If you're a small-business owner with most of your growth ahead of you, one place you may want to go to finance your expansion is back to school. At least that's the advice of Mark Rice, professor of entrepreneurship at the Rensselaer Polytechnic Institute's (RPI) Lally School of Management and Technology in Troy, New York.
Rice, whose staid title belies his contribution to making Rensselaer one of the powerhouse entrepreneurship schools in the country, has seen the same scenario happen over and over again. Young growth companies tap into the activity surrounding a university and find themselves awash in the kinds of resources--capital included--that help turn great ideas into great companies.
"Creating an environment where companies can thrive requires an important underlying fabric," Rice says. This fabric consists of an active angel network, a source of technology or new business ideas, a large number of entrepreneurs, a base of professionals--such as lawyers, bankers, accountants and marketing consultants--that understand entrepreneurial companies and are prepared to assist them, and, finally, a state or local government that maintains a pro-business stance.
Rice says universities are uniquely qualified to promote and integrate these diverse elements, and as a result, they're havens for entrepreneurs seeking capital as well as the technical resources that are often part of a great success story.
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Off To College
To see just how fertile a university environment can be for raising capital and promoting success, consider the story of Michael Marvin, once an employee at RPI who ran the school's manufacturing center and now an entrepreneur with several successful ventures under his belt.
His tale dates back to December 1985, when four RPI students who were completing an entrepreneurship class wrote the course's required business plan. The quartet, who envisioned a company that would create and distribute in-car navigation systems, approached Marvin. Would he help them put the plan into action?
Marvin, who gravitated to the university because of its stable of new business opportunities, anted up $12,000. The funds were critical--they put the first breath into the company that was to become MapInfo Corp., a mapping software company in Troy.
Marvin, who joined MapInfo's board, says that the RPI "friends and family"--trustees, board members and affiliated angels--immediately invested another $70,000. Six months later, in June of 1987, investors within the university community kicked in another $500,000, and one year later, yet another $500,000. All told, as part of RPI's affiliate program that allows off-campus companies to participate in various university-sponsored programs, MapInfo raised nearly $1.1 million in its own backyard.
But Marvin, who joined the company full time in 1987, says the university's help didn't stop there. When MapInfo went outside RPI to raise institutional venture capital, the movers and shakers of the university who sat on the company's board added a lot of weight. "They met with the investors and gave the company a lot more credibility," says Marvin.
As a result, the company raised another $1 million in institutional venture capital. Four years later, the company went public, raising $26 million from a syndicate of underwriters led by the technology investment banking firms BancBoston Robertson Stephens and BT Alex. Brown Inc., with First Albany Corp. also present to provide regional support. Today, MapInfo boasts annual sales of more than $60 million.
While MapInfo was reaching critical mass, Marvin and RPI were also nurturing Interactive Learning International Corp. (ILINC), which was founded by RPI professor Jack Wilson and graduate students interested in advancing distance learning (learning via the Internet, videotapes, TV and other technologies). Research and development for ILINC, which is also in Troy, began in 1992. Marvin, who now had a seed fund called Exponential Business Development Co. LP, with many in the RPI community as limited partners, kicked in seed financing in 1995 and joined the company's board.
Executives from a technology company touring RPI in 1996 learned about ILINC and eventually became clients. This was followed by several rounds of institutional venture capital funding and an investment from Intel. In February, Marvin took the helm of ILINC to help manage the company's rapid expansion.
Looking back, Marvin says it's been a wild ride, but one made possible by the entrepreneurial momentum established by the RPI community. More important, he says, "It's a path other entrepreneurs can take to help themselves realize their vision."
If you need help and feel that a university environment might be right for you, your first task is to find the institution that best fits your needs. Experts like Rice and Marvin suggest that not every educational institution is capable of delivering the assistance you need. In particular, they say you should focus your energy on working with a university that has an entrepreneurship program. The different mindsets at schools teaching entrepreneurship are subtle but important. At most universities, for instance, professors prepare students to join a company as an employee after graduation. At schools with entrepreneurship programs, you'll find professors and students preparing to build businesses.
Even schools with fledgling entrepreneurship programs are worth checking out. For instance, Bob Tosterud, chair of the Council of Entrepreneurship Chairs, a group of business schools with endowed entrepreneurship chairs, says entrepreneurship is a hot topic in universities these days. "People who are hired by schools to cultivate entrepreneurship chairs are often highly qualified and have lots of contacts in business and academia," says Tosterud. "I recommend calling any university nearby, and if they have even a rudimentary entrepreneurship program, schedule an appointment to talk to the person running it."
Marvin also advises that if you want to approach a university for funding, keep in mind that they offer many ports of entry. "Go in as many doors as possible," he says, "but don't stay anywhere too long if it doesn't look productive."
For instance, a school like RPI that has a hyperactive entrepreneurship program might have affiliate programs in which companies off campus can get involved; they may also have SBA-sponsored Small Business Development Centers, alumni outreach programs, campus networking events, business incubators, manufacturing assistance centers or entrepreneurial resource centers that can be beneficial. In addition, try approaching professors, deans, executive directors and even students. With ILINC and MapInfo, for instance, Marvin says the companies got their strongest support and best contacts from alumni.
When going the university route, keep the many people you meet along the way apprised of your progress. Remember, schools are political. They need to be able to share credit for your success, which strengthens the entrepreneurial fabric for those who will follow you.
You can find a list of top entrepreneurship programs and gain some framework for evaluating them by reading "Measuring Progress in Entrepreneurship Education" in the Journal of Business Venturing, published by Elsevier Science. Call (800) 282-2720 for a reprint of this article, which appeared in Issue 12 of the publication, pages 403-421. The cost is approximately $45.
Council of Entrepreneurship Chairs, University of South Dakota School of Business, 414 E. Clark St., Vermillion, SD 57069
MapInfo Corp., (518) 285-6000, http://www.mapinfo.com
Rensselaer Polytechnic Institute, (518) 276-6554, firstname.lastname@example.org