On The Money

You want to start a business in college, but you're still buying the 10-for-$1 packages of Ramen noodles because you can't afford macaroni and cheese. You just maxed out your student Visa buying books for second semester, and your car needs a winter tune-up. How the hell are you going to finance your business? Let's not get ahead of ourselves . . . we should begin with the hardest question: Where do you start? We've put together a list of basic steps:

1. "First, there's the written business plan," says Roy Thomasson, CEO of Young America's Business Trust in Washington, DC, a promoter of entrepreneurial development programs for young people in Latin America, the Caribbean, the United States and other locales. "You have to have something concrete to sell or show."

If you need help putting together your plan, you can try business development organizations like SCORE (Service Corps of Retired Executives), your local Small Business Development Center or your local SBA office. Don't forget about entrepreneurs at a local business incubator or business professors at your university. "Get a mentor," advises Alexei Wagner, 18, founder of Tutor TEAM, a Wellesley, Massachusetts, firm that pairs high school tutors with middle school students. "Even if you've never taken a professor's class, write him a letter."

2. Once you have a plan, start making contacts. "You have to get on the pavement, talk to lots of experts in the industry and get feedback," says Stephen Spinelli, director of the Arthur M. Blank Center for Entrepreneurship at Babson College, also in Wellesley. "Develop that network in the planning process. You will build some relationships and get access to people who know what investors are looking for."

3. Now it's time to start asking for money. Who should you hit up for the cold, hard cash? "Go to people you know," advises Thomasson. "They have more confidence in your ideas and know your commitment to them."

In addition to any contacts you've made, you'll also want to approach family and friends . . . and friends of family. "I have a family friend who is an entrepreneur," says Wagner, who couldn't even wait to get out of high school before starting his business-he launched Tutor TEAM while at Wellesley High. "I went to him with my business plan, and he ended up writing me a check for $200 and told me to pay it off within two months."

Can it really be that easy? "Borrowing money is really about having credibility," explains Thomasson. "Certain people can borrow any amount of money they want because they're credible."

Any amount? Even the sums usually provided by venture capitalists? Yes, but for most young entrepreneurs, asking a major investor for a lot of money is intimidating-and unnecessary. "I don't think most college students need to start at that level," says Thomasson. "You have to learn along the way to protect yourself from the predators."

4. Still, venture capital isn't entirely out of the question. If your plan requires lots of funding, it might also require larger financiers-and, subsequently, even more preparation. A good idea might get you through the door, but good prepa-ration will get you the money. Take Andy Lam, who scored almost $1 million from both a venture capitalist and an angel investor for his Austin, Texas, start-up, OneCard Technologies, an ASP for loyalty programs. "The key for me was having market statistics from Wall Street firms," says Lam, 22, who started his business while a student at Stanford University. "But a less tangible thing the venture capitalist and angel investor told me later was that they liked my passion for the idea."

But that passion can also work against you. "The perceptions go both ways," says Thomasson. "Having a lot of enthusiasm can also mean moving too fast and not thinking it through."

And with the recent slew of dotcom failures, many investors don't trust anyone under 30. "Because of the downturn and some pretty spectacular failures, you have to really know what you're doing," says Spinelli. "Students who understand that will put together a good business plan, do their homework, build their networks and then get the money."

And leave yourself plenty of time to do it. "You have to know it's going to take a lot more work than you imagine," says Lam. "But my advice is go for it. Take a swing for the fences."

Contact Sources

• OneCard Technologies, (512) 587-5648, www.onecard.com
• Tutor TEAM, (781) 772-1004, www.tutorteam.com
• Young America's Business Trust, ybiz@oas.org, www.ybiz.net
• Arthur M. Black Center for Entrepreneurship, Babson College, (781) 239-4000, www.babson.edu