VCs Turn Cautious on Professor-Led Startups Amid Commercialization Challenges

Since 2022, “poaching professors” has become a hot trend in the VC circle.

Previously, there wasHuituo(CEO Chen Long: Ph.D. and Doctoral Supervisor at the School of Computer Science, Sun Yat-sen University; Chief Scientist Wang Feiyue: Current Director of the State Key Laboratory for Management and Control of Complex Systems at the Institute of Automation, Chinese Academy of Sciences) within six months,Secured Over RMB 500 Million in Two Consecutive Funding Rounds. Subsequently, there isWeigou Workshop(Founder and Chief Scientist Chen Guoqiang: Professor at Tsinghua University; Co-founder Wu Fuqing: Associate Researcher, School of Life Sciences, Tsinghua University)Secured RMB 359 Million in Financing。

At that time, there were even rumors circulating in the industry: some early-stage venture capital firms had already compiled target lists and were visiting professors one by one. However, recently, as changes in the capital market have intensified and challenges have mounted,“The Professor-Backed” VCs seem to be cooling down again.

It is unclear when it began, but the term “professor-hunting” seems to have declined in frequency. An investor who once frequented major universities and engaged in lively discussions with professors remarked, “I’ve been visiting less often lately.”

Although he has not severed ties with professors, the focus of investment has indeed shifted from “professors” back to “commercialization,” and this is not an isolated case. The landscape of large-scale early-stage financing in 2023 reveals that venture capitalists did not concentrate their bets on a single technology as they had in the past; instead, their investments were distributed across every sector. This indicates that investment strategies have undergone a change.

2023 Early-Stage Financing (Source: VCBeat Orange)

Regarding this phenomenon, the reason he gave is:“Everyone has come to realize that some professors still lack a strong understanding of commercialization; when it comes to entrepreneurship, one should look to industry veterans.”

Although “wealthy professors” such as Shi Yigong and Li Zexiang have set a precedent for faculty-led entrepreneurship, not all researchers are suited to starting businesses. Some professors lack commercialization experience; despite having leading-edge technologies, their ventures often encounter obstacles in market operations. Additionally, some professors’ research is too cutting-edge, with technological maturity and commercial application prospects yet to be validated. Amid the capital winter, investors are exercising caution and remain hesitant to invest due to the inherent uncertainties associated with professor-led startups.

And in pursuit of the professor’s “B-side,”Investors’ insufficient understanding of the technology is also one of the reasons they part ways with professors.

Although some researchers have entered the investment arena, they remain a small minority within the broader investor base. Hard technology is characterized by high technical barriers and well-defined application scenarios. Without a solid understanding of the underlying technology, it is difficult to engage in meaningful dialogue with professors; even if collaboration opportunities are secured in the early stages, partnerships may still dissolve in the mid-to-late stages.

Therefore, in the later stages of the “professor recruitment frenzy,” some venture capital firms rationally adjusted their investment logic and decided against following the professors.

“Professor Poaching” Fever: Driven by the Wind of Hard Tech

The frenzy to “poach professors” has emerged almost in sync with the boom in hard-tech investment. Amid the trend of deglobalization, shortcomings in upstream sectors across various industries in China have come to light. These “breakpoints” and “bottlenecks” are driving domestic industries to strengthen their capabilities in upstream areas.What follows is an explosive growth in upstream market opportunities.

These technologies, which play a core or supporting role in fields such as intelligent manufacturing, biotechnology, and aerospace, are known as "hard tech."

Investing in hard technology involves, among other things, uncovering high-quality original innovations.Extracting original innovative achievements from Professor Gao Wa is undoubtedly a relatively efficient approach.In an investment philosophy that prioritizes technological pioneering to address “chokehold” challenges, investing in scientists has become a trend. Some investment firms have achieved results through years of practice. However, it is clear that this success is not applicable to everyone.

In reality, the commercialization of hard technology is often difficult to achieve. The core issue is that technological maturity in the laboratory and market readiness are entirely different concepts.

In the laboratory, achieving a stable output of tens of kilograms can be classified as pilot-scale production; however, such capacity is not commercially viable in actual manufacturing. Yet, most researchers lack expertise in production, making process scale-up the primary hurdle.

Of course, there are second and third hurdles, such as intellectual property, personnel management, marketing and sales, and regulatory review and approval. Each stage carries the risk of failure and requires time. For investors in hard technology, this entails bearing substantial risks.

Therefore, as the hype gradually subsided, it became evident that the investors who had previously flocked to the professor had split into two camps:One camp remains bullish, continuing to uncover underwater projects at research institutes and universities; the other takes a more cautious approach while exploring alternative directions.

Lotus Pond Ventures remains one of the investment firms that adhere to the “investing in professors” strategy. Zhang Shanliang, Managing Director of Lotus Pond Ventures, told VCBeat:“Hetang Venture Capital persists in investing in professors because it has reaped the benefits.”

Currently, over thirty of Hetang Venture Capital’s portfolio projects—accounting for one-third of its total investments—are derived from the technological achievements of renowned professors and experts at Tsinghua University, the Chinese Academy of Sciences, and Grade A tertiary hospitals. Despite market contraction, most of these professor-led projects have maintained steady growth, with a significant number of enterprises successfully securing financing in 2023.

Regarding this “anomaly,” Zhang Shanliang believes there is a reasonable basis: “It’s quite normal. Over the years of investing in professors, we have gradually discovered that enterprises with core hard-tech innovations, both domestically and internationally,While maintaining technological leadership, the pace of development is also faster.”

Companionship also requires a solid foundation; the most important aspect of being a “professor-style investor” is technical expertise. For researchers, every R&D project represents their painstaking efforts and high expectations. Therefore, investors must understand the underlying potential and market value of the technology to make sound judgments and mitigate risks.

Certainly, it is an undeniable fact that some professors who transition from scientific research to entrepreneurship lack business acumen. In response, Hetang Venture Capital has developed a comprehensive incubation and investment model: on one hand, it encourages professors to focus on their research; on the other, it helps professor-led startups establish effective operational management systems and formulate robust development plans, thereby increasing the success rate of commercialization.

In addition to Hetang Venture Capital, investment firms such as Shuimu Ventures and CAS Star are still persisting in “investing in professors” amidst the “winter.” Perhaps for them, investing in professors is not only a demonstration of strength but also a matter of sentiment. Most of these investment institutions originated from research institutes and hold a special affection for academic research; thus, investing in professors may well represent their original mission.

But more importantly, they have mastered the skills to communicate with professors and can leverage their own advantages to achieve greater returns. As Zhang Shanliang said:“Make strategic investments in the commercialization of research outcomes; the future holds substantial rewards, not mere scraps. Investing in professors will inevitably follow this path.”

The previous frenzy among venture capitalists (VCs) for professor-led startups, while promoting the development of hard technology, also led to the distortion of some projects due to excessive capital追捧. Some startups even experienced inflated valuations, severely impacting their later-stage development and market order.

Now that VCs engaged in the “professor rush” are gradually cooling down, it also signals the arrival of a watershed moment—On the research front, scientists suitable for entrepreneurship have been identified, while on the capital side, investors with technical expertise have been retained.

However, in the market, there is no hierarchy or right-or-wrong distinction among investors’ choices. In fact, it is precisely the coexistence of investors with diverse choices that makes the market flourish in all its diversity.

Some venture capitalists are adept at sensing market trends, driving the emergence of new sectors through a fast-paced investment rhythm. The rapid rise of the internet industry, for instance, sparked a nationwide frenzy and yielded substantial returns for many investors who placed their bets correctly. Other VCs, however, prefer a more companionate approach. They understand the challenges involved in translating research into commercial applications, yet they also recognize that once innovative technologies enter the track of commercialization, they can deliver stable returns and long-term value.

Yet, it is undeniable that regardless of how market trends shift, the emphasis on original scientific research and innovation will remain unchanged. Hard technology will ultimately become the driving engine of industry, leading the market into the next decade.