The R&D Venture Studio Playbook

Building a thriving R&D venture studio begins with securing support from the organization’s top leadership: think VP of R&D, Chief Technology Officer, Dean of Engineering, or equivalent. If you are in one of these roles yourself, you will still want to convince your peers in the leadership team of the value of building and supporting an R&D venture studio.

Each organization is different, so you will need to emphasize and align the benefits that are most strategically relevant to your organizational strategy. At MIT, we have found that the senior administration is eager not only for more spinoff companies but also for researchers to engage in technology translation and to collaborate more with each other. To set the right expectations, you can emphasize to your leadership the outcomes the R&D venture studio will actually deliver:

• Greater translational thinking and connective tissue within the organization
• More real-world relevance for R&D projects that purport to be application-oriented
• More impactful new products or businesses within 5 years
• A culture of translation and commercialization

Clarify that new programs take time; if possible, your leadership should give the venture studio five years before making a final judgement about whether the program is successful. As shorter-term indications of success, agree with your leadership on interim metrics that you will track together, such as improvements in translational thinking and among researchers and number of new partnerships and connections within your organization.

It’s crucial for your R&D venture studio program to be in-house.

Some R&D organizations don't have an in-house venture studio, but they tacitly allow for-profit venture partners to hang around, looking for promising research and offering to partner with the inventors on a spinoff company. Other organizations (especially universities and national laboratories) enter formal agreements with a for-profit venture studio, like the Woods Hole Oceanographic Institute with Propeller VC, or Oxford University with Oxford Science Enterprises. While these symbiotic relationships can sometimes work, in our experience, they are inherently limited in their effectiveness compared to an in-house studio.

​​While symbiotic relationships with external firms can sometimes work, in our experience, they are inherently limited in their effectiveness: it’s crucial for your R&D venture studio program to be in-house.

The reason is simple: a third-party studio doesn’t share your organization’s incentives or culture. Researchers naturally sense this, and they often distrust for-profit people coming from external private companies. One of us recalls his PhD advisor enthusiastically partnering with a venture partner at a prominent for-profit venture studio about a new startup, only to discover months later that they had founded a competing company without him.

Another reason why in-house studios are more effective is that it’s essential for venture builders to embed in labs day in and day out, and this is inherently difficult to do if the studio is a separate entity and the venture builders aren’t employed by your organization.

At MIT Proto Ventures, two of our most successful projects — Chimera Marine, a nuclear cargo ship developer, and American Fusion Instruments, a plasma diagnostics solutions provider — only came about because David had come to know the researchers through regular informal lunches in the departmental lounge, and because his office door was wide open across the hall from their own offices.

Finally, an in-house venture studio is equipped to partner with —and leverage— all the existing resources and programs at your organization (tech transfer office, mentorship programs, seed funding for researchers, maker spaces, etc.). This is inherently difficult to do for a private venture studio trying to “break into” the ecosystem and being seen as an outsider.

There are many ways to structure an R&D venture studio inside your organization. If possible, try to set it up within your R&D or innovation group (if you work in a corporation), or within your entrepreneurship or technology transfer group (if you work in a university or national laboratory). The studio will need a managing director, a set of sponsors at the top leadership of your organization, an administrative assistant, and physical space and a budget. At MIT, we have found that the cost of operating an R&D Venture Studio is roughly $500K per venture builder per year, which covers the overall operations of the program, salaries, as well as funding for prototyping and market derisking of venture ideas.

An R&D venture studio complements and strengthens the programs that your organization already has, such as a technology licensing office, an entrepreneurship education center, a seed fund program, and so forth.

Approach the people running these programs early on, and help them see the value that an R&D venture studio will bring them:

• It will create new, higher-quality projects that they can support
• It will engage a greater population of researchers who haven’t traditionally been involved with their programs

At MIT Proto Ventures, we have built strong symbiotic relationships with the Deshpande Center for Technological Innovation, which provides research grants and coaching, and with the Trust Center for MIT Entrepreneurship, which offers entrepreneurial education and runs an accelerator program for MIT spinoff companies. Hyperion Transport Systems, one of our portfolio companies revolutionizing satellite propulsion, went on to successfully apply for support from the Deshpande Center. Similarly, Vertical Horizons, a developer of advanced power supply units for data centers, was admitted into the Trust Center’s MIT delta v accelerator program.

Your organization’s R&D has potential applications in countless industries, such as health, defense, information technology, or energy. To carry out effective venture building explorations, your R&D venture studio should structure its efforts into distinct tracks (at MIT Proto Ventures, we call these ‘channels’). Venture builders will work in a single track that is aligned with their subject matter expertise and interests. If you have the budget to hire multiple venture builders to team up on the same track, that is even better: most people think better when they have a thought partner.

How should you define these channel areas? This will depend on the funding model for your R&D venture studio. At MIT Proto Ventures, funding for venture building comes from foundations, family officers or other university support mechanisms, so the financial sponsors play an important role in defining the topics of interest. If your venture building budget is internal, it may make sense to define channel areas related to problem areas or specific industries in which you hope to launch new products or businesses.

A proven model is to define a channel at the intersection of a technological area and an industry area, for example:

• The intersection of AI and healthcare
• The intersection of biology and mining
• The intersection of behavioral economics and personal finance
• The intersection of nuclear science and medicine

Either way, it’s important to define these areas with some flexibility. For example, when MIT Proto Ventures launched a channel in partnership with the Plasma Science & Fusion Center (PSFC), we were careful to define it as “Fusion & Clean Energy” as opposed to narrowly restricting it to fusion. This is what allowed fascinating and unexpected ventures to emerge, such as Hyperion Transport Systems, which is building upon superconducting magnet advances developed for fusion applications to develop more efficient satellite propulsion systems.

Finding a channel scope that is neither too broad, nor too narrow, is also important. A downside of “Fusion & Clean Energy”, as one can easily imagine, is that anything related to clean energy is potentially fair game: in hindsight, the scope for this channel was too wide. There are real efficiency gains when the venture builder becomes an expert in a particular area, and that is harder to do when the field is too large. Our next channel was scoped more appropriately: “Geothermal Energy”. This allows the venture builder to explore a range of possible innovations ranging from drilling technology to downhole electronics and heat extraction, while still allowing his learnings to compound on each other over time.

Venture Builders (VBs) are the lifeblood of an R&D venture studio. These individuals will lead your studio’s venture building process and drive the studio’s outcomes. This is the most important variable to get right when building your studio.

The ideal Venture Builder has a very unique DNA: ⅓ technical postdoc, ⅓ startup founder, and ⅓ venture capital investor.

Look for candidates who have technical expertise, entrepreneurial chops, and experience in the industry most aligned with the channel topic:

• They need technical expertise so that they can embed in your labs and engage meaningfully with researchers and inventions.
• They need entrepreneurial expertise so that they know what makes a successful startup and what risks to retire early on. Also, there is a ton of tactical stuff that only a past founder can know from direct experience (e.g. when to approach your technology licensing office, when to transition to full-time,or how to handle visa considerations)
• Finally, they should have a strong interest and ideally past industry knowledge & contacts in an industry related to the channel topic.

To succeed, your R&D venture studio needs dedicated VBs, and they need to be full-time for at least two years. Here are some examples of individuals that you should not try to hire as VBs:

• Don’t hire current researchers. Researchers lack the requisite incentives, time, breadth, and entrepreneurship and industry experience to build ventures. While it’s a good idea to teach them about customer discovery, company roadmapping, go-to-market strategy, and fundraising, and to involve them in the process, it's unreasonable to expect that they'll do a world-class job at leading these explorations.
• Don’t hire current postdoctoral associates. VBs must be experienced in network building, evangelizing, navigating uncertainty, building a process as they go along, and so forth. Postdocs rarely have this skillset.
• Don’t hire current entrepreneurs-in-residence (EIRs). Your institution may have EIR who teach entrepreneurship courses, run hackathons, and so forth. Your EIRs are already busy mentoring, teaching, incubating, and running hackathons or other innovation events. Venture building is a full-time job and can't be a side activity.
• Don’t hire non-technical business people, such as recent MBA graduates with no technical background. VBs must have strong technical chops (for example, a Ph.D. degree in science or engineering) to engage at the deepest technical levels with researchers.

Once you’ve hired a VB, keep them on a finite employment timeframe so that they really treat each exploration as their next gig. This is more effective than permanent roles at places like Google X, where teams rarely launch anything because it is so cushy to stay employed at the mothership indefinitely.

Proper incentives are crucial. It’s important to equip your VBs to become prospective founders. They should be viewing this role as a unique opportunity to build their next gig, not as a ‘job’ working for you. To this end, your process should let venture builders heavily weigh personal fit in their process. If they aren't passionate, they're not going to launch it full time (or at any rate, it won't succeed). In contrast, some private venture studios discourage the staff who came up with the startup concept from becoming part of the founding team. This approach goes against the common knowledge that the team matters most to the success of a venture.

Beyond a salary and a desk, your venture studio should offer resources to VBs to amplify their work and keep them focused on what they do best. In particular, hire support staff or partner with other teams in your organization so that your VBs can easily get help with event planning, market sizing, legal advice, intellectual property reviews, marketing and design, and so forth.

Another key way to support your VBs is to form an advisory board for each channel. This advisory group should consist of both internal leaders in your organization and external subject matter experts. A well-crafted advisory board will extend your VB team’s industry network, complement any gaps in their technical or business knowledge, and provide guidance and encouragement as needed.

Once you have defined a channel and hired a team of VBs, it’s time to define the metrics of success for the channel. These can take the form of objectives and key results (OKRs) that your VBs will relentlessly pursue, and that the studio’s leadership and advisory group can track to gauge progress.

The specific choice of metrics will depend on the strategic objectives of your organization and of the stakeholders who are sponsoring the channel — fiscal sponsors but also labs that are hosting your VBs.

Download reference: OKRs from our Fusion & Clean Energy channel

The studio’s management and advisory group can use these key metrics to keep track of progress: are the VBs doing enough ecosystem building? Tech scouting? Customer discovery? This will help you keep their efforts balanced and proactively identify blind spots or bottlenecks.

Note: Designed properly, your knowledge management system will make it effortless to track and regularly report these key metrics.

The next priority is to find a lab or R&D center within your organization that is eager to host them. You should conduct this search in parallel with the VB hiring process, so that everything is already set up on the VBs’ first day. In finding the right host lab, it won’t do for the VBs to be merely tolerated — they have to be actively welcomed by the lab leadership. This is a critical precondition for the system to work properly and the extra work necessary to create a good relationship with the lab should not be neglected.

Once VBs are hired, get the lab leadership to send an email to the entire lab on the VBs’ first day, introducing the VB(s) and encouraging all researchers to open their doors to them. The lab leadership should make it that this is a strategic priority, and that the lab leadership will be checking in regularly.

Crucially, you should ensure that the VB(s) are provided with an office or desk inside the research center. VBs should be interacting with researchers at lunch, at regular staff meetings, in the kitchenette, in addition to during seminars, thesis defenses, and other formal research events. It helps to give VBs a budget for taking researchers out to lunch, organizing social events, and other low-cost ways to get researchers to come out of their shell.

In their initial months, VBs will ask as many researchers as possible: what have you invented lately that might be commercially relevant? And if something looks promising, they will follow-up by asking: would you be interested in me serving as your commercialization sidekick?

Finally, let VBs engage in their own research if it’s appropriate. For example at MIT Proto Ventures, we collaborated with PSFC researchers on a peer-reviewed article on materials for fusion power plants. This lets the VBs maintain their publication track record (if that’s important to them), build deep bonds with other researchers, and deepen their technical grasp of research in the labs.

If a successful venture is like a great cooking recipe, it all starts with discovering what ingredients you have at your disposal.

Venture building involves mixing and matching three essential types of ingredients:

1. Technological capabilities are new methods, materials, or data in your labs that could potentially enable a venture idea. VBs find technological capabilities by:

   • Attending research seminars and group meetings
   • Meeting with researchers to learn about what they are working on
   • Reading academic papers and patents
   • Collaborating with your IP management office
   • Engaging in brainstorm sessions with interested researchers

   Each of these capabilities must be logged in a format that can be easily shared and tracked. For each documented capability, the VB should assess:

   • Technology Readiness Level (TRL)
   • Intellectual property status
   • People (e.g. researchers) involved
   • Time and cost to commercialize
   • Key risks
   • Technical specifications (if applicable)
   • Resources (people, reports, websites)

You should look for technologies that are already developed and working for their originally intended application, at least at the lab scale (TRL 3-4), not early concepts. Focus on technologies that represent a genuine breakthrough in the state of what’s possible: you want technologies that go from zero to one, not incremental improvements.

2. Market needs are pressing customer pain points that are unaddressed today and that a new venture could solve. VBs identify relevant market needs in their channel area by:

   • Speaking with company executives and operators
   • Following industry news and funding opportunity announcements
   • Speaking with investors (e.g. VCs) and research grant administrators (e.g. DARPA)
   • Attending industry conferences
   • Reading analyst reports
   • Primary market research

   For each documented market need, your VBs should consider tracking:

   • Relevant industry vertical(s)
   • Severity of need
   • Total addressable market (today, and by 2035)
   • Solutions to this need today, and their shortcomings
   • Emerging solutions (e.g. recent startups)
   • Resources (people, links)

3. People are the lifeblood of any new venture. This obviously includes prospective founders but also potential advisors, investors, technologists, advocates, and corporate design partners who could play an instrumental role in one of your projects. VBs build a network of relevant people and keep track of them by:

   • Meeting as many researchers in the lab as possible
   • Performing market discovery
   • Attending conferences
   • Networking with investors
   • And so forth.

   For the people that you keep track of, your VBs should log:

   • Basic information (organization, job title, background)
   • Contact category (investor, serial entrepreneur, researcher, etc.)
   • Context (how we met)
   • Goals (how they are looking to engage with your potential projects)

Keep in mind that certain types of people are harder to find than others: for example, it’s easy to build a network of early-stage investors, but it’s much harder to find a technical co-founder if the original inventor of a technology is not interested in leaving the research lab.

Venture building in an R&D Venture Studio becomes all about connecting dots and sense making. To keep track of your portfolio of identified capabilities, needs, and people, you’ll need densely linked documentation.

There are many ways to do this. Some teams use online software like Notion or Coda. At MIT Proto Ventures, we use Obsidian, a free and flexible note-taking tool that lets us link notes to each other, easily find backlinks (i.e. past notes that link to the current note), and create connections between ideas. We use a modified version of the Zettelkasten method for note taking and knowledge management. In a nutshell:

• We use tags for different note types: #needs, #capabilities, #venture_ideas, #people…
• We also use tags for relevant industries and fields (e.g. #industries/mining)
• We write each new idea in a separate note
• We use templates to give a common format to our logged capabilities, needs, people, meeting notes, and so forth.
• We publish our universe of notes for leadership, advisors, and other key stakeholders to follow our venture explorations in real-time

As the database of potentially relevant capabilities, needs, and people comes together, your VBs can start forming venture ideas. An idea starts by matching up a market need with one or more technological capabilities that could address it. Thus, the idea generation process will draw heavily from your databases of capabilities, needs, and people.

Like in any brainstorming exercise, you should aim for quantity (not quality) at first. Later on, you will eliminate many of these ideas, since many technologies don’t have the right TRL, many market opportunities aren’t aligned with your organization’s strategy, and many people won’t be the right fit for a new venture. But at this stage, you are generating as many venture ideas as possible.

Each venture idea should keep track of:

• Description of idea
• Market needs this venture would address
• Technical capabilities this venture might leverage
• Business model
• Competition
• Team
• Outstanding risks
• References

A key activity to generate promising ideas is to organize guided brainstorms and product ideation sessions with interested researchers and other stakeholders from business units, advisory groups, etc.

There are more founder roles than there are VBs, so your studio will need to engage potential future founders early on. These individuals should not be an afterthought: they will need to build a sense of ownership in the venture idea over several months. By collaborating with your VB team, these potential cofounders will act as a force multiplier for your VBs.

At MIT Proto Ventures, we engage potential future founders by running a fellowship program. Each semester, we recruit 5-7 talented members of the MIT ecosystem — mid-career MBA students, PhD students, postdoctoral associates, or even alumni — who want to found a startup in our domain of interest. We look for individuals who bring something unique to the table, such as industry experience, startup experience, a business idea (but no technology to enable it), or a promising technology (but no clear sense of the customer need it would solve). As part of this unpaid fellowship, fellows work closely with our VBs to drive a venture exploration, and they are explicitly equipped to become a prospective cofounder if the venture launches.

Exploring a venture idea takes time and resources: your R&D venture studio should only do this with the most promising venture ideas. We recommend a formal stage gate process to select the venture ideas to explore. Once the VBs have formed an opinion about the most promising venture ideas to explore, the stage gate should involve the relevant stakeholders (fiscal sponsor, advisors, program leadership, etc.) and should evaluate the proposed venture ideas based on the strategic metrics that are most relevant to your organization.

Download Template: Proto Ventures Stage Gate Process

At MIT Proto Ventures, we evaluated each venture idea along six metrics:

• Severity of market need & customer willingness to pay
• Availability of relevant MIT IP & expertise
• Team passion level
• Potential impact (financial and societal)
• Crowdedness of space (i.e., are plenty of organizations already doing this?)
• Additionality (i.e., does our venture studio add unique value, or will this idea materialize without us?)

Note: Do your best to keep this selection process free of internal politics. We’ve heard horror stories of corporate innovation teams spending months on rigorous exploration only to have all of their ideas rejected, with upper leadership eventually deciding on an arbitrary concept that the venture builders hate.

Once a venture idea has been selected for further exploration, a team can form around each select idea to:

• Refine the technological vision
• Conduct customer research and define what the ‘product’ would be
• Develop low-fidelity technical proofs of concept
• Develop low-fidelity business models (e.g. business model canvas, preliminary pitch deck, and rough financials)

It’s very common for venture ideas at this stage to have either a strong market thesis and a weak sense of how to address it technologically, or vice-versa. In other words, early venture ideas are rarely balanced across market pull and technology push at the outset. To restore balance, the team will need to focus significantly on the weaker aspect. For example at MIT Proto Ventures, we commonly take a second pass at technology scouting once we have a clearer set of customer needs in mind for a particular venture idea. The market thesis for the venture acts as a "flashlight", so that our team is no longer tech scouting in the dark but instead has a mental map for what types of breakthroughs would be impactful and commercially relevant to the venture idea.

During this phase, the VB can play one of two possible roles: he/she can either lead the exploration as a ‘proto CEO’, or she can act as a program manager, overseeing the team’s progress but letting another team member lead the exploration. At MIT Proto Ventures, we let our Fellows run explorations, while each VB chooses a single exploration to personally lead.

During this exploration, the team lead is responsible for:

• Determining what technical or business de-risking activities that need to happen at any given time
• Documenting the process and sharing outcomes with stakeholders
• Nurturing members of the ecosystem (e.g. business leaders, external funders, industry partners) who can support these ideas or take them forward
• Leading the process of fleshing out, de-risking, and down-selecting the most promising ideas and iteratively refining them

The ‘Build’ phase is the logical continuation of the ‘Explore’ phase for the team projects that show the most promise. In evaluating team projects, you may find it helpful to ask each team to summarize their current state of their venture concept in a written brief.

Download Template: Venture brief to enter the ‘Build’ phase

Venture projects that have sufficiently validated the market opportunity, retired the greatest technological risks, and that have a strong plan to move forward are ready to enter Build mode. This phase should focus on setting up the venture for escape velocity as a standalone company (or as a new business line or new product in your organization).

Being ready to launch means having:

• A core mission and vision
• A set of co-founders and advisors
• A technological differentiator, presumably based on patented technology from your labs
• A vision for the first product, with visual mockups or early prototype
• Confirmed intent to purchase from early customers, as well as market segmentation and market sizing
• A 10-slide pitch deck that outlines the market problem, solution, business plan, competition, etc.
• A financing strategy, with funding conversations actively under way
• An 18-month roadmap
• Tactical blockers identified and removed: IP options, visa considerations, company incorporation, legal representation, office space, etc.

This phase takes roughly 6 months and requires more resources: if your program can afford it, you should provide each team in Build mode with $50-100K for prototyping, market research, consultants, and other key activities. If other programs in your organization already provide this kind of incubation support, this is a perfect time to leverage them: your R&D venture studio provides the most value at the inception stage, and other programs may add tremendous value at the incubation and acceleration stages.

The actual launch process will look different for each venture: for a startup, it means the company is legally incorporated, that the founding team is in place, and that the founders are now working full-time. For a new business or product within a corporation, it means that the project has graduated out of the venture studio and has become its own business line or product development team within a profit & loss (P&L) division of the organization.