Studying Startups by Starting One

A course at Boise State University ditches theory and business-plan contests to give budding entrepreneurs some real-world experience

By David E. Gumpert

The graduate business course at Boise State University has an innocuous enough title: MBA 585: Emerging Technology Entrepreneurship. So Leslie Major, a student working toward her master's in accounting, figured it would be like many of the other courses on entrepreneurship offered not only at Boise State, but around the country -- "mostly about writing a business plan."

Maybe she should have read the course description heading a bit more closely: "Come for a Class and Potentially...Leave with a Business."


  A month into the course, which premiered in January, Major and her nine classmates were each "gifted" 10 shares in a new company, Emerging Technologies of Idaho Inc., a company capitalized by her three professors to the tune of $100 apiece. Emerging Technologies searches out promising new technologies at Idaho's universities and a national lab, and then seeks federal grants to commercialize the ideas it determines have the best chances of making it as businesses.

Major and the other students spend endless hours reading through invention documentation, interviewing inventors, and writing grant applications. "I've never had a course like this," she says. "It has opened up a whole new world."

Courses on how to start a business (or some variation thereof) have been among the most popular on college campuses since the late 1990s, when twentysomethings were almost routinely taking startup companies public. A major challenge at many colleges and universities has been finding enough qualified instructors.


  But another, even more serious, challenge has cropped up: How do you teach students what it's really like to start a business? How do you communicate the feelings of insecurity associated with not having enough money and with being rejected by prospective investors and customers? How do you teach students to work through conflicts with partners who are dogging it?

The traditional approach has been to have students study cases about successful startups like Dell (DELL ), to bring in successful local entrepreneurs as guest lecturers, and to assign students to write business plans for fantasy companies that the students enter into university-sponsored business-plan contests. But as medical schools discovered long ago, there's no substitute for putting students into real-life situations with real-life problems.

So it's refreshing -- indeed inspiring -- to see a course like MBA 585 flash onto the entrepreneurship education scene. The course's evolution is instructive into both the opportunities and potential obstacles to this kind of trial-by-fire class.


  The brainchild of three faculty members -- R.J. Twilegar, Norris Krueger, and Newell Gough -- the course actually traces its roots to Ecuador. There, Twilegar, who has launched two technology companies, took up teaching entrepreneurship at a university while on a personal sabbatical in 1999. "I decided to create a company with the 25 students in my class," Twilegar says. "I asked the students to invest an amount they would have spent on books for the course -- about $50.

So we created a little handicraft company. We found craftspeople in the hinterlands, took photos of their products, and obtained a credit-card merchant account."

At the end of the semester, the company had achieved a couple thousand dollars of sales, with a bit of profit. Twilegar closed it down and returned roughly three-fourths of what the students had invested. "The course got great reviews," he recalls. "The problem was the class ended, the students dispersed, and I dispersed."


  At Boise State, Twilegar and his colleagues have sought to resolve the problem of transience by launching a company with a long-term time horizon. "The students will leave," Krueger says. "But we [the professors] will continue. This class, the next class, and the class after that will be issued securities in the corporation."

Yet, Boise has problems that didn't exist in Ecuador. The reason this semester's students were given stock rather than asked to buy in was because of the professors' concerns about potential conflict of interest charges based on faculty members using students to help launch a company. Plus, federal regulations limit entrepreneurs seeking investment funds in privately held securities to well-heeled individuals.

The professors realize, Krueger says, that the class isn't a true representation of what it's like to be an entrepreneur because the students don't "have some skin in the game." But the professors see these as temporary obstacles. They're petitioning Idaho's State Board of Education to approve the course and have engaged a law firm to seek an exception to federal and state securities laws limiting who can invest.

While the classes may be short-term, the professors see the lessons as lasting. As long as the students are shareholders, they'll be getting two kinds of reports from Boise State long after they graduate. "They'll hear from the alumni office, and they'll receive their annual shareholder report," Twilegar says. "Which letter do you think they'll open first?"

David E. Gumpert is author of Burn Your Business Plan! What Investors Really Want from Entrepreneurs and How to Really Start Your Own Business. Most recently, he's the co-author of Inge: A Girl's Journey Through Nazi Europe

Edited by Rod Kurtz

Before it's here, it's on the Bloomberg Terminal.