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January 28, 2008

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FOR START-UP ENTREPRENEURS, youth has its advantages — particularly when you're still in school.

Three years ago, Andy Tabar, then an 18-year-old college freshman at Belmont University in Nashville, Tenn., started up the first iteration of his web-development company, Bizooki, with less than $1,000 and a little bit of know-how.

To help get his business off the ground, Tabar applied for membership to the university's "hatchery" called the Practicing Student Entrepreneur Program. Through the hatchery, which began in 2004, Tabar and about 70 of his fellow fledgling entrepreneurs have access to desks, computers, phones, fax machines and copiers. Students can bounce business ideas off of seasoned entrepreneurs in residence at the university, as well as seek out free marketing advice and accounting help.

Students also can apply for need-based seed funding or vie for larger sums through an annual business plan competition. Tabar garnered a $5,000 award in his freshman year but says "the amount of consulting and support that I'm getting from these people is just as valuable as any financial support that I'm getting."

Entrepreneurship studies have long been a focal point at graduate business schools. Now, a growing number of colleges and universities are offering classes, degrees and support to undergraduates with big entrepreneurial dreams. In particular, school-sponsored "incubators" or "hatcheries," once the domain of business schools, are giving budding entrepreneurs like those at Belmont a taste for ownership and a testing ground to grow their businesses.

About Incubators

Incubator programs offered at universities including Arizona State University, the University of Wisconsin at Madison and Syracuse University vary widely in their scope of services, accessibility and amount of seed money that gets doled out.

The University of Maryland at College Park, for example, offers universitywide access to mentors and entrepreneurs-in-residence as well as seed-stage funding on a case-by-case basis, with a maximum investment of $30,000 over two years through the Dingman Center of Entrepreneurship. The program also provides shared office space on a first come, first served basis.

Undergraduate students working on their businesses in one of Belmont University’s Practicing Entrepreneurship program hatcheries.

Two-thirds of those participating in the entrepreneurship incubator, according to Asher Epstein, managing director of the Dingman Center for Entrepreneurship, are undergraduates while the rest are master of business administration candidates. Over the last few years, he says, about 15 to 20 businesses have been started via the program. Many have experienced success: Between five and 10 of those businesses now earn over $100,000 a year in revenue, while one business is up to $1 million, he says.

At Babson College in Wellesley, Mass., the program is more formal and typically only available, among undergraduates, to juniors and seniors. To gain entry to the program, which only accepts about five undergraduate businesses a year, students must offer an executive summary or a business plan and complete a statement of intent. Additionally, students must comply with unique milestones such as building a web site or getting shelf space in a retail store. Seed funding is also provided, although students can't access it until they raise their first round of funding.

"They learn how to run companies, for better or worse," says Elizabeth Riley, a program advisor and entrepreneurship professor at Babson.

Youthful Benefits

Of course, failure at this age might not sting as much as later in life. Starting businesses via incubators allows college-age entrepreneurs to start and run real businesses without as much damage to their careers or wallets if the venture flops. Also, "if [the business] fails, you still have your degree," says Epstein.

In fact, it's the educational aspect of starting and running a business that's typically emphasized at the undergraduate level. Students who take part in university incubators can apply many of the skills they learn to real-world situations, education experts agree.

"Entrepreneurship is inherently a process of moving a thought into action or application," says Marjorie Smelstor, vice president of higher-education programs at the Ewing Marion Kauffman Foundation, a Kansas City, Mo., nonprofit that supports entrepreneurship. "This is a concept that is well worth learning for students and faculty in any discipline," which, she adds, partly explains why many universities now offer such programs.

Growth Spurt

Today, more than 2,000 two-year and four-year colleges offer classes or degrees in entrepreneurship, up from more than 1,000 in 1992 and fewer than 300 in 1980, according to the Kauffman Foundation.

"The growth of entrepreneurship programs across college campuses in the past 10 to 15 years is not a fad," says Smelstor. Instead, she says, more universities are becoming acutely aware of the key role that entrepreneurial organizations play in the U.S. economy.

According to a 2007 report from the Small Business Administration, small businesses produced half of private nonfarm gross domestic product during the 1998 to 2004 time period. Additionally, small businesses employ about 50% of all private-sector workers and create about 75% of the net new jobs in our economy.

Another reason for the upsurge is that demand for such programs among students appears to be on the rise. Jeffrey Cornwall, the director of the Center for Entrepreneurship at Belmont, cites figures that show as many as 40% of freshmen came to the university one recent year with a business idea already in mind. This entrepreneurial zest is mirrored nationally as well. According to a recent poll from the Kauffman Foundation, four out of 10 people aged 8 to 21 have entrepreneurial aspirations, while another 37% believe starting a business is a possibility.

"We are really focused on giving students practical opportunities in the trenches," says Epstein from Maryland. "There is no better way to teach entrepreneurship than to go out and do it."

"Starting Up," a weekly column written by Diana Ransom for smSmallBiz.com, follows entrepreneurs through the early stages of launching a business. Write to her at dransom@smartmoney.com.