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COOLEST COLLEGE STARTUPS

5 Steps to Turn a Dorm-Room Startup Into a Real-World Success

The former college founders of ModCloth and Insomnia Cookies offer firsthand advice for building a big business.
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For most, the first job out of college is a training ground, a steppingstone in a long career. But when your first job post-graduation is running the business you launched in college, there are a lot of added pressures.

Just ask Susan Gregg Koger. In 2002, she and her then boyfriend, Eric Koger (now her husband), started selling vintage clothing out of a college dorm room when she was a freshman at Carnegie Mellon University. To get ModCloth off the ground, the pair balanced a full course load with working part time on the business. As graduation loomed closer, they realized that if they wanted to scale the business, they would need to take some critical steps.

As is true for any young founder, making the leap from college to full-time entrepreneur isn't as simple as pulling an all-nighter. From fine-tuning your business model to thinking strategically about funding, expanding a business beyond campus takes much thought and careful deliberation.

To find out the best way to make the leap, we surveyed the young founders of ModCloth and Insomnia Cookies. Here are their five key lessons that can help any fledgling startup take off:

1. Make tough (but strategic) decisions.
The summer before her senior year, Koger realized that if she was going to run ModCloth after college, she needed to be able to scale it. "Once we sat down and started doing the numbers, it became clear that we couldn’t just keep launching one-of-a-kind vintage pieces," she said.

ModCloth's traffic numbers were growing, but Susan and Eric needed to make a critical shift if they wanted to expand the business significantly. They surveyed customers to gauge whether they'd be interested in buying vintage-inspired clothes and began reaching out to independent designers. "I was so passionate about what we were doing," says Koger. "But it was really important that it was actually going to be able to support me." Today, ModCloth has 504 employees, and though it wouldn't disclose financial data for last year, in 2012, revenue reached more than $100 million.

2. Prepare to learn on the job.
Seth Berkowitz started Insomnia Cookies during his junior year at the University of Pennsylvania in 2002. The sudden growth of the business took him by surprise. After the local newspaper ran a story about his cookie delivery business, he started getting up to 30 orders a night. He had been baking, taking orders, and delivering cookies all on his own up until that point and realized he needed help in order to expand the business.

The summer after graduating, Berkowitz opened three shops around the country. But it took some time for him to come up with the best business model. At first, he tried a delivery-only model. Then he tried selling from trucks. Then ultimately, he ended up opening brick-and-mortar shops. Today, Insomnia Cookies has 46 locations across the country, with an average of two new locations opening each month. The company has 25 corporate employees and more than 800 people working in its retail shops. But it didn't happen overnight. "It took me a few years to figure out the best way to scale it," says Berkowitz. "I had no idea what I was doing. It was on-the-job training for a few years."

3. Make your first hires count.
Building a strong team from the start is one of the most important ways to transition from a college startup to a successful, growing business, says Berkowitz. "You need to surround yourself with great people," he says. "It's critical to let go of the reins and let people come in and help you."

In Koger's case, one of her first hires was a graphic designer who could take over the responsibility of graphic design from her so she could focus on other aspects of the business. "Really look at your team and what skill sets you're missing," she says.

4. Don't rush to raise capital.
Until 2008, the Kogers had bootstrapped their business with the help of small investments from friends and family. They avoided raising capital as long as possible so they would have solid numbers to show investors when they did. "It helped to be able to go out and pitch the business not just as an idea but as a concrete business," says Koger. "We tried to get as much traction as we could before going out and raising institutional capital."

5. Brace yourself for the shock of graduating.
The ups and downs of running a business can be overwhelming, particularly when you're used to the structure of college--the constant evaluation, deadlines, and praise for work well done. "As an entrepreneur, you don’t have anyone telling you you're doing a good job," says Koger. "The successes of the business can feel really great, but the failures are also on your shoulders, and that can be really intense."

Allowing yourself to adjust takes some time. But it's a natural part of the process, notes Berkowitz. "As a college student, you are very idealistic," he says. "You don’t have any idea what it takes to run a business. You have to live it and learn what it means."

IMAGE: Courtesy Company
Last updated: Mar 17, 2014

JANE PORTER | Columnist

Jane Porter is a freelance writer and editor based in Brooklyn, New York. Her work has appeared in publications including Fast Company, Fortune, The Wall Street Journal, Businessweek, Entrepreneur, Men's Health, and The Chronicle of Higher Education. In 2013, she was named an emerging writing fellow by the Center for Fiction. She has a B.A. from Brown University and an M.F.A. from Warren Wilson College. You can find more of her work at Janeroseporter.com.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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