Want to Graduate? First, Create a Company
Originally posted on Entrepreneur.com by Hannah Seligson
Want to Graduate? First, Create a Company
Yes, contends a global training program called the Founder Institute, which was started in 2009. For tuition of less than $1,000, students attend classes with one goal in mind: to create a fully operational company. In fact, they are required to incorporate before they can graduate.
To be accepted, students don’t need to have a fully baked idea, but they must take a test that the institute says can predict their entrepreneurial success. They can keep their day jobs while attending class, but that does not mean the program is easy. The workload is grueling, and 60 percent of the students fail to graduate.
But this for-profit institute, based in Mountain View, Calif., says it has helped start more than 500 companies. It has done so by going global, with chapters in 14 countries, in a total of 27 cities. It aims to make money partly through its equity stakes in the companies created by its graduates.
Boaz Fletcher, 44, a consultant to new companies in Israel, started the Tel Aviv branch this year. “As a country, Israel is amazing at technology, but not great at building sustainable businesses, and that is one of the things the Founder Institute teaches: how to build an enduring, stable company,” he said. The branch’s first class of nine students will graduate in September.
The institute is the brainchild of Adeo Ressi, 40, who has started eight companies of his own. Back in the mid-1990s, he was a co-founder of Total New York, an online regional city guide that was acquired by AOL.
Mr. Ressi saw a need for nurturing entrepreneurs even before the idea stage. He set out to create a vocational school of sorts to teach the nuts and bolts of entrepreneurship, setting it apart from highly selective programs that often support start-ups before the venture capital stage. One of the best known of these “accelerators,” TechStars, accepts only 1 percent of applicants.
Mr. Ressi says he wants to reduce the failure rate for new companies. For every Dropbox, the popular file storage service, there are hundreds of businesses that never make it, he said, adding: “Why is that the case? And can it be fixed?”
HE came up with the idea for the institute as C.E.O. of TheFunded.com, a Web site where entrepreneurs and chief executives rate venture capital firms and investors. Through the site, he has a community of founders at his fingertips, and he was able to ask them: What would they have done differently at the beginning?
From Tel Aviv to Chicago, the curriculum is partly based on answers to that question from 2,000 executives. Classes often consist of around 30 students, with a much smaller number making it to graduation. In 15 sessions, students learn about topics like revenue, costs and profits; marketing and sales; presentation and publicity; and fund-raising.
There are adjustments in the curriculum to address local markets. In Singapore, for example, there is an additional session on doing business in China. Sessions are taught by chapter leaders and by seasoned entrepreneurs who can also serve as mentors.
Fundamental to the institute is the belief that many aspects of entrepreneurship can be taught.
Jose Luis Senent, 43, had been a car broker in Paris for 20 years, but had no previous experience with technology or start-ups. He graduated from the Paris chapter in April 2011 and now runsAutoreduc, a group-buying site for cars that he says is profitable and will expand into Spain, Belgium and Switzerland this year.
“I cannot imagine starting a company without knowing what I learned at the institute — there is so much to know about marketing, business models and raising money,” Mr. Senent said. The institute connected him with mentors who challenged his ideas and set his company in the right direction, he said.
Mr. Ressi says he wants to help budding founders avoid rookie mistakes — like bad Web design and off-key marketing, or creating the wrong corporate structure.
Katherine Bicknell, 31, a graduate of the New York chapter and co-founder of Kindara, an app that helps women track their fertility, would still be calling her company “Moonlyght” if not for a session on naming and branding.
“The Founder Institute said that you had to be able to say it, spell it, read it easily, and the dot-com had to be available,” said Ms. Bicknell, whose company is based in Boulder, Colo. So far, she and her co-founder have raised $100,000 from friends and family.
The institute aims to democratize the access that up-and-coming entrepreneurs need, partly by opening up networks and opportunities to those on the outside of the tight-knit start-up world. It “helped me build my network — when I came from Turkey to the U.S. in 2008 to start my company, I didn’t know anyone,” said Eren Bali, 28, co-founder of Udemy, an online learning company that has raised $4 million from investors. “I was starting from scratch, ” said Mr. Bali, who graduated from the Silicon Valley chapter in 2009.
Carlos Rozo, 38, a graduate of the chapter in Bogotá, Colombia, said the institute steered him away from a potentially fatal mistake — starting something big and complicated — and toward something more narrow that would fill a niche. He abandoned plans for a content-sharing platform in favor of Thotz.net, a provider of software that companies can use to share information among employees. Mr. Rozo says he has received $50,000 in seed funding from Wayra, which is backed by the Telefónica Group.
“Colombia is really behind the eight ball on how to attack this amazing opportunity to have great tech start-ups. It’s a desert down here,” said Alan Colmenares, 48, who began the Bogotá and Medellin chapters last year. The first semester in Bogotá ended in the spring. So far, five out of nine graduates have secured $50,000 or more in outside funding, according to Mr. Colmenares.
VIETNAM was similarly lacking in programs to encourage technology start-ups, says Tuan Pham, 37, who began the Hanoi and Ho Chi Minh City sections there in 2011.
“The fact that the Founder Institute agreed to work with us is huge — otherwise, we would have to rely on what we read from books,” said Mr. Pham, founder of the Topica Education Group, a Hanoi-based online learning company with 300 employees. The Vietnam chapters have produced five companies.
Chapter leaders are generally experienced entrepreneurs from the area, and they often find sponsors to cover costs of running the local program, which can vary from around $25,000 to more than $100,000 a semester, depending on the number of staff members.
Mr. Colmenares secured sponsorship from .Co Internet, a company based in Bogotá that sells domain names. About 80 percent of chapters are sponsored by a law firm, where the students typically end up incorporating. The law firms usually charge students around $1,000 to incorporate.
Local chapter leaders acquire a stake in the companies they help nurture. Graduates put 3.5 percent of their company into a shared equity pool that expires after 10 years. If a company is sold, merged or goes public in that time, 30 percent goes back to the mentors, 30 percent to the entrepreneur’s graduating class, 25 percent to the local chapter leadership and 15 percent to the Founder Institute.
The institute says that 42 percent of participants have received external funding in their first six months of operation and that about 10 percent of its companies have failed.
But could the approach work on a wider scale? “While I would hesitate to be critical of the ‘wham-bam four months you’ve got a business’ approach, I think the vast majority of ventures take more than that amount of time to become operational businesses people can be proud of,” said Len A. Schlesinger, president of Babson College in Wellesley, Mass. This year, U.S. News & World Report ranked Babson as having the No. 1 entrepreneurship program among the nation’s business schools.
In graduate classes in entrepreneurship at Babson, “students learn the nuts and bolts of starting a business,” Mr. Schlesinger said. “But they also learn the framework of what makes a good idea and have the time to experience and experiment without pressure,” he added. He emphasized that he was not specifically familiar with the Founder Institute.
The academic route, however, comes with a hefty price tag: more than $110,000 for a two-year M.B.A. program, according to Babson’s Web site.
The Founder Institute also accommodates people who want to keep their day jobs and stay in their local regions — thus attracting somewhat older entrepreneurs.
“Younger people are usually the only ones without a family who are in the position to just pick up and move,” said Dave Lambert, managing director of Right Side Capital Management, a San Francisco-based investment firm that has invested in four Founder Institute companies. “But there is a whole other high-quality entrepreneurial market that isn’t being tapped because those people can’t just quit their job.” The average age of a Founder Institute participant is 34.
SOME are skeptical, however, about an after-hours entrepreneurship model. “I think the Founder Institute is useful as far as it can be a catalyst for putting some structures around their ideas, but we like to fund people who are working on their ideas full time and are world experts,” said Aziz Gilani, a director at DFJ Mercury, a venture capital firm based in Houston that invests in companies from accelerator programs like TechStars.
Then again, not everyone can quit their jobs to test-drive their idea — although 80 percent of Founder Institute participants ultimately do — nor are there enough spots for everyone who wants to attend TechStars or other selective accelerators.
As much as the Founder Institute aims to expand entrepreneurial opportunities, it also helps some people come to grips with the idea that they may not be in the right position to run a high-growth start-up.
Ben Cox, 35, a software engineer in Santa Cruz, Calif., left the Silicon Valley program in June after just one week. “Looking at the financial requirements of incorporating my company and bringing in a team and advisers, I just realized it wasn’t feasible,” he said.
Phil Libin, a mentor at the institute and founder and C.E.O. of Evernote, the online software program, says he spends as much time discouraging as encouraging participants. “I ask people, ‘If I could guarantee that you would spend the next 10 years developing a product millions of people will use but you will make no money for a decade and it will be a total financial failure, will you do it?’ Most people answer no,” he said.
Not surprisingly, he said, “some people drop out of the program because of the question.”
This article has been revised to reflect the following correction:
Correction: August 5, 2012
An article last Sunday about the Founder Institute, a global training program for technology entrepreneurs, misspelled the surname of the man who started chapters of the institute in Colombia. He is Alan Colmenares, not Colemenares. The article also misidentified the company started by Carlos Rozo of the Bogotá chapter. It is Thotz.net, not Thotz.com.