Revenue source for strapped universities: entrepreneurs

As state support for the UW systems continues to fall, the new chancellor of UW-Madison, Rebecca Blank, has announced her intention to go dialing for dollars among its far-flung alumnae.

She has little choice. As long as the federal and state political leaders refuse to deal with rising costs of health care, there is little dough left for other public priorities.

Under Act 10, Gov. Scott Walker and the GOP-controlled legislature did shift some of the cost of the benefits back to public employees. But that major move didn’t manage costs; it just shifted who pays.

Much work remains to impose management disciplines to the soaring costs, ala the reforms racing ahead in the private sector. But politicians are on the same fat, under-managed plans as civil servants; so don’t expect a lot of rapid change.

Accordingly, Blank is right. She needs to find new sources of revenue elsewhere. UW-Madison already pulls in about a billion per year from federal government for R&D, so it’s hard to see much growth from that source. With sequestration at work at the federal level, it could go the other way.

Her campus could seek more R&D dollars from industry, where it is historically not done well. But much of the faculty and administration is anti-business, so Blank has a culture to change if UW-Madison is ever going to look more like Stanford and MIT.

The revenue source of choice for UW regents and executives the last decade has been stiff tuition increases, but there is great political pressure from students and parents to throttle back those annual hikes. The same goes for student fees.

Out-of-state students are an opportunity for high tuitions and more revenues, but Wisconsin parents want most slots reserved for their kids. That’s a tough political nut for Blank to crack.

As she turns to her alumnae for help, she will undoubtedly turn first to the entrepreneurs among them. That’s where most of “the gold” she refers to lies. Our capitalistic system gives its greatest rewards to innovators who are willing to put their financial assets and careers at risk to bring new ideas to the market.

As the new chancellor prepares her pitch to the entrepreneurs, she and other leaders may want to do some closed loop thinking.

Start with the reality that Madison has slipped to national average for start-up companies. (Milwaukee trails the U.S. average.)UW-Madison excels at patents and licenses, but not start-ups. Even the patent activity has slipped in comparison to other R&D universities in recent years.

She and we clearly need more entrepreneurs at the front of our business creation pipeline so we can have more successful exits – and entrepreneurial philanthropy back to the university – down the road. We also need entrepreneurs as the leaders in job creation.

An acceleration of startups can happen only if investors in the state do more early stage investing. That should include the foundations in Madison, which now own some $6 billion in assets – invested largely elsewhere.

In contrast, the University of Michigan has carved out millions for start-up investments. Four foundations in Milwaukee have also stepped up. Closed loop thinking needs to recognize that the biggest chunks in most university endowment funds came from entrepreneurs in the first place.

Blank needs to help the state connect the dots been higher levels of investments in Wisconsin entrepreneurs and the long-term financial success of her institution.

This entry was posted in Business and Government. Bookmark the permalink.