Funding a Start-up? Friends Lead the Way

University scientists seeking to commercialize their research results most often turn to friends and family for startup funding. Nearly 21% of companies started by professors in fiscal year 2004 received initial funding from friends and family, compared to 10.7% tapped from angels and 5.7% from angel networks, according to the latest survey from the Northbrook, Ill-based Association of University Technology Managers (AUTM).1 Forty-nine percent of funding came from individuals vs. approximately 45% received from institutions. "Far from marauding bands of venture capitalists sweeping in and reaping profits from the back of federal research, these data show that most startup funding comes from friends, family, and other individual investors," says Ashley Stevens, AUTM survey editor and director of Boston University's Office of Technology Transfer.

Nearly 460 new companies were started from US university research in fiscal 2004, almost 25% more than in 2003. Friends and families typically invest $10,000 to $20,000 ...