Funding now, innovation tomorrow. Or not.

Following Harvard’s dismissal of Trump’s administration requests regarding employment, governance, and the perspectives of faculty and students, the government halted over $2 billion in funding for research in scientific, medical, and technological fields at the University. Overall, the administration has scrutinized more than $9 billion in Harvard funding. As a response, the University filed a lawsuit late last month.

The disruptive repercussions of slashed research funding at Harvard and similar higher education institutions have been observable across the U.S. economy. Even if the total funding reductions amount to merely one-quarter of what has been threatened, the gross domestic product is projected to decrease by 3.8 percent (adjusted for inflation) in the upcoming years, a rate comparable to the 2008-2009 Great Recession, according to fresh findings from economists at American University. Their study followed a March report by the nonprofit United for Medical Research, which details $2.56 in U.S. economic activity for each dollar invested in federal biomedical research in 2024.

Less immediately apparent are the potential impacts the funding freeze may exert on a primary driver of U.S. economic growth, the startups that facilitate the commercialization of scientific advancements and breakthroughs.

In this modified discussion, Jeffrey J. Bussgang, a senior lecturer in entrepreneurial management at Harvard Business School, examines the role research universities play in the startup ecosystem and how disruptions to funding in science and medicine could alter the future of entrepreneurship. Bussgang instructs the M.B.A. course “Launching Technology Ventures” and is a co-founder and general partner of Flybridge Capital Partners, a venture capital firm focused on early-stage investments.

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In what ways do research universities integrate into the startup and venture capital landscape?

There are two crucial avenues to connect the university framework with the startup ecosystem. One involves the faculty, and the other focuses on the students.

From the faculty’s perspective, commercialization pathways often emerge from lab research. This can take place in both computer science departments and biomedical fields. Furthermore, Harvard boasts numerous laboratories and diverse entities such as the Wyss Institute and the Broad Institute, which collaborates with MIT, alongside the electrical and mechanical engineering, as well as computer science departments. Robotics also serves as a fertile ground for startups.

Additionally, students gain from a remarkably rich entrepreneurship curriculum. This is the most favored area of study at Harvard Business School, housing the largest faculty unit. We consistently see numerous startups stemming from our students’ efforts, as does SEAS — for both graduate and undergraduate students.

It appears that research universities serve as incubators in this framework. What has led to this evolution — is it primarily due to risk?

It’s not so much about risk but rather an intentional curriculum and launchpad for academics and students. The institution is designed to aid faculty through the technology licensing office and various entrepreneurs in residence and venture capitalists linked to the school. We have a clear goal of enabling our students to become creators of companies and entrepreneurs. Thus, it’s not about risk; it’s about seizing opportunities and intentionality.

Historically, why is federal funding for scientific research and development so vital to tech and biomedical startups and entrepreneurs? In what ways does it promote U.S. economic growth?

The more well-funded the laboratories are, the more effective they can be in generating innovative ideas that could potentially evolve into immensely successful commercial enterprises. Additionally, the more attractive the institution becomes for top-tier talent globally, the more it is likely to draw exceptional, aspiring entrepreneurs. If their endeavors are motivated not solely by the labs, but also by the nature of the work, the quality of the educational framework, and the caliber of the faculty, that too serves as a significant draw.

What effects have the federal funding freeze on NIH research and suspension of previously greenlit grant distributions had thus far?

We are merely witnessing the onset. There are hiring freezes in place. Various initiatives have been scrapped, and grants have been revoked. The process of establishing companies takes time. The firms that are currently being established and will launch in 2025 were fostered over the past three years, which means we won’t observe an immediate impact. The repercussions will unfold more as medium and long-term effects in the years to come, resulting in fewer promising startups emerging from the system.

When might we begin to observe the full ramifications of this scenario, and could the negative impacts be mitigated?

Reversing the situation is possible, but I believe it will entail a one-to-three-year ripple effect due to the duration it takes for lab concepts to materialize and transition into commercially viable companies.