College Startups: The 'New Master's Degree'Francesca Di Meglio
As a student at University of Indiana’s Kelley School of Business, Derek Pacqué lost his coat at a bar, got angry, and came up with a business plan. He borrowed and saved $500 to purchase racks and hangers to start a coat check business at local hangouts.
CoatChex does not require patrons to keep tickets, which often get lost. Instead, someone at a kiosk photographs clients’ faces and coats with an iPad or smartphone and then uses their phone number and photos for secure pick-up. A paltry original investment eventually had Pacqué negotiating with—and turning down—a $200,000 offer from entrepreneur Mark Cuban on ABC’s Shark Tank for a 33 percent stake in the business. In the last two months, CoatChex earned $100,000.
“You go to school to get a job or an education,” says Pacqué, who graduated in 2011. “I went to college because I wanted to create my own career, to create something of value.”
Pacqué is among a new breed of undergraduate business students. Professors and classmates say they hunger to be their own bosses. More undergraduate business students than ever before are launching startups right after graduation—or sometimes while still at school, say administrators. A query to the top 20 undergraduate business schools asking for contacts with promising startups launched by students, or by very recent graduates, resulted in at least 100 responses.
The popularity of entrepreneurship courses is skyrocketing. For example, at New York University’s Stern School of Business, the number of undergraduate entrepreneurship courses has increased from two in 2003-2004, with 62 students enrolled, to seven courses, with 281 students enrolled, in 2012-2013. The school also introduced its academic track in entrepreneurship in 2012.
No doubt the recession has driven undergraduates to embrace entrepreneurship. Charles Sinn, president and co-founder of Guys and Dollies, a storage business for college students in Indiana, says he wasn’t sure whether he should work to grow his startup or get a traditional job when he was about to graduate from the Kelley School in 2009.
“I saw classmates in investment banking who made a lot of money for a year; then they lost their jobs and had no resources,” Sinn says. “It helped me decide to stick with Guys and Dollies moving forward.” Today the company offers summer storage and moving help to more than 1,000 students at Indiana and Purdue universities; it is “income producing,” he says.
A desire to make a difference in the world is also a contributing factor, says Scott Stimpfel, assistant dean of student engagement and innovation at Stern. In fact, many of his students are pursuing social entrepreneurship, or at least getting exposed to it, as early as high school, he says.
Jeffrey White, who graduated from Boston College’s Carroll School of Management in 2012, launched Rightside Shirts, a nonprofit T-shirt company. Kids in public schools in the Boston area create T-shirt designs; Rightside, of which White is chief creativity officer, chooses one design from each school, puts it on shirts, and sells them to the community to fund art programs in the schools. White is not able to support himself with Rightside Shirts alone, and he waits tables twice a week to pay the bills. But the company has taken in $10,000 in revenue so far, he says.
Technology has made entrepreneurship more convenient, especially for a generation that has never lived without the Internet and its offerings. “We’re living in a time when it has never been so easy or cheap to start a business,” says White. “The barriers are so low, thanks to social media. If you have a good idea, you can gain momentum.”
The chances that a new company can withstand the test of time are daunting. The U.S. Bureau of Labor Statistics says only half of all new businesses survive for five years, and only a third make it to the 10-year mark—a fact about which many undergrads seem unaware. Many an undergraduate business student wants to be the next Mark Zuckerberg. Ted Zoller, director of entrepreneurship at UNC’s Kenan-Flagler Business School calls it the “Zuck Distortion.”
“He’s created a perception that anyone with a good idea can take off after school and become a billionaire,” says Zoller. “I wish that were true.” While Zoller encourages his students to follow their dreams and give their ideas a decent shot, he tempers their expectations.
“I’ve been very careful to say that entrepreneurship is not a panacea,” he adds. “It’s hard. It requires rigor, discipline, and serendipity.”
Still, some ideas are worth taking a leap for—and schools realize that. For example, Emory University is negotiating with some of its undergraduate students for a stake in their business, Campus Bubble, which is like Google Circles for universities. The relationship between the institution and the student entrepreneurs is evolving, says Andrea Hershatter, senior associate dean and director of the BBA program at Goizueta Business School.
So far, Campus Bubble is the first student venture to be officially licensed by the university, which means it can use Emory’s name, infrastructure, and back-end support. Emory is the home base and beta test for Campus Bubble, says Hershatter. Not every undergraduate business gets funding from the school. But schools provide all sorts of support for these budding entrepreneurs, including relevant course work, a professional network, mentorship, office space, business plan competitions, and more.
Despite the support, most business schools suggest that students shape a plan B for their careers. If students fail, they can always use the experience as a point on their résumé, especially if they seek employment from another startup, suggests Emily Cieri, managing director of entrepreneurship at University of Pennsylvania’s Wharton School.
The biggest reason more undergraduates are starting their own businesses, say administrators, is because school is the perfect incubator. It’s a time in students’ lives when they still don’t have families or mortgages tying them to more traditional jobs—and they have a protector: their alma mater. “Business school allows students to get their hands dirty and try out ideas in a nice, safe environment,” says Stimpfel.
This is not to say that you should expect these young people to run back for a graduate degree.
Ryan Edwards, co-founder and director of marketing and sales for CampusGrumble.com, an online suggestion box for students to gripe about whatever is bothering them at their university, started his business before graduating from Wake Forest School of Business in 2012. He says that coming out of college, he did not find the opportunities he thought he would have. He thought the business had great potential, so he opted to pursue it full time rather than stay in school.
“A startup,” he says, “is like the new master’s degree.”