Beyond the Breakthrough: How Financing Paths Influence Academic Start-Up Success

An OECD study finds that academic start-ups are highly innovative and more likely to secure early grants and support, but they do not raise more funding overall than other firms. Early reliance on non-equity funding can limit their ability to access larger follow-on investment, creating challenges in scaling up.

Across OECD countries, thousands of scientists are stepping beyond universities and launching start-ups built on cutting-edge research. A new OECD study from the Directorate for Science, Technology and Innovation explores how these academic entrepreneurs finance their ventures and whether early funding choices shape their long-term success.

The study draws on data from more than 81,000 start-ups founded between 1990 and 2022, including over 8,000 companies launched by founders with a PhD. By combining company data with global patent records, researchers provide one of the most detailed cross-country pictures yet of academic entrepreneurship.

The numbers show that academic founders are not rare. About one in ten new start-ups across the OECD includes at least one doctoral graduate. In sectors like biotechnology, health, clean energy and advanced manufacturing, the share is even higher. These are areas where scientific discovery and commercial innovation naturally overlap.

Science-Driven, High-Impact Ventures

Academic start-ups stand out for their strong links to scientific research. They are far more likely to file patents than other start-ups, and their patents often cite university research or scientific publications. Many of these inventions are more original, more radical and more likely to be classified as breakthroughs.

In simple terms, academic founders tend to build companies around frontier science. They are often working on technologies that could have a major societal impact, from new medical therapies to clean energy solutions.

But building something technically impressive does not automatically make raising money easy.

More Funding Access, But Not More Money

At first glance, academic start-ups appear to do well in funding markets. They are more likely than non-academic firms to receive some form of external funding. However, once factors like industry, patenting activity and team size are considered, they do not raise more money overall.

The real difference lies in how they raise money.

Academic founders are significantly more likely to rely on non-equity funding at the beginning. This includes government grants and support programmes such as incubators and accelerators. They also secure this support faster than other founders.

Equity funding, where investors take ownership stakes in the company, remains common. But compared to non-academic founders, academics are much more likely to start their funding journey with grants.

The Risk of Getting “Stuck”

Here is where the story becomes more complicated. The study finds that early funding choices strongly influence what happens later.

Start-ups that begin with grants are far more likely to continue relying on grants. They are much less likely to transition into equity financing later on. In contrast, companies that begin with equity funding are more likely to attract additional rounds of investment and diversify their funding sources.

For academic start-ups, this pattern can create a gap. While they raise similar amounts of money in their first funding round as other firms, they raise significantly less in follow-on rounds. In other words, they are not struggling to get started, but they may struggle to scale.

Why does this happen? Part of the answer may lie in experience and networks. Academic founders are highly skilled researchers, but they may have fewer connections to investors. Writing grant applications is often familiar territory for scientists. Pitching to venture capitalists and negotiating investment deals may not be.

As a result, it can be easier and less costly for academic entrepreneurs to stay within the grant system rather than move into private capital markets.

What This Means for Policy and Innovation

The findings carry important lessons for governments that want to turn research into economic growth.

Grants and support programmes are clearly valuable. They help academic entrepreneurs launch companies and move early ideas forward. But they may not be enough to ensure long-term growth.

To help academic start-ups scale, policymakers may need to strengthen programmes that combine funding with business training, mentorship and investor connections. Accelerators and incubators that build commercial skills and networks can make a difference. Ensuring smoother transitions from grants to equity financing is especially important.

Academic start-ups continue to deliver strong innovation outcomes. They file more science-based patents and contribute to high-impact technologies. However, they are less likely to raise growth capital or exit through acquisition, suggesting that scaling remains a challenge.

The message is clear. Transforming scientific discovery into thriving businesses is not just about funding more research. It is about designing the right mix of financial tools at the right time. The journey from laboratory breakthrough to market success depends not only on brilliant ideas but also on how those ideas are financed along the way.