Ask HN: Is it possible to do a Startup that's a Research Center?
I was wondering this a few days ago, while reading about Microsoft Research. I pretty sure that is the answer is a negative, but I would like to know if someone already thought about this.
The basic idea is that a Research Center doesn't output products but ideas that can be licensed or sold to third parties. Like a for profit SRI that sells time and access to PhD and equipment to do research.
Could something like this come out of venture funding?
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Doing research for profit is very tricky, which is why it almost inevitably winds up being done at a loss. The world is full of entities (such as universities and government labs) which would love to be able to do research at a profit, but they succeed only sporadically despite the advantages of lots of smart people and equipment.
The sort of research that can turn a profit is usually fairly incremental stuff (e.g. let's formulate a new kind of paint), and is done within large companies' own research labs with deep domain expertise and trade secrets you won't be able to get your hands on. You can try to invent an improved paint and licence it to DuPont if you like, but if they want it they'll probably have got there before you.
Bluer-sky stuff, on the other hand, takes really long timescales and large numbers of people, with low probability of success. You'll be competing against university researchers in the same field who aren't even patenting their work.
There is money to be made in the last mile -- taking technologies from the point where they're almost ready to hit the market, doing that little bit of extra research to bring them to market, patenting your method and watching the bucks roll in. But opportunities like that are rare and heavily sought after, and even then it usually involves a crapload of money and risk. You can build a startup around just one of these ideas if you can find one, but nobody will give you money to go around looking for them in general, just like nobody will invest in your gold mine until you've actually found some gold.
You get what amounts to a seed round and a series A with no dilution, few strings, and you own to IP you come out with.
http://www.nsf.gov/eng/iip/sbir/
It is possible, but up until this point it has not been profitable. But there are other ways to measure fulfilling work, and independent research has been enormously fulfilling. Having absolute freedom to set our own research goals was what kept us from ever taking VC. It is not the life for everyone but it is the life for us.
Long answer: We have delved into so many areas, worked so hard in seclusion for the past several years, almost existing in a parallel universe to Silicon Valley. Our own private Idaho, if you will. New database structures, encryption, automatic parallel programming, low power servers, basically whatever suits our fancy. Now it is decentralized genomics. Who knows what tomorrow may bring?
I figured out early on that we were so weird that PhD land, corporate research, VC-istan, and federal contracting would think we were too "out of the box". So we decided to go it alone. We are motivated by pushing science forward purely, and the other groups have competing objectives that did not suit us.
The tragedy is that many of our inventions and code may never be used by the masses. We are so private the thought of sharing our work is excruciating. We have amassed a large amount of work. I guess we will start sharing it soon, but that would pull us away from the development, which would be terrible. :-)
That's the thing - in the research for hire business secrecy is pretty important. You are trading your code, patents, and trade secrets for compensation. It is prudent to stay private.