Starting a Business as a Student


starting a busines

Imagine for a moment two fictional students – let’s call them Jack and Diane “two American kids growing up in the heartland.”  Both are seniors in business management at a top-tier university with a minor in entrepreneurship, and both are starting a business.

Jack’s Story

Jack is highly motivated and an A student.  In fact, he is so motivated, he has taken classes each summer in order to complete his degree in three years.  In his “spare time,” Jack organizes and attends entrepreneurial events on campus.

During his final semester, Jack and two friends took an MBA level course on business planning and strategy.  The course required them to do the following:

  1. Review the existing technology being researched at the university
  2. Identify a specific technology and evaluate the market applications for that technology
  3. Develop a business plan
    • Market opportunity
    • Team and organizational structure
    • Product plan including engineering and technical development
    • Marketing and sales strategy
    • Funding plan
    • Five year financial projections

Jack and his friends identified a billion dollar opportunity for manufacturing a game changing medical device.  Based on the quality of their plan, the each received an A in the course.  In addition, they entered into the annual student business plan competition where they finished second and won $5000 in prize money.

Next steps: After graduation Jack and his friends plan to incorporate so they can begin the process of licensing the technology and pursue funding.

Diane’s Story

Diane is also a highly motivated A student, but her path has been slightly different.  In order to earn money for tuition, Diane took a summer job after freshman year selling Cutco Knives door-to-door.  Her first few weeks were difficult, but by the end of the summer she had earned enough money to pay her fall tuition.

Back on campus, Diane found a part-time job at the online student newspaper selling ads to local businesses.  She loved the job because the hours were flexible and she was able to learn about each of the businesses she sold to.  In addition, Diane was learning the advertising business.  She learned about cost-per-impression versus cost-per-action, and how to show ROI to her customers.

In spite of her success, Diane wasn’t satisfied with how the newspaper was selling its inventory.   Nearly 60% of the premium ad space was being wholesaled at 1/20 of the price that she was able to charge.  Near the end of her sophomore year, Diane approached the newspaper with a proposal where she would purchase a portion of the wholesale ads at 2x what they were currently selling for.  She was no longer paid a commission from the newspaper but was paid by the advertisers.  And she was limited to non-local advertisers in order to not compete with the other sales reps.

Diane set up a simple LLC, opened a bank account, and signed her first advertiser, Cutco Knives – Cutco needed to recruit a new crop of sales reps for the summer.   Diane had a real business.

At the start of the fall semester, and after selling much of her inventory, Diane decided to test an expansion plan.  She approached three additional university newspapers with a similar proposal and was able to sign two.  With the success of the business, Diane was obligated to hire another sales rep and a friend in computer science to handle the technology which included setting up an ad server.

As she prepared to graduate, Diane was running an ad network for thirty college newspapers, with five part-time employees, and twenty advertisers.

Question:  Which student, Jack or Diane, has a better opportunity to get funding for their business (and why)?

 

Photo credit:  OZinOH

About Tim Huntley

Tim is the COO at Paired Health, an early-stage healthcare IT company helping hospitals extend care out into the community. He the former CEO of Ganymede Software.

  • Xavier Robinson

    I think Diane has a greater chance than Jack . While Jack had a novel technology tool and others believed it was promising proved by the Business plan 2nd place, i feel that Diane would received funding over jack based on the fact she demonstrated proof of concept. The fact that she had revenue, a number advertisers and is most likely profitable i think it would make investors more comfortable giving her a check. Also i think more power would be in Diane’s hands as well because she is already earning money she can give away less of the company due to her pre-funding valuation. Diane can benefit from choosing which investors can provide more opportunities to expand her business with a good biz dev team making good deals. She may not be the next google but if she get some kind unique ad software then she will most definitely grow a sustainable ad network provided that she successfully leaves the college paper space into a bigger market . I am by no means saying that John would not get funding, actually if Jack does get funding and proof of concept is done i think his med device business is more likely to become a billion dollar company than Diane. Its just harder for Jack to get funding and he also has to worry about the FDA which means is a much risker venture but the rewards are significantly higher than Diane’s Ad Business.

    • http://anentrepreneuriallife.com/ Tim Huntley

      Good analysis Xavier! The other point I would make is that Diane has learned substantially more about creating and running a business – and should she choose to pursue a bigger idea/opportunity, she will have some great experience to pull from.