn biology or chemistry or electrical engineering or computer science, but you also learn how entrepreneurship and innovation and moving technology out into the marketplace works—rather than having to learn that after you graduate.
X: There are a lot of resources and options on campus for people who want to get their company started.
LN: Yeah, everything but money, because MIT does not have a venture fund or something that would invest in your company.
X: Would it ever do that?
LN: There’s been no need. People say to me, “Does MIT have an incubator?” And my classic answer has been, “Yes, it’s called the city of Cambridge.”
But there’s another reason, a very important reason, and that is that, when we’re talking about serious investment—not two students and a puppy and a laptop in the dorm—but real technology-based, or shall we say research-based, entrepreneurship, where you’re taking truly new stuff that’s going to take a lot of money and a lot of time to bring to market…
X: And patents.
LN: And patents. Patents are needed because the whole idea is if you’re going to get somebody to invest a lot of time and a lot of money, if you succeed you don’t want the other guy, the bigger guy, saying, “Well, thank you very much. Now that you’ve shown the way, get out of the way.”
We are primarily using patents as an incentive for investment. We’ll give you an exclusive license if you’ll commit to development. And then if you succeed, you can recoup your risky investment because you will have patent protection in the market.
X: And the other reason why MIT wouldn’t do a fund?
LN: Well, given that it takes a lot of sweat equity to get an MIT company off the ground. [The Technology Licensing Office helps] start about 25 or 30 companies a year. God knows how many [other companies started on campus] go out the back door. No one fund could put that amount of sweat equity into all of them.
Now imagine we have MIT’s fund, and I invest in company A, but don’t have the resources to do B, or maybe not C. Then I go with C to [an outside venture capital firm] and say, “How would you like my leftovers?” There’s a negative selection bias there for
