Yesterday I interviewed an entrepreneur who graduated from Cornell with a Ph.D in Chemistry and went directly into a local startup.  When I asked him why he would choose this path (seemingly more risky than a corporate or academic track), he smiled and said “what better time would there be?”  I’ve heard that often—see our 800+ clips from entrepreneurs who started in college.

My conversation with the Ph.D graduate reminded me that even in demanding, rigorous academic settings such as Cornell, the entrepreneurial spirit is undaunted, finding its way to the surface.  Sometimes this results in a new startup company, other times expressing itself as an entrepreneurial adventure on campus.  Two examples come to mind.

1. Entrepreneurial Campus Adventure.  Mac Bishop, an advisee of mine, started a very innovative student group with some others called fEEDBAK, with a stated goal “to provide apparel companies with targeted market research, strategic counsel, and creative design suggestions, while providing students with tangible industry experience and insight into the apparel production process. “ This is no trivial undertaking.  Read about their work with Pendleton Wool here.

The students in fEEDBAK went  through a complete simulation of running a small apparel brand – designing, producing, marketing, and selling a complete line.  That means working together as an effective team, being creative, and meeting all kinds of deadlines and milestones—all great experiences for budding entrepreneurs.

2. Actual Companies run by students.  In 2008, Student Agencies and E@C collaborated to create eLab, Cornell’s Cornell’s “newest opportunity for “High Potential Entrepreneurs”…. a non-profit (501c3) entity whose mission is to provide business acceleration services to Cornell Undergraduate Entrepreneurs.  This is an exciting new accelerator for student entrepreneurs, and has aided various business concepts including, but not limited to:

• Ancillare (tactical outsourcing  company)
• Anjolie Ayurveda (I can personally vouch for their wonderful all natural, handmade Ayurvedic soaps from India)
• Better Battery – (cheaper, longer lasting, more environmentally friendly laptop batteries.)

Should students consider entrepreurial activities in college?

As a college professor myself, I do warn students about mixing business with academics.  On the academic side, classes, homework, exams, projects and presentations have due dates that are not typically fungible.  On the business side, customers, suppliers, investors care only about executing the business processes in a timely way.  Thus, an inherent conflict is always there for student entrepreneurs.

Still, I can’t help wondering why we in academia cannot do a better job of taking advantage of the “learning moments” that are an outcome of the ups and downs these entrepreneurial students are having with their businesses.  It would be great to find a way to apply the tools of teaching to help surface the “lessons” students are learning and share them in a collaborative environment.  At the same time, the classroom environment/discipline could help the students reflect, analyze and generalize the lessons to broader principles.  And students could benefit from applying the frameworks and tools that come from a business education, while earning credit for work that helps to accelerate their businesses.

Hmm…how about a course called Experiential Entrepreneurship?  Might just have to ponder that.

Kirsten Barker, President of Prendismo,  recently gave a new twist to an old saying: explicit knowledge is knowing that a tomato is a fruit (scientifically speaking).  Tacit knowledge is knowing not to use that tomato in a fruit salad.

The tacit knowledge, the sort of insider wisdom gained from experience is often the most difficult to capture, but the most important thing to have.

In my conversations with entrepreneurs, I see this all the time.   Here are some examples:

Whenever an entrepreneur accepts capital in exchange for ownership in the company (e.g., through friends & family, angel or VC investing) the company must be valued to determine each player’s share of the business.

Explicit knowledge (and very useful) knowledge on valuation models can be found in an article by William H. Payne, Senior Program Consultant, Kauffman Foundation.  Payne goes through terms like “pre- and post-money valuation” and provides formulas that are used to determine vaue.

Tacit knowledge (also very useful!) is what it feels like to go through the process of valuation and how much of it is negotiation.    You can find tacit wisdom in this clip featuring Lance Stewart, co-founder of Emerald Biostructures, talking about the valuation process during the growth of his company.  He discusses the details that have to be worked out and also describes the feeling of going through what he calls “some nasty discussions about what you are worth.”

My favorite line?  In talking about the differing perceptions of what might be fair as viewed from each side, Scott says:  “….at the end of the day it comes down to whether you want to do this with these people or not.”

I just returned from a visit to Europe, where I taught a short course at the MCI Management Center in Innsbruck, Austria (the photo shows the view I saw on my daily walk).   The class, on Entrepreneurial Leadership, was delivered to a room full of undergraduates from all over the world.

After our many conversations about the cultural differences in entrepreneurship in the various nations represented (Germany, Austria, Mexico, France, Russia, Canada, Bulgaria, Sweden, Japan, to name a few), I came away for a new appreciation for how my own country views failure.

I played an eClips mini-video on failure one day and a heated discussion ensued about the consequences of failing in their various home countries.  The segment featuring Tom Szaky saying “I have had six businesses before this one, and all of them failed” evoked a question from one of the students:  “How could he face his family and friends?”

In many of the home countries of these students, failure results in financial ruin and public and private disgrace.  An interesting discussion by a European Commission explains some of these issues, including the need for change in both mindset and the law in order to encourage more business startups.  For a more in-depth analysis, see this detailed set of slides from a presentation made at Stanford by Ignacio de la Vega.

I was left with the question:  Are Americans really more resilient to failure and if so, why?   We do seem to have less punitive bankruptcy laws.  And the myth of the self-made man (or woman) persists.  The media presents many us with various “comeback stories” — public failures followed by redemption and return to the public life (see, for example, Bill Clinton or Tiger Woods).  However, I fear that such recoveries seem to depend on the relative wealth of the individuals and their ability to reconstruct a new persona.  What happens to the “regular guy” when his/her business fails?

The current crises, including the economic downturn, the floods, the ash cloud and the oil spill) will be a severe test of our resilience.  I worry about the many small businesses who will fail as a result of one or all of these events.  No bailout for them.  Just the sturdy American will to pick oneself up and start again.

The past few weeks, I addressed several dimensions of why it is particularly hard to lead in an entrepreneurial setting (as compared to a large corporate environment).  In this entry, I want to address the fact that as a new venture grows, each stage requires a different leadership style and talent.

Leadership has to flex to the stage of the startup

I recently read a great blog entry on this topic on Siftstar.com.  The blogger laid out the stages of growth of a startup venture based on a dinner conversation with a CEO.

The full list  he provides is quite good (resonates with my experience interviewing hundreds of entrepreneurs) and bears some discussion, but here are some interesting aspects of the evolution.

Are there individuals who can cross over from one stage to the next?  Not many.

Stage 1.   The personality type that fits the first stage is someone who enjoys the challenge of starting something new, is good at problem-solving in the absence of adequate resources resources, can sell something that is only in the concept stage as if it were created, and knows how to put on a happy smile even when the last angel investor just called to pull out of the round.  When the company is successful and things become more routine, they get bored.  Furthermore, they don’t have a lot patience with formalization of business processes.

Stage 2. In stage 2, you want a leader who is more detail-oriented, is able to shepherd the financial well-being of the firm and can execute on deadlines and really enjoys management work.  This type of person feels like puking if they have to promise things to customers that are only on the drawing table.  And they know that to deliver appropriately, that the resources in the company have to be adequate, so they are extremely uncomfortable with a tight cash flow.  However, the Stage 2 leader has the talent needed to build out and manage a larger team.

Stretch or switch? The dilemma comes when a Stage 1 leader can’t see that Stage 2 has started and/or cannot stretch into the next stage.   This has widespread implications for the company. The business can stagnate in the absence of needed business processes.  Worse, it can lead to a power struggle within the leadership team.  Employees and management team members suffer when the transition is bumpy. If the leader doesn’t stretch to the challenge, the investors often replace him.  Change in leadership can be greeted with relief or with skepticism depending on how it is done.

Summing up this 3-part series.

Taking the three aspects of new companies together:

It is easy to see that leading a new venture is not for sissies.