The college dropout turned billionaire is a tale that's becoming stale.
Sergey Brin and Larry Page famously dropped out of Stanford's Ph.D. program in computer science to launch Google. Microsoft's Bill Gates and Facebook founder Mark Zuckerberg are managing just fine without their mahogany-framed diplomas from Harvard. Steve Jobs quit Reed College to start Apple, but hung around to sit-in on classes that piqued his interest. And Michael Dell started Dell Computers out of his University of Texas dorm room before dropping out at age 19 -- once monthly sales topped $80,000.
Gates, Dell, Zuckerberg and friends are not alone. At least 73 of the high-flyers on Forbes' 2008 "The World's Billionaires" list are dropouts.
But many of the Inc. 500|5000 CEOs say that they never would have gotten their businesses off the ground without help from the academy. "Stay in school," is their advice to budding entrepreneurs.
"Student startup businesses are definitely on the rise," says Donald F. Kuratko, a professor of entrepreneurship and executive director of the Johnson Center for Entrepreneurship & Innovation at Indiana University's Kelley School of Business. Kuratko offers several reasons, including the expansion of entrepreneurship programs and their increased popularity, as well as the development of student business incubators and growth of student business plan competitions.
A lot has to do with the students themselves. "This is a new generation of students with more independent expectations of what they seek in their careers," he says. Put simply, these student entrepreneurs witnessed the erosion of job security and set out to become their own bosses.
And so the dorm room has become the ideal business incubator. Here Inc. 500|5000 CEOs weigh in on the pluses and minuses of getting an education while building a business.
Starting a business while in school is less risky than later on in life.
"The benefits of starting a business while in school is that you're already broke," jokes Thomas Wick, founder and CEO of eVitamins, an online retailer of health and nutrition products, No. 3632 on this year's Inc. 5000 list. "So I really had nothing to lose. No wife, no kids, no worries. If the business flops, oh well. I'd start another business or use my degree and get a real job." Wick started his company at the kitchen table of his college apartment in 1999 with $1,000 he borrowed from a friend. His mom owned a heath foods store, and he needed to pay the bills while studying finance at Western Michigan University. eVitamins is on track to rake in more than $5 million this year, and Wick is about to launch eMuscle.com, a social networking site geared toward the exercise enthusiast.
LiveOffice founders and UCLA fraternity mates Matthew Smith and Alexander Rusich were able to continue their "starving student" lifestyle into their mid-20's, allowing them to reinvest all of the software company's earnings into building the business. If they didn't achieve their goal of "making $100,000 and living by the beach," they could chalk it up as a "learning experience."
They like to joke that in the early days, they were "funded by Visa, MasterCard, and American Express." The longtime buddies initially invested $38,000 of their own money, working out of an off-campus apartment near UCLA that doubled as office space. The company, which recently welcomed new CEO Nick Mehta, posted $19 million in revenues in 2007. This year, the company is ranked at No. 2092 on the Inc. 5000 list.
For Dan Roitman, the timing was right. Knowing that "I could become a 'boomerang child' and return home after college, practically rent-free" gave him the security needed to take $5,000 of his own money, rent a nearby office for $250 a month, and start Stroll, an Internet retailer with close to $6 million in revenue last year from selling personal development and language learning audio books. Once he graduated, he moved back home and rented a nearby office for $250 a month. This year, the company is ranked at No. 2290 on the Inc. 5000 list.
For the college entrepreneur, it pays to view your classmates as hot commodities. They can serve as sounding boards for your ideas, become your business partner, or even serve as cheap labor. Roitman's fellow students at University of Maryland, College Park, would "willingly work for burritos," he says.
And several of the Inc. 500|5000 CEOs looked no further than their college campuses when determining a target market. While in college, Scott Neuberger bought a company called University Trucking to provide affordable shipping and storage services to his classmates at Washington University in St. Louis. After graduating, he founded Collegeboxes by combining his company with a similar one at Duke University, and taking the business model to a national level. Revenues soared 145 percent since 2004 to $2 million last year. This year, the company is ranked at No. 2535 on the Inc. 5000 list.
The college market is recession-proof, says Rishi Narayan. "College-age spending habits do not follow the normal trends." As sophomores, Narayan partnered with childhood friend and University of Michigan classmate Ryan Gregg to found a college dormitory loft company called Big Ten Loft Co. The problem was, business boomed for only one week a year in late summer, when students moved into their dorms. So the enterprising duo dropped $5000 on screen printing equipment. They founded A-1 Screen printing, and began reaching out to fraternities and other campus groups to fulfill their customized apparel orders.
"Our team operated during the same hours as college students — sometimes making sales after 10 p.m.," says Narayan. Sales more than tripled in three years, growing from $42,000 in 2001 to $140,000 in 2003. In 2003, they bought another company, Underground Printing, the name the company now goes by. Underground Printing currently operates nine stores located in high-traffic areas near college campuses and ranked No. 1256 on this year's Inc. 5000 list.
A Harvard MBA provided a "great insurance policy," says Paul Conforti, co-owner of Finale Desserterie & Bakery, an upscale chain of dessert restaurants and No. 3945 on the Inc. 5000 list. The MBA also gave him the credibility needed to raise money from investors, with the Harvard alumni network contributing one-third of the original $750,000 investment and at least half the $5 million investment over the course of the company's life.
Conforti wrote the business plan for Finale along with fellow HBS Class of 89' students Kim Moore and Kristen Krzyzewski (Krzyzewski opted not to join the company). "We had the luxury of researching our niche from soup to nuts," says Moore, "under the guidance of HBS professors."
Professors — including Len Schlesinger, Ray Goldberg and Joe Lassiter —doubled as mentors, playing a key role.
Although starting a business while in school has its perks, something has to give. Often, it's the GPA that suffers the most. "Working 70-hour weeks, I just didn't have the time to study much," says Joel Shapiro, co-founder of Shapco Printing, No. 4942 on this year's Inc. 5000 list. "I had a 3.5 GPA the first two years and probably a little under 3.0 the last two years," he says. It was a small price to pay, he says. His printing company, which specializes in coffee table books and plastic menus, is bringing in $32 million in sales.
Then there's the issue of ageism — this time, discrimination against those with little life experience tucked under their belts.
"It's a little hard to have people take you seriously when you are half or one-third their age," says Paul Van Metre. Van Metre founded the engineering and manufacturing company Pro CNC with fellow grads of Western Washington University's Vehicle Research Institute, with whom he used to build racecars with for national college competitions. The company ranked at No. 2196 on the Inc. 5000 list this year. "But when you show them you are smart and aggressive and you mean business, they come around pretty quickly."
Before starting a business out of your dorm room, you're best off reading the rulebook. Derek Kleinow, founder and president of TigerGPS.com, learned that the hard way.
"A dean found out I was sending business-related emails from my campus email account. Although she applauded my entrepreneurial efforts, she gently reminded me that I was prohibited from operating a business in my dorm room and that operating any sort of for-profit business using university resources was strictly against university policy," he says.
Though it seemed like an overreaction to him, "the episode reinforced a business lesson I was already busy learning: for an entrepreneur, flying through headwinds is the norm," he says. His company is now ranked No. 989 on the Inc. 5000 list.
Doing double-duty as both student and entrepreneur isn't easy – but it can pay off big-time. "There were a lot of late nights," says Collegeboxes' Scott Neuberger. "But it was definitely worth it in the end."