Illinois Policy Summit paving the way for longer-term startup success

It is no surprise to hear that starting a new business is hard. Research indicates that, on average, over 20% of startup companies fail in the first year, 30% do not survive two years, and 50% close within five years. The failure rates among tech startups are significantly higher, with only 10% surviving in the longer term.  While venture capital-backed startups have lower failure rates of about 30%, up to 75% don’t return cash to investors.

Gies College of Business Professor Joseph Cheng has made it his mission to develop ways to help businesses during that difficult, initial startup period. In 2023, he started a three-year NSF-funded project to provide comprehensive commercialization training to university researchers in STEM fields (science, technology, engineering, and mathematics) who are launching tech startups.

In addition, Cheng recently organized an Innovation Policy Summit in partnership with the University of Illinois’ Discovery Partners Institute (DPI) as a means to bring together government, university, and industry experts to explore the issues and obstacles facing startup companies. The full-day summit, titled “Strengthening Community Innovation Ecosystems for Startup Success: Research Insights and Policy Recommendations,” was held at DPI in Chicago on August 8. The event was supported by the Don and Anne Edwards Gift to the University of Illinois.

“This was not a typical academic conference,” Cheng (left) said. “This summit had the main object of generating ideas for policymakers in both the private and public sector to do something to strengthen community innovation ecosystems to help startups in that community to be more successful.”

Past research on startup companies has mostly focused on factors affecting an individual startup’s launch or creation and has not examined determinants of longer-term success. Rather than taking a piecemeal approach, Cheng wanted the summit to work toward developing something much more comprehensive and holistic with synergistic impacts. His goal was for the summit to begin the process of constructing a roadmap to:

• Creating enabling institutional environments (economic, legal-political, and socio-cultural) to attract private and public investment in startups, particularly deep-tech ventures which are high risk.
• Building supportive innovation infrastructure (incubators/accelerators, research parks, cooperative R&D consortia, high-speed internet, etc.) to facilitate startup activities from launch to scale and beyond.
• Providing easily accessible, field-tested training resources to help aspiring entrepreneurs develop the needed capabilities (mindset, knowledge, skills, and confidence) for startup success.

About 100 people attended the summit from a variety of universities, startup companies, and established businesses from across the US, as well as representatives from the Federal Reserve Bank of Chicago, National Science Foundation, the City of Chicago, and other government agencies. Breakout sessions enabled diverse groups of participants to share ideas and best practices and to build on the presentations through brainstorming and developing ideas that could be useful for policymakers.

“Our discussion during this summit was really successful,” Cheng said. “The ideas we will be expanding on will help develop further collaboration between government, universities, and startups. I am excited for the impact we can have and for the innovative ideas that will come out of these discussions.”

Continuing from that work, Cheng met with a smaller group from the summit on August 9 (the day following the main event) and again on August 29 to explore interest in conducting a pilot study of some of their summit recommendations. They set up criteria and a process for developing and field testing these recommendations over two years.  Currently, the team is finalizing a grant proposal to support a 12-state in-depth investigation of 600 startups from 36 cities that will include 240 interviews with entrepreneurs and with state and city officials. Additionally, the study will administer online surveys to 1,200 local community stakeholders over the course of the proposed two-year data collection period.  When completed, the study findings will help advance knowledge and inform policy on what communities can do to help startups be more successful.

This summit and the planned pilot study fit within Cheng’s passion for helping innovators achieve success in their businesses. Through these efforts, as well as the AccelCorps commercialization training program developed from his current NSF-funded project, Cheng is working to improve the chances that new startups will have longer-term success. “What we're trying to do is find ways to reduce the failure rates among startups,” he said. “That is, to have a higher percentage of new businesses be successful after three years, after five years.  This will help fuel economic growth and create new jobs not just during the startup launch period, but for a much longer duration after that!”