Yesterday on Twitter I asked the following question and I wanted to follow up because it is an interesting topic.
Flip but serious: what is lean startup/incubator/hacker version of a university lab?
There is a lot of discussion about funding sources for science/biotechnology as pressure increases on some of the traditional pools of money. Yesterday David Shaywitz shared his thoughts on the challenges of smart young investigators and the challenging environment they face in getting grants dollars. He included David Grainger from Index Ventures and David’s response about resource allocation prompted my note about indirect costs.
The R01 grant from the National Institutes of Health (NIH) is a very common funding mechanism for investigators (generally university professors) to fund the research in their labs. Perhaps I should use a different phrase though as according to Sally Rockey, NIH Deputy Director for Extramural Research (see link for stats):
Application success rates, as I blogged about in December, declined in 2013 to a historic low.
When investigators write a grant application, they include the costs of the research and related items, known collectively as direct costs. Facilities and administrative costs (also known as indirect costs) are:
Costs that are incurred by a grantee for common or joint objectives and that, therefore, cannot be identified specifically with a particular project or program.
Investigators are told to consult their university for the indirect cost rate, which has been negotiated with the government already. So what are we looking at? Here is a blog post with indirect cost rates for 49 institutions that range from 52% to 76.5% (with links).
While I’m not suggesting that industry performance is stellar, the last few years have seen a significant shift for many companies to “capital efficient” models driven by private investors and the public markets. So my flip but serious question:
What is lean startup/incubator/hacker version of a university lab?
The Next Element 
It’s a really fascinating idea, how to have a lean laboratory. The problem is that value creation and value capture are inherently decoupled in the laboratory – this is the entire reason that they are funded through grants rather than the sale of, well, products, or even the license of IP.
I should mention; if you can sell products you should quickly get out of academic labs and start a spin-off. If you can license IP, get venture capital or something like that. Tech transfer. Academic labs really are for things that are too far away from transition to be evaluated; and better yet, insights of such a general nature that they facilitate technology broadly but can never be usefully captured as a single product.
For a typical EVM or lean model to work, one needs to assess cost and profit centers and minimize one while maximizing the other. That doesn’t work when there is no value capture – no profit centers. Or else you turn something into a profit center that really shouldn’t be the focus of your attention at all (publications, citation rates, and all the distortions in modern hypercompetitive institutions).
Overhead is a big mess – there have long been complaints about how the institutions work – but simply getting rid of it doesn’t work. That just ends up splitting the ‘hot’ and trendy, well funded labs from the rest of the institution; risk sharing is necessary in academia to preserve the universe of competencies for when suddenly unpopular diseases/regions/whatever experience a breakthrough in interest – and to keep alive areas of inquiry.
Lean startups have a burn rate… they produce by a date or the fail. This doesn’t really provide any continuity or depth of experience on the decade-century time scale.
Incubators don’t really do risk sharing to unpopular areas either, though they do spread base costs over groups. They are more focused on flexibility. Academia is more about continuity. Perhaps there should be a responsive element to the academy, but having a floor is absolutely critical. One place where this concept exists is the government. There, it is sometimes critiqued as being wasteful, because the people populating the floor are not particularly productive (nor does it attract the best and brightest, often). But somehow, allowing the best and brightest student of [name a taxa, for example] to explore his passion on a living wage with the minimum required equipment, a part time secretary and a student, … and to provide 1/x of his students a job in the field, perhaps so that there are two junior, one senior, one emeritus faculty of X at all times (total, 1 new grad student every 2-3 years)? That should be a national target. Even when X is unpopular.
Hackers require a day job. That’s the essence of that problem. You can’t turn all the university labs into hobbies.