Rochester Institute of Technology recently got its largest gift ever from an alumnus who left school to start his own company. Here’s how it happened—and how the institution is helping other entrepreneurial alumni.

Thursday, September 13, 2018
 

By Gayle Bennett

https://www.case.org/currents/all-business

As an undergrad at Rochester Institute of Technology in New York, Austin McChord was never a stickler about homework. Thank goodness.

"As I got close to graduation, I got increasingly concerned about my career prospects given my grades," says McChord, who initially studied electrical engineering and then switched to bioinformatics. So he left college in 2007. "I thought that potentially I'd start a business myself with the idea that I'd certainly fail but at least I'd have something on my resume besides my poor grades," he says.

Turns out McChord made the right move—for himself and for RIT. The year he left RIT, McChord founded Datto, which provides backup and disaster recovery and business continuity solutions. Shortly after starting the company, McChord found his niche selling to IT channel partners, increasingly known as managed service providers. The company took off, and McChord returned to RIT to find employees and interns. Soon, the institution was helping him test products in RIT labs and open another office in an RIT building in downtown Rochester.

Early on, Adam Platzer, senior director of development at RIT, regularly checked in with McChord to see how RIT could help. "When I first met him, Austin was 25, and the company was pretty small, but you could tell it had a lot of potential," says Platzer, who at the time was a development officer in the B. Thomas Golisano College of Computing and Information Sciences. Platzer and others on campus got McChord involved in many of RIT's student entrepreneur efforts. For example, McChord was the keynote speaker at the RIT Entrepreneurship Conference; a student-team mentor for RIT's accelerator program for student startup businesses; and a sponsor, speaker, and volunteer at hackathons—events where computer programmers collaborate on software projects in a limited time period—and other computing events that provide students with hands-on opportunities.

In turn, the university committed to helping McChord build his company in any way he needed.

PERSONAL RELATIONSHIPS: As alumnus Austin McChord (center) became more involved with RIT, he got to know former President Bill Destler (right) and served on the RIT Board of Trustees. Here, McChord and Destler talk with current President David Munson (left) on the day of the announcement of McChord's gift.

PHOTO CREDIT: A. SUE WEISLER/RIT MARKETING AND COMMUNICATIONS

McChord also formed a relationship with then-President Bill Destler, serving on the President's Roundtable and eventually the RIT Board of Trustees. "Along the way," McChord recounts, "Dr. Destler said, ‘Someday your business will be worth an enormous amount of money. What are you possibly going to do with all that money? You should give some to RIT.'" McChord told Destler that if he sold his company, he'd give the university 10 percent of the sale price up to $50 million.

When McChord sold the majority shares of Datto—where he remains CEO—for more than $1 billion, he made good on his promise. In December 2017, RIT announced that McChord had donated $50 million, the largest gift in RIT's 189-year history. The gift will, among other things, transform the library, endow faculty positions and student scholarships, fund an entrepreneurial gap-year fellowship for students, and advance RIT's cybersecurity and artificial intelligence programs.

"I have a PowerPoint presentation that I show around campus because people want to know how a 31-year-old gave $50 million," Platzer says. His answer: campuswide engagement. "The PowerPoint has pictures of people from all the departments who had a hand in this in some way."

McChord's success—and gift—has helped RIT tune in to the fact that its STEM-focused students and alumni are often well suited to start their own businesses. Helping them do so provides a return on investment that can be much greater than just a large gift down the road.

What RIT Offers Its Entrepreneurs

Along with many other higher education institutions, RIT has a lot to offer startups, including top-notch employees, product assistance, and business development help.

As he was building his business, McChord got directly in touch with students to recruit them and their friends as employees and interns. "We were kind of guerrilla in the beginning, and then we formalized the process a little bit more," he says.

As McChord's relationship with RIT grew, his involvement in student entrepreneur events, especially the hackathons, exposed him to the type of students who would be a fit for Datto.

Connecting with professors is another good way to find employees and interns. That's what RIT alumnus Stephen Schultz, who earned a bachelor's in computer science in 1989, did when he was building Pictometry, the aerial measurement company he co-founded and later sold for almost $1 billion.

"If you have a professor whose employment judgment you trust, he or she can get you the cream of the crop," Schultz says. "The math that we used on the programming side—there's a very small number of people who can do that. A number of critical employees came through the imaging science program at RIT."

Schultz also took advantage of faculty brainpower and institutional infrastructure. When Pictometry was moving into the drone space, Schultz hooked up with RIT, which was part of a consortium that the Federal Aviation Administration had tasked with figuring out how to integrate drones into national airspace.

"When you are flying drones, there are all sorts of regulations for flying them outdoors, but there are no regulations for flying them indoors," Schultz says. "The problem with flying them indoors for testing is that you don't get the GPS signal, so you can't test navigation or compensation for wind. So RIT, with some funding from Pictometry, built a large building made of netting. The drone could achieve full GPS, but as far as the FAA was concerned, it was inside. It was very advantageous when testing."

Schultz has given generously to RIT, including $1 million in Pictometry stock for a new hockey arena. When the stock was sold for $2 million, he and his wife designated the extra $1 million mainly for scholarships. He also served on the RIT Board of Trustees.

Today, Schultz mentors and invests in other RIT alumni startups. He's currently working with TokenRing, founded by RIT alumni Melanie and Steve Shapiro, which makes a smart ring—wearable technology that can be used for purchases, on subway systems, to open a car or home door, and more. When the company needed a curved battery and help with the antenna design, RIT was able to provide the technical know-how.

TokenRing is part of Venture Creations, RIT's technology business incubator for alumni, faculty, and staff. While Venture Creations has existed since 2003, its director, Richard Notargiacomo, says the organization began to operate more like a business in 2010.

The goal was to be more than a workspace provider by offering concrete direction and advice to companies. While Venture Creations still offers office space, coaching and mentoring are now its biggest benefits (as confirmed by a recent client company survey). "In 2010, we put some processes in place. First and foremost was this notion of having a scheduled cadence with your coach," Notargiacomo says. Coaches are Venture Creations staff members who have developed vast experience through work with startups and more established businesses. Mentors are alumni or local business people who offer subject-matter expertise.

RIT also started a venture fund in 2012 that provides investment capital to RIT-related entrepreneurial endeavors. Kailey Bradt, founder and CEO of OWA Haircare, applied to the fund and recently made a pitch for—and received—pre-seed capital to bring her powder shampoo product to market later in 2018. After graduating from RIT with a chemical engineering degree and then working for a startup in Los Angeles, Bradt got the idea for OWA after work travel highlighted the benefits of more compact haircare products. To figure out how to launch the company, she returned to RIT to get her master's in product development.

"The product development program had this technical basis where it was still engineering," Bradt says, "but then it was complemented by courses that included marketing, accounting, and entrepreneurship as my electives."

She also piloted a program option for entrepreneurial engineers to work with RIT's Albert J Simone Center for Student Innovation and Entrepreneurship so they too could be ready to take their product to market by the end of the product development master's program.

"I've helped bring the engineering college together with the Simone Center, and they are working on more formalized coursework for this program option," she says. "Going forward, I hope to see the master of science in product development attract entrepreneurial engineers."

What Entrepreneurial Alumni Give Back

When McChord is at the Rochester Datto office, he often meets with students who want to run their business ideas by him.

"He loves talking to students, and, obviously, the students love it because he's now the most famous alumnus we have in their book," says Platzer, who often sets up those meetings at the Datto office.

McChord likes to push students to take more risks: "RIT, and probably any university, tends to try to keep people within the lines. My job is to provide a little bit of that counterbalance, that it's OK to color outside the lines in these areas—you'll probably be fine."

Bradt praises the many mentoring opportunities RIT offers. "To speak with someone who has done it before, or someone who can offer guidance in certain areas that are unfamiliar to you, can save you a lot of time and money when starting a business. RIT does a great job of offering on-site coaches and mentors while also providing contacts outside of RIT for advice after graduation."

In addition, Bradt says McChord's success is positively affecting other RIT entrepreneurs. "There's a marketing firm in New York that is willing to help OWA because they know Austin [McChord] so well," she says. "Building those connections has been really helpful. Austin's made a great name for RIT entrepreneurs, which opens more doors for us."

Notargiacomo agrees that McChord's success has created a buzz for RIT. "It puts us more on the map," he says. "The incubator success is only as good as our companies' success. We were not involved in Datto, but the RIT ecosystem was certainly involved."

Furthermore, Platzer notes that the PR surrounding McChord's business success, highlighted by his $50 million gift to RIT, can help everything from student recruitment to alumni job prospects—a gift that goes much further than the dollar amount.

When asked what he thinks his biggest impact on RIT has been, McChord says his success has changed RIT's perspective of what its students can do. Previously, professors and institutional leaders would "assume that students will go on and have very productive careers but not necessarily have outside impact or start big businesses, and certainly not right out of school," he says. "I demonstrated that even an unlikely case can produce a big outcome."

But he doesn't think he'll be the top RIT entrepreneur forever: "I expect that there will be other people who will eclipse me in just a few years' time."