For undergraduate students with a yen for starting their own business, a Yale Entrepreneurial Institute summer fellowship can be a true career igniter. Fellows selected from the Ivy League university's student body receive a stipend, mentorship, legal and accounting advice, and access to Yale's alumni network of successful entrepreneurs and investors.
Established in 2007, the YEI, as it's known on the New Haven, Conn., campus, has helped launch close to 100 companies, 52 of which are currently active. Among the successful startups to its credit: an online wedding resource for brides-to-be, a forest inventory management software business, and an early-stage medical diagnostics company. Many YEI fellows launch their businesses while simultaneously pursuing full-time studies.
Yahoo! Small Business Advisor spoke recently with YEI Director James Boyle and Program Manager Alena Gribskov, who both had real-world entrepreneurship experience before joining YEI's leadership, about what makes young entrepreneurs successful.
Yahoo! Small Business Advisor: What important lessons have you learned about young entrepreneurs?
Boyle & Gribskov: One of the key things we've seen is that entrepreneurship isn't for everyone. At YEI we deal a lot with founders. We started seeing students interested in entrepreneurship but maybe not as interested in a founding role or without an appetite for that kind of risk. We've been figuring out new ways to plug them into existing ventures or into internships in the real world. We can socialize them with the process of entrepreneurship and help them understand that some people don't want to be founders.
What kind of people do want to be founders? Is it about being comfortable with risking money?
We don't think it's about money. People who are successful here see an inefficiency in the marketplace and feel very strongly that they have a unique handle on solving it. They're the ones who have the most zeal and the most get-up-and-go to solve the problem.
The one common trait we see among people who are successful as entrepreneurs is that they're comfortable in an environment where there are no guideposts or rules. That's really important. For students who are looking for a guided experience, entrepreneurship seems especially scary. No one is telling you what to do next. You're constantly evaluating what assets and resources and risk you have in front of you and deciding who to talk to and what work process to create to knock down the next impediment between you and a successful launch of your company.
We've also seen that students who excel at entrepreneurship have a kind of stubbornness and dogged persistence so that they will face it down till they get to the end.
Are those things innate or can you teach students those behaviors?
It's fair to say anecdotally that a number of students who have come through YEI come from households where there's some embodiment of entrepreneurship. It might be that they're comfortable with it because they've already experienced it as children through their parents.
But it's also somewhat of a feedback loop. If you have a vision that you really believe in, you find the way within yourself to develop the other aspects. If the question is, 'Can you learn to be an entrepreneur?' Yes, you can. But another question is, 'Do you want to?'
What else are you looking for in prospective YEI fellows?
We're looking not only at whether they have a good idea, but at the personality traits of the student or the student team to see how coachable they are. If they're given a set of constructive criticism, what do they do with that between the first and second meeting? Faced with a daunting challenge or an idea that doesn't work, can they pivot into something that might be more businessworthy?
Can you tell us about a student entrepreneur who joined the YEI program, exhibited some of those winning characteristics, and has had success?
Michael Inwald, the founder of Cheeseboy, was in the YEI program in 2009. It's pretty fair to say that, especially as a sole entrepreneur, he had a real dogged determinism to open up a grilled cheese fast-food restaurant. Michael had a clear sense of what he wanted to create. The kneejerk reaction of many of us was, "How can you possibly turn grilled cheese all by itself into a business? You don't have any proprietary advantage. You can't get a patent on grilled cheese. What are you going to do?" But Michael persisted in talking to us about an un-served market and he had a clear idea of what his costs were and that he could make money at a price point that would be really attractive to a large demographic.
He didn't have any real estate background or fast food background or background in opening stores in malls, but he persisted because he thought he had a winning business proposition.
He put several tens of thousands of his own dollars into building a prototype, buying presses, going to state fairs, and video recording people eating his product and reacting with profuse joy. He showed these videos to one man who wrote a sizeable check to get Michael off the ground.
That was the basis for Cheeseboy's first store opening in 2010 in a mall near New Haven. Michael was still a student in the Yale School of Management when it opened. That store did very well, so with further investment he opened 3 stores in Boston. Those did well enough that he has gone on to open stores 5, 6, and 7 in Rhode Island, New York, and Massachusetts. He has over 100 employees now at Cheeseboy.
He certainly demonstrated those traits of doggedness and persistence!
Yes, he just kept at it. The guy literally did it all himself. And his early success is interesting, but what's really staggering is the wisdom that students like him show in making decisions after they come out of the gate about how to grow the business and take the least risk possible. Michael's been very diligent about site selection and controlling costs and hiring people. He hired a COO for the company. He understands he needs people with more experience than himself.
We've written a lot in this blog about the difficulty small business people have in getting capital, particularly bank loans, today. Is it a tougher fundraising environment now than when you started YEI five years ago?
When we first started YEI it was 2007, the economy was starting to slide downhill, and we didn't have the confidence of investors. In the last 6 years investor interest in what we're doing has become greater. That being said, it's never easy when you're a nascent venture to figure out where to find those pre-seed dollars.
At Yale we try to be as generous as we can with grant support for students we bring through the accelerator every summer. But then we have to scramble pretty hard to find that next round of cash, early investment, angels and the like, to come in right after us and take students through that next winter. That's always a challenge. We work hard to find either alumni, whom we refer to as brave angels, or angels at large. We also have a strong partnership with the state program Connecticut Innovations, which has taken a stance in helping to get early ventures off the ground.
Other keys to success for young entrepreneurs?
One thing we always encourage students to do is to make sure they're solving a real pain. If they are able to find a paying customer right off the bat—someone who is not related to them and is willing to put their own money down—then there's an indication that they might have hit on something that could be a sustainable business.
Is it difficult for Yale students to identify whether something qualifies or not as addressing a pain?
No one is able to really understand pains in the market or world unless they have some exposure to them. Most students in any college lack enough exposure to outside businesses and processes and products to know where there's pain. So a lot of the problems we hear about from college students are born of their own experiences. They come in with ideas for service innovation around food, clothing, entertainment, social media, things that are particular to their experience.
That's not entirely true of graduate and professional school students who have been out in the world working for a while. They do have some exposure to domains and industries. There's another YEI program, the Emerging Entrepreneurs Program, where we'll take professional school students and help them co-found companies based on university-licensed technology—faculty inventions out of the research lab. They understand enough about those spaces to serve as very early CEOs for companies where we try to help them raise larger rounds of capital, including institutional rounds.
Are you more interested in certain kinds of businesses than others?
Ultimately what we care about at YEI are scalable ventures—technologies and products and processes that can go far and wide. A great many businesses are successful sole proprietorships that contribute to the economy. Yale doesn't see its primary role as creating sole proprietorships. We're asking, can we energize faculty and students to think about creating ventures that can be the likes of the next HigherOne—a publicly traded company started by Yale undergrads 12 years ago? Can you become a public company with hundreds of employees and hundreds of millions of dollars of market cap and impress on people that people come out of Yale with those ideas in the first place?
Even though there have been a great number of people who have come out of Yale and done great things, the university historically has not been seen as a bastion of entrepreneurship. Our hope is to change that perception.
Note: this article has been corrected from an earlier version that reported Michael Inwald hired a CEO for Cheeseboy. He hired a COO.