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Professor Offers Advice on Starting Spin-Off Companies

In 1995, Deepakraj M. Divan took a two-year leave of absence from the College of Engineering to start his own company, Soft Switching Technologies Inc. It was a risk that paid off for this professor of electrical and computer engineering. His venture--which commercializes core technologies developed at UW-Madison in the area of power conversion, motor drives and controls--is beginning to flourish.

Deepakraj M. Divan

Deepakraj M. Divan (large image)

But success did not come easily for Divan and his approximately 20 employees; along the way there were a variety of setbacks and surprises. Recently, Divan returned to campus to share his experiences with students, faculty and staff through a talk titled "From College Professor to the School of Hard Knocks: Taking University Technology into the Business World."

"It's good to take some time off and go into the real world for a while," Divan told his audience. "The best way of learning is to actually experience the pain." But, he cautioned, when considering starting spin-off businesses, "please don't plunge into them blindfolded."

In order to make a spin-off succeed, said Divan, entrepreneurs need to pull together a team that has members with a variety of experiences. "You can't just bury yourself in the technology issues; you need to be focused on other areas, too." This includes manufacturing, sales, marketing, insurance, financing and computer resources.

Divan also stressed the importance of a solid business plan outlining factors such as vision, strategy, competitive advantage, marketing, infrastructure and financing. And, he added, you must identify any questions or problems that stand between where you are and where you want to be. "If there are more than two question marks, you have a ways to go yet."

Based on his own experiences, Divan offered the following tips to potential entrepreneurs:

     

  • Time and cash are the most precious resources you have. Use them wisely.

     

  • Get your family to buy into your effort. Because of the time commitment involved in starting a business, you may not see them for a while.

     

  • Avoid the temptation of pursuing every opportunity that comes along; stay on targeted activities.

     

  • Understand in detail the path you must take and the resources you'll need to accomplish your goal.

     

  • Be careful in choosing customers. Dealing with an unstable customer can take up a substantial portion of your company's resources.

Additionally, said Divan, in the world of spin-off businesses it's crucial to know that "Murphy's Law is alive and well." In particular, "remember that everything costs more money and takes more time than expected."

Divan also offered some advice on how the university can encourage more students and faculty to pursue transferring technology to the private sector through spin-off companies. His list includes having better-defined regulations governing spin-offs; developing a for-profit foundation to provide seed funding for such ventures; offering a course in entrepreneurship strategies; encouraging faculty and students to work together in submitting mini business plans; and initiating a "leadership in technology" program.

Of his own efforts, Divan concluded that it was "a crash learning course"-one he's glad he enrolled in.

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