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Best business schools
On the first of the month, Michael Healey hid from his landlord. The rent was due on office space for PC-Build Computers, the brand-new company he was starting with fellow Babson College student Robert Lofblad.
They didn't have the money. In fact, when the partners rented the space, they knew they wouldn't have the money - not yet. But in three days, the Douglass Foundation would announce its prize for best student business plan at Babson.
Lofblad and Healey had a great plan: They would sell build-it-yourself computer kits to the hobby market. They thought it was a sure bet to win the prize money. They had to win - or go out of business before making their first sale.
On the fourth of the month, the winner was announced: PC-Build. Healey picked up the check and marched straight down the street into the business district of Wellesley, Mass. He put the $3,000 down as a deposit and picked up the keys to the office. He and Lofblad were in business.
"Basically, we started with nothing," says Healey, 31. Nothing but the lessons they learned at Babson, perhaps the best business school for entrepreneurs in the world.
Three years later, Jeffry Timmons, one of Healey's professors, is using the PC-Build case as a classroom exercise for the annual SEE, the weeklong Symposium for Entrepreneurship Educators held at Babson. He has not told his audience of 50 professors of entrepreneurship that the case is real, nor has he told them whether the company was ever established.
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He asks them to pretend they're at a family dinner three years ago. Their nephew, Michael Healey, has just come in from college with his partner and his business plan. "Before the Sunday dinner is over, Mike asks a question," says Timmons." 'Most of my classmates are taking jobs. Do you think I'm crazy to do this?'"
The educators laugh. "All you have to lose is everything you own," says one. "Depends on what you own," chirps in another. "All you'll lose is someone else's money."
"I don't think it's risking that much," says a third. "You can always get a job later. I'd say, go for it."
Before the exercise is through, Timmons asks the crowd whether they would invest in their nephew's dream. "I would give him a gift to help him follow his dream, not expecting it back," says one professor. "It's a gift, not an investment."
"How many of you think that business would be alive today?" asks Timmons. About half raise their hands.
"In our classes, we try to have the protagonist in these cases come in to put a real face to the business plan," continues Timmons. And with that, he calls down Healey, who has been quietly, anonymously, sitting in the back of the room.
"We did have a weak team," Healey tells the crowd. "I mean, nobody's going to look at two 27-year-olds." He fills in the history of the company: How they raised $80,000, mostly from the parents of friends. ("We looked for people we could live with if this thing failed," he says.) How they needed $20,000 more and almost went under when the cash ran dangerously low. How they redesigned the company in its second year, moving away from the hobbyist market and targeting schools and small businesses with computer upgrades and service. How it took nine months to break into their first school system, and how they finally cracked the new market after forming a strategic partnership with school supplies manufacturer J.L. Hammett Company Inc., the original makers of blackboard erasers.
"Hammett had a computer business that was all service," says Healey. "They wanted to get rid of it. They basically gave it to us for equity."
PC-Build has just expanded into Hartford, Conn. Healey expects the new location to start pumping revenues right away. "We made all our mistakes with the original office in Massachusetts," he says.
To fund this latest growth, Healey and Lofblad took on a couple of new investors, including Steve Spinelli, one of the founders of Jiffy Lube International Inc., who cashed out and became a full-time professor of entrepreneurship at Babson. Spinelli was one of the role models who inspired Healey to start PC-Build.
Today, the company employs 22 people, has annual revenues of $3.2 million, and is growing. Healey and Lofblad have a strategy to cash out in their seventh year.
A graduate of the University of Massachusetts at Amherst, Healey first worked in New England as a project manager for Siemens-Nixdorf, one of Europe's largest computer makers.
When his division was downsized, he went to graduate school to learn how to become an entrepreneur. Babson taught him how to get the resources he would need; how to find customers; and how to survive in order to thrive.
"They taught me how to have a thick skin," says Healey. "Nothing offends me anymore."
Master Your Fate
In the past 15 years, there has been an explosion of entrepreneurship programs, creating a new paradigm of learning for business schools. Mixing academic discipline with war stories from the front lines of entrepreneurship, they teach the skills and attitudes that create success: raising capital; managing resources; exploiting global opportunities; launching and marketing your business on the Internet; developing the confidence to take control of your own destiny.
"Let me tell you what we can't do," says Bill Bygrave, director of Babson's Center lot Entrepreneurial Studies. "We can't make people into entrepreneurs if they don't have the basic drive, energy, and a strong sense of what it takes to run a business. But give me someone who has those basic skills, and we'll make him into a much better entrepreneur."
The Price Institute for Entrepreneurial Studies, a sponsor of the annual SEE, has based its program on the conviction that entrepreneurs often make excellent teachers. As its mission statement asserts, "Successful entrepreneurs are, by necessity and natural inclination, superior leathers and superior teachers - they do this every day."
Price calls for schools to use real entrepreneurs in the classroom to create "an intellectual and practical collision between academia and the real world."
David Janes Jr. was hungry for that collision. After earning his undergraduate degree in 1984, he went to work at the family business, California Manufacturing Enterprises. A science whiz, he had to round out his background before he could realize his dream of becoming an entrepreneur. Janes knew exactly what he needed to learn: marketing, operational management, and finance. But he also sought exposure to savvy veterans of the entrepreneurial wars. At UCLA's MBA program, he found it all.
When he was accepted into the management program, "I was scared of computers," he says. "I would not be competent unless I had more training. I sought out partners at school; you cannot be successful without partners. I took classes in every topic, from human resources to finance. You've got to be a Renaissance person when you're running your own business."
Four days a week, he attended classes. On the fifth day, he would visit local companies, talking to entrepreneurs about the challenges they faced. He visited businesses in other countries, touting facilities in Mexico, the former Soviet bloc, and Japan.
"I tried to leave every facility with one idea," says Janes. At the Japanese electronics giant Matsushita Electric, he saw how employees who found defects were presented with a $5 red apple. The modest reward system created a company in which every worker was in a frenzy. to uncover product flaws.
After graduation, Janes returned to the family business, manufacturing spare parts for jet engines. He wanted to spin off his own division. One day, a staffer brought in a smashed snow-board. He had spent $600 to buy it, then destroyed it in just one hard afternoon on the slopes. "A group of us looked at it and said, 'Hey, we could build that,'" Janes recalls. "We dissected it and found it was within our capabilities."
It was an epiphany. Janes had the product and manufacturing know-how to make it happen. He studied the snowboard market and saw it was bursting with potential. "In 1991, snowboarding was not yet a craze but was in a growth stage," he says. He decided to become a player.
Janes and his engineers developed a unique snowboard with a durable capped edge. In 1992, he landed his first customer, a brand name company that placed a $500,000 order. In three years, 5150 Sports Inc. of Corona, Calif., has become a $14 million company. It manufactures snowboards for other finns and sells its own label to the retail market.
Every day, Janes, 33, applies the lessons he learned at UCLA: Recruit the best people you can find. Manage your company's growth. And, what one of his professors had called "the number-one job of the entrepreneur": Never, ever run out of cash.
Build a Network
Michael Hanratty was in a rut. After more than eight years working at Briggs & Stratton in Milwaukee, a $1 billion engine manufacturer, "I felt I wasn't exposed to fresh business ideas," he says. "I wasn't finding new opportunities."
Hanratty wanted to work for himself but felt he needed "that secret idea that would unlock success." He searched for a business school with a strong curriculum in entrepreneurship.
"It was difficult to discern one school from another," he says. "The key was in talking to students."
At the University of Texas at Austin (UT), home of the Moot Corp. Business Plans Competition, Hanratty found an "energy" that inspired him. UT was also the home of the Austin Technology Incubator, where he believed he could find resources and gain exposure to growing companies.
Hanratty interned at the NASA Technology Commercialization Center, which was seeking commercial applications for technology developed for the space program. "NASA has a lot of patents," he says.
Relentlessly, he sought a brainstorm: a ground-breaking product on which he could build his fortune. "I worked with a partner researching various ideas," says Hanratty. "We had a list of 50 ideas: a color printing technology; a welding technology; a metal fusion technology. After a lot of searching, it came down to wanting to get our feet on the ground quickly. We wanted to have a product that could go to market quickly."
Hanratty uncovered a NASA research-based design for a chair that placed the human body in the position it takes naturally in zero gravity. NASA contractor Brian Park designed the chair, called the Flogiston, after the Alchemists' term for the latent energy stored in matter. The futuristic chair created an effortless sensation of floating.
"We went to retailers and showed them the chair," says Hanratty. "We told them the story and how it delivers a superior level of comfort." They were enthusiastic. Green light time.
Hanratty incorporated True Dimensions and licensed Park's patented design. "We'd developed a network of fellow students," he says. He started the company with his best friend, Jeff Hoogendam, Irene Bond, and two other MBA students.
The team entered their business plan in UT's 1995 Moot Corp. competition and won first prize. In the question-and-answer session, the judges grilled them, demanding they develop answers for potential hurdles: What to do if a huge order comes in. How to develop working capital. Where to get equity financing. The process helped them work out solutions before they were faced with problems. "We also gained industry contacts," says Hanratty. "One wants to set up our European distribution. Another was a manufacturing contact. The contacts were remarkable overall." The Moot Corp. victory also gave True Dimensions office space in the Austin Technology Incubator, home to 25 startup companies.
Together, Hoogendam and Hanratty put in $30,000 in seed capital, drawn from savings. They started shipping new Flogiston chairs two months before graduation. Their two-year goal: to stay in business. Their five-year goal: $6 million in sales and a presence in 250 retail outlets.
"I think the whole process works," says Hanratty, who is 33. "The business school experience is a viable means to launch an entrepreneurial career."
Gain Critical Shills
Entrepreneurship is a process," says Babson's Bygrave, "and we can certainly teach and coach that process. From the very beginning, potential entrepreneurs must be customer-aware. A great idea is not a business if there's no customer need. A satisfied customer is the only condition necessary for a business."
Liz Elting knew she could make customers happy. After graduating from Trinity College with a major in modem languages, she worked for three years at language services giant Berlitz. "Translation was 8 percent of its business," she says.
Elting knew Berlitz was wasting a tremendous opportunity. The company sometimes turned customers away or charged higher rates to justify its translation sideline. But over the past few years, as companies became more global, demand for such services had skyrocketed. If she could create a responsive, reliable firm that specialized in helping businesses go global, she could dominate the niche before her giant competitors even knew it was there.
The problem was that Elting had no formal business training, so she enrolled in the MBA program at New York University's Stern School of Business. "Specifically, I needed finance and marketing skills," she says. "You need to be a generalist. Managing people is such a big part of it, and the management courses were some of the most useful."
At Stern, Elting found a partner with skills complementary to her own: fellow MBA student Phil Shawe. She met him in her international finance class. "He had worked at Chemical Bank and had a lot of experience in sales," she says. "He also had a great mathematical mind and was excellent with computers."
Elting knew site had a great idea: to create her own language services firm to provide multinational firms with translating, software localization, and language instruction. "Translation is a special skill, and translators consider themselves to be artists," says Elting. "Our professionals have been trained to appreciate that effectively serving clients and meeting their time constraints is the most important thing we do."
However, Elting had no money. Right after graduation, she took a $5,000 advance on her VISA Gold card, rented a computer, and founded TransPerfect Translations Inc. in her one-room apartment. "As the checks arrived, we'd pay for projects we were working on," she says. "We weren't able to get an office or a staff; we hired freelance translators, proofreaders, and editors." Shawe was still in school. By his graduation the following year, the New York company was doing better than $400,000 in revenues. Sales for 1995 are projected to be $2.5 million.
"School was incredibly useful," says Elting. "When we started, Phil was able to lake advantage of the school's resources lists of law firms, lists of corporations. Then, the management courses, the brainstorming, the networking. If I hadn't gone to school, I would never have had that so easily."
The Learning Never Stops
After earning an undergraduate degree from the University of Michigan and an M.S. in engineering from Stanford, Jennifer De La Cruz launched what she thought would be her career, working for the R&D department of General Motors Corp. Excited by the computer-aided design hardware and software being developed for the automotive industry, De La Cruz chafed at GM's sluggish progress in exploiting these new tools. "Working in a large organization and seeing the potential of this technology, it was frustrating to see it adopted so slowly," she says.
De La Cruz wanted to move fast and start her own product development firm. Eager to connect with people who had the expertise and resources to help her realize her dream, she enrolled in the Wharton School of Business at the University of Pennsylvania. "I knew from my research that Wharton had a very good reputation for its conventional business program in finance and marketing," says De La Cruz. "And it had a stellar entrepreneurial management program." The Wharton network would open doors.
At Wharton, De La Cruz plumbed the knowledge of her professors - many of whom were actual entrepreneurs. She grilled them, scouring for insights and anecdotes that would teach her to thrive. "I researched," she says. "I read their research papers. I read everything I could get my hands on."
Right after graduation, De La Cruz hunched Protogenesis Inc., a firm that uses computer-aided design and manufacturing technology to develop product prototypes. The 35-year-old runs the business with her husband, Jeff Upton, who is the manufacturing manager. The company is an all-purpose product development firm and has helped create a wide variety of prototypes for research and manufacturing companies, from a videoconferencing product for Sony Corp. to medical packaging units.
De La Cruz credits Wharton with teaching her how to evaluate and execute ideas. When she was figuring out the best place to locate her company, "we were encouraged to look at the local area economics." The East Coast and Midwest regions had more manufacturing volume, but the Southwest offered a market that was more diverse. "That showed me Southern California was an ideal place to locate the business," she says. "I flew out and met with the economic development corporation. That solidified this area as the location to put this company."
In December 1990, De La Cruz, armed with her first SBA loan, opened her doors in Carlsbad, Calif. Today, Protogenesis has 300 clients, four employees, and $500,000 in revenues. "We call what we do manufacturing, but we're organized more like a law firm or a doctor's office. Everyone is a different type of specialist."
De La Cruz could have struck out on her own immediately instead of spending years at a business school. She's glad she didn't. "People without MBAs start and run successful businesses all the time," she says. "Personally, I wouldn't have risked it."
"The e-word has become ubiquitous in business schools," says Bygrave of Babson College. "There's no question, a sea change is taking place. Up until five years ago, entrepreneurship educators were a bunch of pioneers; most schools taught it, but it tended to be one small class. Now, significant schools are building in-depth entrepreneurship programs.
"Fifteen years ago, we knew very little about angels or venture capital or where the money came from," says Bygrave. "Today, we can be very precise. There's no other paradigm in the management sciences about which we've learned so much in so little time."
Executive editor Michael Warshaw and senior editor Katherine Callan are students of entrepreneurial opportunity. They track and report on cutting-edge concepts in the field of entrepreneurship.
COPYRIGHT 1995 Success Holdings Company, LLC
COPYRIGHT 2004 Gale Group
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