How good are Canada’s universities at creating startups?

Like many university students, Aditya Bali finds delayed and missed parcel deliveries a “royal pain.”

Bali and his friends Mike McCauley and Jay Shah, fourth year engineering students at The University of Waterloo, are frequent online shoppers for things such as textbooks, robot components, and Snuggies. Class schedules, however, often make them miss the delivery of the stuff they purchased.

The trio developed a simple solution. As part of their fourth year engineering project, they created BufferBox.com which provides an on-campus, 24/7 self-serve kiosk and locker service where students can have their online purchases delivered to and picked up. Since its launch last year, the BufferBox has processed hundreds of deliveries and there are now plans to offer the service to other campuses.

BufferBox may be a long way still from growing into the likes of Waterloo’s OpenText Corp. or Research In Motion (Canada’s largest software company and the country’s largest tech company respectively) but BufferBox nevertheless joins the ranks of a long list of startups that grew out of projects from the Waterloo, Ont. university.

Across the country, universities are increasingly focusing on not only serving as centres for higher studies, but also as incubators of business startups.

“Learning to develop a business, run a business and turn it into a viable source of cash flow is an education that can be just as important as other courses available in universities everywhere,” says Mike Kirkup, director of VeloCity an incubator program at the university. The “dorm incubator” was launched in 2008 to help students launch their ideas as viable businesses in various areas of technology such as mobile, Web and digital media applications, said Kirkup.

“University incubators offer an environment where students can test out ideas, fail, learn from their mistakes and succeed,” said Kirkup. The VeloCity Venture Fund offers a $25,000 grant to University of Waterloo students interested in starting their own business.

As business in various industries seek out new sources of intellectual properties to monetize and as governments explore ways to boost the economy, campus incubators are emerging as a an ideal solution, according to Andrew Maxwell, chief information of the Canadian Innovation Centre, a non-profit organization helping innovators and entrepreneurs. Maxwell is also a lecturer at the University of Toronto’s School of Continuing Studies, and at Waterloo.

“Universities and schools are ideal sources for bright talents and innovative ideas that businesses seek to invest in. Universities also offer the environment where startups can sprout out and stimulate the economy,” said Maxwell.

Not all incubators are created equal

Not all universities are good startup incubators, according to Maxwell, who has a developed a system for measuring the ability of universities to spawn startups.

In Canada, he believes, Waterloo is best positioned to cultivate tech startups because of a unique combination of geographic location, programs and what he calls “startup culture.”

Apart from VeloCity, Waterloo also has another incubator program called Communitech which provides students with a defined workspace to develop their businesses

Maxwell, however, is quick to explain that a campus’ shortage of startups is not necessarily a bad thing. “Different universities have different strengths and priorities and reasons for being.”

For instance, he said, Toronto may have significantly less startups under its belt compared to Waterloo. But this doesn’t make the Waterloo school necessarily better than Toronto. “The U of T focuses more on theory and research which lead to discoveries, inventions, and development of intellectual property.”

Over the years, Maxwell said, Waterloo has developed a strong co-op program which thrives on the robust tech company environment in the Kitchener-Waterloo area. Companies like RIM, OpenText, Christies Digital Systems Canada Inc. and Com Dev International provide fertile training ground for students. These and other companies also provide resources and valuable mentorship to tech students.

Other campus-based startup incubators include:

• Ryerson University’s Digital Media Zone an incubator which has so far hatched 31 ventures in its Toronto location.

• The Next 36. This is an “entrepreneur boot camp” that aims to launch 36 promising and innovative Canadian undergraduates. A venture challenge gives nine teams of four students $50,000 cash and guidance from industry mentors to build a business. Then the students get a four-month summer residency at the U of T`s Massey College to study with faculty and prominent Canadian entrepreneurs. Funding is provided by Canadian business leaders.

• The University of British Columbia’s UBC Seed Accelerator Fund, a venture fund that provides students, faculty, staff and recent alumni early-stage capital for their business ventures.

• Carleton University’s Nicol Entrepreneur Institute. From two $1 million gifts from Carlton graduate Wes Nicol, an overseas paid internship program was developed to help support the “next generation of entrepreneurs.” Carleton undergrad and graduate students from all faculties are eligible to apply.

• McMaster University’s Don Pether Incubation Centre (created from the $1 million donation made to the engineering faculty by the former Dofasco Inc. president) provides startup support for tech businesses by students and recent grads.

‘Inventor all’ policy

But Waterloo’s ace-in-sleeve is a unique philosophy called “inventor all.”

“Inventor all means that whatever intellectual property a student or faculty member develops belongs to them 100 per cent,” said Kirkup. “This is a tremendous incentive to inventors and entrepreneurs because it means they have control over their creation.”

Kirkup said not many universities in North America share this particular policy and if they do, it does not extend to faculty members. “This policy is probably the biggest contributing factor to encouraging the growth of startups in Waterloo.”

The inventor all policy is in direct contrast to policies adopted by universities such as the Massachusetts Institute of Technology, said Maxwell. “Over there the policy is ‘whatever you create, we own and we will tell you what you should do with it,’” he said.

Such policies, Maxwell said, are not conducive to encouraging students to develop startups. “Although MIT is one of the top universities that develop tech spinoffs, the message this policy sends out is that the university has control over your ideas.”

It’s not all in the numbers

Maxwell also, however, said that a university’s startup spinoff success should not be measured by the number of startups it is able to produce. Such a practice would lead to misleading results and even runs the risk of forcing institutions to focus on the wrong factors.

He is also wary that metrics might be used by used governments or businesses to divert funding from one school to another.

“If you start measuring for the number of startup spinoffs a university is capable of, some schools might focus on just that to the detriment of other programs,” said Maxwell.

Rather than just the number of patents and startups, Maxwell’s systems also takes into account other factors such as the type of courses offered, number of students enrolled in startup-related or innovation-related courses, school programs and policies, research papers published by students and faculty, contacts or interactions by the school with businesses and industries.

“By taking these and other factors into account, the metrics provides a more complete picture of the university and its ability to produce startups,” said Maxwell.

Nestor Arellano is a Senior Writer at ITBusiness.ca. Follow him on Twitter, read his blog, and join the IT Business Facebook Page.