Categorized | Business

Young Business Entrepreneurs Are Rewriting Business Rules

Posted on 17 October 2009

A decade ago, when Robert Atkin assigned his freshmen business students a research project, they approached it with the casual indifference of any other college paper.

Today when his first-year students get the same assignment, some tackle the project by starting businesses — surprisingly sophisticated ones. One 20-year-old is pursuing an online die-making business. Another is cutting deals to sell advertising space in public restrooms.

“These are mostly freshmen!” exclaims Mr. Atkin, a longtime lecturer at the University of Pittsburgh’s Katz School of Business. “There is a tremendous belief that they can do this that I didn’t see 10 years ago.”

Such down-to-the-marrow confidence has always been a defining characteristic of the young. But at this historic moment, it seems, that aplomb is based on more than the arrogance of youth. Against the backdrop of a booming economy, capital aplenty and the wide open frontiers of technology, a new generation of entrepreneurs are utterly prepared to amass their fortunes under their own steam. Guided by their own rules, they are, along the way, changing the way America does business.

Some of the young entrepreneurs are fleeing corporate life; others have never so much as set foot in a Fortune 500 cubicle. But even amid the wild stock-market swings of late, nearly all recognize that they are in the perfect time and place in economic history to chart their own course.

“Our parents were upset if they didn’t work for the same company their whole lives,” says Dan Nevers, a 30-year-old from Winchester, Mass., who is attempting to launch an Internet start-up selling a line of toys. “Now it’s like, ‘Thank God I don’t have to work for the same corporation my whole life!’”

The New Carnegies

Certainly every era spawns its self-made business titans. Some historians see echoes today of the advent of the railroads and the “Go west, young man” era that gave rise to the Carnegies, Rockefellers and Morgans.

“There’s that same sense of boundless opportunity, that anyone can go out and make a fortune,” says Ria David, a Pittsburgh business historian.

Other periods have been marked by the influence of the young. The 1920s flappers threw off the restrictions of Victorian mores. The 1960s “youthquake” rocked politics and the arts.

But, many historians agree, the past decade or so presented a confluence of events perfectly calibrated for a vast number of young entrepreneurs to strike it very, very rich.

Indeed, something shocking happened when tech-savvy Generations X and Y launched their businesses into the waiting embrace of the 1990s economic boom.

“Technology, particularly the Internet, has changed everything,” says Andrew Zacharakis, professor of entrepreneurship at Babson College in Wellesley, Mass., known for its strong entrepreneur program.

Twentysomethings across America haven’t just been exposed to technology; they’ve wielded it and shaped it their whole lives — writing code for their computers, mastering games, conducting their social lives on the Internet.

Young entrepreneurs are making a profound stamp on the culture of business, even on buttoned-down Corporate America. They’ve lowered the dress code and raised the expectations for fun — and hours — on the job. They’ve increased the speed of business (it’s no coincidence that coffee is their beverage of choice) and embraced risk more tightly than ever as a signal that the potential payoff is great.

Happy Days

Dave Nelson keeps his young tech employees happy at CoManage Corp., a start-up in Wexford, Pa., by encouraging them to wander around barefoot, drinking the company-provided Starbucks coffee and Frappuccino. He also provides them with Nerf rocket launchers and the company’s beloved Mystery Castle pinball machine to give them breaks from their work on high-tech communications software. “I’m the old guy at 39,” Mr. Nelson says.

It was only a decade or so ago that freshly minted M.B.A.s would go striding off to Goldman Sachs, McKinsey or Procter & Gamble, suits pressed and obsessed with market share. Today’s college graduates are coming of age at a time when cynicism about corporate life couldn’t be higher. Dilbert reigns. Even a starched Old Economy behemoth such as Procter & Gamble has adopted casual dress, apparently in hopes that it will spark some youthful creativity.

These days it’s instinct and fooling around that spark new technological applications — not plodding market studies groping at the unknown. Look at 19-year-old Jacqueline Thorpy, from Scarsdale, N.Y., who helped her father write software code when he was starting his own software company. At 14, she started her own Web site where friends could register their brand preferences on teen clothes and other products. Soon, the site, Teenfx.com (www.teenfx.com), was the No. 1 site for teenagers using the Lycos and Alta Vista Web portals, polling visitors and posting their comments on everything from braces and bath products to movies and sexual preferences. With plans to earn a profit through banner advertising and e-commerce links to other sites, Ms. Thorpy says her Web site is on its second round of financing, and she’s interviewing potential chief executives.

“It was a hobby,” she shrugs. “It was fun with my friends.”

Business-school instructors certainly recognize the upheaval, and have adjusted accordingly. “Traditionally, we used to tell students that they should go out and build their experiences and learn on someone else’s dime” before starting their own businesses, says Dr. Zacharakis of Babson. No more. Now Babson, like many colleges, has an in-house incubator to help students get started in business before they even get their degrees. There’s no reason to delay a start-up because of a lack of experience, he says, and every reason to jump in fast before a competitor stakes out the turf.

Students Take Charge

At a recent informal gathering at Pittsburgh’s Carnegie Mellon University, nine students of its Graduate School of Industrial Administration met in a conference room and kicked around some thoughts about their businesses already under way.

Their confidence is the stuff of self-fulfilling prophecies.

The group displays a knack for coldly eyeing old-style industries and envisioning a transformation through technology. Michael O’Connor, 28, is starting an online portal for trucking companies.

“It’s not glamorous,” he says, but it beats his previous stint at a joint venture of General Electric Co. and Hitachi Ltd. designing industrial products. “I was off in my corner. It was boring.”

Yong Kim and Chang Oh are launching a business called airFreightCentral.com that auctions air-cargo space. Don Herzog is starting PowerNetworks.Net, an online marketplace for outsourcing power-engineering contracts.

Other students have decidedly less gritty nuts-and-bolts business ideas, but they bring the energy and, well, lack of dignity that has been the hallmark of many a young entrepreneur. Mr. Nevers is planning a blitzkrieg invasion of the New York toy show in June. He can’t afford the several-thousand-dollar cost of a booth, but will rent a hotel room, stuff fliers under doors, and parade outside the trade-show floor with his laptop to give presentations about his own line of character toys, akin to Beanie Babies, to anyone who will listen. Why not? “There’s no longer a black mark to try to start a business and fail,” he says.

To many, the challenge of the New Economy endows business with an irresistible calling, an air of romance and bravado. “You are making stuff happen, and it’s invigorating,” says James Walker, a 30-year-old who spent time at a telecommunications company in Sweden, and is now involved in two tech start-ups — one a dot-com and the other involving wireless communications — while finishing his degree at Carnegie Mellon.

At the time of the group meeting, one of Mr. Walker’s companies was just 10 days old, but already had secured a lawyer, “and three hours ago we cleared some short-term financing,” he tells the group, based on “a bunch of bullet points on a piece of paper.” He adds, “It has to happen quick” in the hypercompetitive wireless-Internet-technology world. “There’s a revolution every year and a half now,” Mr. Walker says.

Interestingly, though the gathering preceded the recent Nasdaq slide, most seemed to anticipate a shakeout of the sky-high valuations for start-ups gone public. “There are a lot of businesses that are overvalued now,” says Mr. O’Connor, who adds that even if a new business doesn’t achieve those excessive levels, “it can still be very profitable.” And the prospect of less than a stratospheric payoff doesn’t make the alternative — corporate life — any more appealing. “What’s going to be safe?” asks Elena Kholodenko, who is part of an Internet start-up that provides night-life guides. “There aren’t safe choices. You just have to do it now.”

Capital Games

Raising capital as a young entrepreneur was once an exercise in humble supplication before bankers. Now, a typical twentysomething with a technology-business plan can choose among competing equity partners swimming in capital. San Francisco-based VentureOne Corp., which tracks venture-capital investment, says companies raised some $36.5 billion in venture capital last year. And a Babson study found $55 billion in so-called angel capital, seed money from small, independent sources such as individuals. Today there are special venture-capital funds for women, for African-Americans, for Hispanics. Banks are starting equity funds.

We are already well past the point in the cycle at which young entrepreneurs cash out of their first start-ups and take on the role of venture capitalists themselves. Consider Tony Hsieh, 26, and Alfred Lin, 27, who sold LinkExchange, which let Web sites swap banner advertising under a barter system, to Microsoft Corp. for $265 million in 1998. Now they preside over that sum as venture capitalists in an operation called Venture Frogs, based in San Francisco.

Heroes of the young entrepreneurs today include Jeff Bezos, Michael Dell and Steve Case — high-tech builders who have amassed wealth and empires unimaginable only a decade or two ago, all while relatively young.

“Role models have been driving this explosion in young entrepreneurs,” says Dr. Zacharakis of Babson. When the 37-year-old professor was growing up, he read about sports heroes. That was before Bill Gates and Steve Jobs attained star status. The prestige and perks enjoyed by the new business idols don’t “make being the starting quarterback of the New England Patriots that appealing as a dream,” Dr. Zacharakis says. Nor is the public sector exactly inundated with heroic figures these days.

Increasingly, even those who want to change the world with youthful idealism see business as the best tool for such work.

Tracey Pettengill is a co-founder of a San Francisco-based “e-marketplace” called 4charity.com (www.4charity.com), where visitors can shop and contribute to charity, and where nonprofits can learn about putting the Internet’s power to work. Ms. Pettengill, who holds an M.B.A. from Stanford University, says she spent significant time at refugee camps in Somalia in 1992 and in Sudan in 1994. And she came away thinking about ways in which business skills could be applied to nonprofits, yielding huge payoffs for those in need.

“Think of a refugee camp,” she says. “The logistics of distributing food, water and medical supplies — it’s a business problem. “She wants her business to grow fast to help people like those refugees. She feels the time pressure another way, as well.

“I’ll be 29 soon, but you can still say I’m 28,” laughs Ms. Pettengill. “Twenty-nine is old to be an Internet CEO.”

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