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More than 157k new startups leading to 6.1 million additional jobs with €3.2 trillion in increased equity value in the next 10 years: these are the numbers from the potential growth recorded in a recent report on a specific subject of investigation conducted by Redstone, one of the most active European early-stage VCs. If you're wondering which country these numbers refer to, the answer might surprise you, because it’s not a country at all: it’s the unlocked economic potential of European Universities.
The report, titled "Redstone University Startup Index: Europe’s Trillion Euro Opportunity," delves into the entrepreneurial efficiency of universities across Europe, highlighting both the current impacts and the potential opportunities for economic growth through startup creation.
“Every year, the 457 universities we examined in 34 countries have a combined budget of almost €170 billion,” Michael Brehm, Founding Partner at Redstone.VC, told us when our team interviewed him about the report, “With this study, we wanted to understand what kind of ROI is generated. The budget available to universities is already enormous: it’s not about investing more, but about investing better and adopting a series of measures to reach the full potential.” For this reason, the first question the report sought to answer is the most important of them all: how efficient are European universities in fostering entrepreneurship? And which are the most efficient ones?
The starting point was to develop the first, fundamental metric for the study, namely the number of startups per €100 M university budget. This allowed the researchers to create a benchmark made up of the 100 best-performing universities. “In terms of quantity and quality, there is so much knowledge coming out of some universities every year that is not used in terms of entrepreneurship, and it's a pity,” Michael commented, referring to the most important insight that emerges from the ranking: while the top 100 universities produce on average 16.6 startups every €100M of budget, the average drops dramatically to 6.6 startups considering all the 457 universities together.
And this is just the tip of the iceberg.
With €14.7 Bn, the top 100 universities absorb around 9% of the total combined budget for all universities in the study. And despite consuming so little budget, with 2,366 startups supported, these universities create 31% of all the startups created by universities in the study. The moral? The top 100 universities are 456% more efficient than all universities combined.
First and foremost, let’s start with significant data: 34 out of the top 50 universities are business schools. By narrowing the focus even more to the top 10 places in the ranking, we discover that 9 of these are occupied by business schools as well (WHU – Otto Beisheim School of Management, HEC Paris, Esade Business and Law School, Université Paris Dauphine, ESCP Europe, Skema Business School, Paris School of Business, Vlerick Business School, KEDGE Business School, Ecole supérieure des Sciences commerciales d'Angers).
But what stands out is the fact that those top 10 universities create on average 38.2 for every €100 M of budget. And that’s something, considering that, as we’ve already seen, the average of the universities examined is 6.6 startups for every €100 M of budget.
If Business Schools are to be an example for other European universities, everything comes down to one simple insight that can give the boost to the change highlighted before: making entrepreneurship the third pillar of universities' missions, alongside teaching and research.
But what does this entail and what does it mean?
First and foremost, this translates into establishing strong entrepreneurial foundations by creating dedicated entrepreneurship centres, policies, and structures for spinouts. Much of the success that universities in the top 100 have depends precisely on the presence of clear guidelines and opportunities not only for IP transfer but also for students to access entrepreneurial pathways during their studies and for professors to coexist their research activities with entrepreneurial activities.
By examining the #1 in the ranking, WHU – Otto Beisheim School of Management, the researchers tried to find the reasons for the success of the Business Schools model: “It's a matter of mindset: they push entrepreneurship through studies from day one, even from the welcome speech. The point is not to make every student an entrepreneur or a founder, but to give them all the support possible if that's what they want.”
This effect is achieved through specific academic curricula that teach the skills necessary for success in the entrepreneurial world and by promoting the exchange of professional experiences between alumni and students, thus presenting startups as a viable career option. In this sense, fostering strong alumni networks allows the knowledge acquired at university to be circulated back into the entrepreneurship ecosystem and vice versa.
“Many of these schools act as network facilitators: they don't say 'we have the experts', but 'we know the experts', because they keep track of students' trajectories and create a community that self-generates and accelerates. The better the alumni network organisations are run, the better those universities perform in terms of entrepreneurial success”, Michael stated
The last valuable insight that emerged from Redstone’s report and the conversation with Michael has to do with promoting interdisciplinary collaboration between business, technical, and scientific programs in different universities. “To build a successful startup, you need to have both business knowledge and great technical knowledge. That's why it's interesting that more and more business schools are collaborating with more technical universities. It's a win-win situation,” said Michael. This underlines the importance that knowledge and research results must find a way to become not only the foundation of academic prestige but also a flourishing entrepreneurial activity that starts from research and returns to it through new funds and stimuli.
Implementing these recommendations might not be the easiest thing, especially considering how large and complex institutions like universities embrace and make their own transformative dynamics like those outlined in the article. From a certain point of view, the proposed change is radical and profound, but if there is an opportunity worth seizing, one with 6.1 million new jobs, €400 billion in additional taxes for governments, and €2.6 trillion in additional GDP, it is worth considering.
Since Bocconi University ranked 12th overall in the ranking of the most efficient universities, with 30.44 startups created every €100 Mn of budget, positioning itself as the first Italian university and one of the best in Europe, we asked Michael his opinion on this result: “Bocconi University is definitely in the right position to become an important innovation hub not only for Milan but for Northern Italy. However,I believe it is important to create roundtables with other universities, with the political class and local entrepreneurs, to jointly seek the major topics and tackle them together. When this happens, when people collaborate in dedicated spaces, amazing things always happen.”
To conclude, Michael provided an overview of the Italian entrepreneurial ecosystem, with a really interesting small preview: “In Italy, there is amazing talent coming from universities, or foreign people who come to study in Italy. However, they do not often work or start companies. There is a need for a shift in mindset. From this point of view, being a fund that operates across Europe and aims for the growth of the entire region, we will soon launch an Alpine fund that focuses on that region, including Italy. This is because we believe that right now it is an untackled area in terms of investments. The potential is there, and we can't wait to unlock it.”