Family Dinner: Samir Mayekar

The Garage is back in full swing for the Winter 2017 quarter, bustling with Northwestern student entrepreneurs, flying drones, new prototypes, and exciting builds. To get the quarter going for returning Garage Residents, and to usher in more than 20 new Resident Teams, students were welcomed back with the first weekly Family Dinner and special guest speaker, Samir Mayekar.

Samir is a Northwestern Kellogg School of Management alum (2013) and a true Wildcat. As a student at Northwestern, Samir won the Rice Business Plan competition and raised over $1M. Prior to founding Sinode Systems, where he is the current CEO, he served in the Obama Administration at the Overseas Private Investment Corporation and the White House. Samir is also the President of the Northwestern Alumni Association and met his wife at Northwestern.

Samir shared candid stories of his time as a student founder alongside five important lessons he learned along the way.

  1. Never give up. He learned this after winning the Rice Business Plan Competition. Entrepreneurship is relentless, and takes grit and giving up is not an option. He encouraged student founders to take advantage of pitch competitions and to travel all over and always give them a shot, no matter how small or big the prize.
  2. Pivot if you need to. Samir learned that providing what a customer wants is crucial, and if it means being flexible, so be it.
  3. Widen your market. Samir attributed some of his success to penetrating international markets through local contacts, and encouraged students to avoid being US-centric.
  4. Use the alumni database. As a student at Northwestern, students have leverage and a network at their disposal.
  5. Know your competitive landscape and own it. Samir described calling his competitors himself to find out what they did right, what they did wrong, and gain any insight into the market from anyone who would talk to him.

Samir engaged with the Residents by not only sharing his successes, but also his struggles, and recommended students check out The Struggle According to Ben Horowitz. Check out part of Samir’s talk below. 

“The Struggle is where we turn adversity into opportunity.”

The Next Big Thing: Northwestern Alum Makes Forbes 30 Under 30

Over the past six years, the Forbes 30 Under 30 list has highlighted the next generation of thinkers, doers, and innovators that are challenging and rewriting the rules for the future. Just 4% of the more than 15,000 online submissions made the cut, making this year’s list harder to get on to than ever before. The coveted list includes 30 honorees vetted by judges in 20 categories including media, business, technology, finance, culture and more.

This year, 36% of those who made the cut are immigrants, representing 44 different countries, including Northwestern alum and South African native, Adam B. Struck. Adam was awarded one of just 30 spots in the Venture Capital category. Adam received his undergraduate degree from Northwestern before heading to Georgetown University Law Center for his J.D.

After making the exclusive list, Adam reflected on his time at Northwestern fondly, saying it allowed him to try new things and experiences for the first time without the fear of failure–something that goes hand in hand with innovation. “I was truly free to explore and embrace a plethora of subjects – from philosophy to economics to politics to technology,” Struck said. “Four years of exploration [at Northwestern] allowed me to figure out not only what I wanted to do–but most importantly, what I did not want to do.”  Struck also met his wife, Angela, at Northwestern.

Adam’s entrepreneurial path began with starting and selling an iced tea business, Long Island Beverages (sold to Cullen Investments), before joining the investing game. Today, Struck runs his own $25 million dollar fund, Struck Capital, and has been on the forefront in investing in companies like Nutanix, Postmates, and The Honest Company.

As an immigrant, the road hasn’t been easy. Struck shared that he has had to fight for every accomplishment and opportunity in his life, but his entrepreneurial background and experience as a founder helped him to learn to take risks and diversify his perspective, making him a unique investor today. Adam shared his diverse background and education sets him up as a unique investor, able to recognize the many challenges founders face. Entrepreneurialism takes grit, he said, and the ability to get back up after failures and losses has helped to shape his his career today and his style of investment and mentorship today.

When asked to share some words of advice to Northwestern students or alumni embarking on their own startup venture, Adam shared that as long as a founder has true passion for what they’re doing, the key is to stay the course and keep pushing relentlessly through adversities. “Learn from the losses, and revel in the wins.”

For the complete list, feature stories and exclusive videos, visit: www.forbes.com/30under30.

Changing the Narrative: Tiltas

Tiltas has a stance. Tiltas has a mission. Tiltas is ready to change the narrative.

 The mission is simple – a platform to connect previously incarcerated individuals with employment opportunities in skilled labor. Formerly known as OrangePrint, and co-founded by Tiffany Smith (Kellogg), Tiltas sets out to make the world a place with something to offer those formerly incarcerated, which isn’t a small feat. Just how big is this problem in America today?

According to CNN, former inmates face “enormous challenges finding work after they’ve been released.” Many have been out of the workforce for years, and their criminal records often prevent them from even getting their foot in the door. A recent survey conducted by the Ella Baker Center for Human Rights discovered 76% of former inmates voiced finding work after being released was nearly impossible. Two thirds of the respondents to the survey were either unemployed or underemployed five years after being released. “Ban the box” campaigns in various states are calling for employment applications to do away with the question regarding previous criminal history, forcing employers to first determine if a potential employee meets the requirements for the job. However, with employment playing a major role in an individual’s reintegration into society, and the still huge barriers having a record causes, Tiffany Smith was determined to find a better way.

Tiffany has a personal connection to Tiltas’ mission and values. She has friends who were previously incarcerated and were unable to find employment, but also knowing some previously incarcerated individuals who had found work (in construction, specifically), she recognized a need and a possibility for a solution.  

Tiffany and her team have been working to connect construction companies with recently released or previously incarcerated individuals using a web-based platform to streamline the job-finding as well as the recruitment process. Previously called OrangePrint, the company shifted to the name Tiltas, the Lithuanian word for “bridge.” The name is tied more closely with the purpose of the company. Tiffany’s team is working hard to expand their network, and plan to continue exploring their options with hopes to grow their company and fully launch their web-based system.

Tiltas has also caught the attention of the tech world in recent months. The team just won $50,000 in the 2016 Kapor Capital PeopleOPS Tech competition. The Garage is looking forward to tracking the sure to come future successes of Tiltas.

If you’re interested in helping change the narrative in the world of employment, or you are an employee willing to hire the formerly incarcerated or you are someone who was formerly incarcerated and ready to take the right first step, join Tiltas here.

Startup Spotlight: Prioritizing Learning Accelerates eRetirements

Entrepreneurs often begin their adventure after recognizing a problem exists–and one that is not being sufficiently addressed by the market or should be explored further.

As Jared Scharen, Founder & CEO of eRetirements describes,I was volunteering in rural Peru around March of 2015 when my parents started calling me to complain about everything wrong with their “dream” retirement location.  While sharing this story with several friends, they all asked me what resources my parents used to pick their retirement location.  I laughed. They didn’t use any, but they certainly should have.”

That kicked off several discussions with other seniors at different stages of their retirement journey, and not one of them could identify a helpful resource to aid the process.

It is projected that four million people retire each year, and that trend should continue for the next 20 years.  More than 40% or 1.6 million of those retirees will relocate and represent nearly $30 trillion in wealth.

By the time I met with the team, they had developed a website with some content, a commendably healthy email list, and some thoughts on the problems baby boomers are having.  My job was to act as a growth mentor for Wildfire, the 10 week pre-accelerator program at Northwestern designed to help the team prioritize fast learning in order to achieve even faster growth. I took some time to sit down with the Jared, Founder of  eRetirements, to learn about how he discovered and identified a problem in a specific community, the processes they implemented to solve it, and how shifting their focus to prioritized learning improved results.

The following interview has been edited for length and clarity.

What problem are you solving?

“We feel that eRetirements is solving the problem “Where should I retire?” Sure, some of the senior population know where they want to retire based on where they’ve vacationed before, but for a lot of folks it is a blank canvas and they have no idea where to begin.”  

“Trying to narrow down a list of options, given all the different preferences people have, is very daunting–especially since this is such a major life event. People are essentially transitioning their entire lives, and have saved money over decades or more for this decision.”

How invested are you in the problem?

“I was stuck in Dulles airport for 36 hours when I finally realized how serious this problem was for people. I received a call from an unknown number–it was a woman who had been referred to me from a friend of hers who loved the eRetirements website. She said that while she enjoyed our site, she felt that she had very specific criteria that our algorithm wasn’t capturing. So, I dropped everything I was doing, started researching places that might meet her needs and talking with realtors in our network to narrow down the list. After those efforts, I followed up with her and provided two locations that fit her criteria. She looked into these locations, and agreed they were both a great fit. She is visiting both areas soon to decide which area she will purchase a home in.”

“She was so grateful that she and her husband were finally able to tackle this huge decision. There have been a handful of situations like this one that have made me realize how big of an issue we are solving (and that we need to change our algorithm/user experience to make it more customized-in process as I write this).”

How has prioritizing learning worked in practice?

“When we started Wildfire, Northwestern’s full-time pre-accelerator program, in the summer of 2016, our revenue model was very unclear. We had a range of ideas about the business model and the market, but had no idea who to talk to and how to test them.”

“We quickly learned to embrace an approach of rapidly testing our hypothesis; both those that we had as well as those introduced by others.  Any changes and developments we made on the website were viewed through a lens of what we can learn. We started by creating A/B tests with a specific metric in mind to help us determine what our users want, and then analyzed the results to discover our tests revealed.”   

“One example of this was a dummy feature we created in which users would pay to talk with local experts on the phone and ask specific questions about a location they wished to learn more about. We then measured how many people requested this service, and contacted those who did to see what features they actually wanted.”

“No one requested this service. We started to reach out to our most loyal users to ask them what they thought about the service, and found two conclusions. First, the service offering itself was not clear, and second, people simply need time. People were very interested in the service and thought it was a great idea, but most stated they would be more interested in approximately six months when they were preparing to visit some of the locations they were most interested in moving to.”

What results did a focus on learning help you achieve?

“Most importantly, the team now has a clearer understanding going forward how we will generate revenue, which is a combination of realtor referrals and retirement community advertisements. From the start of the program to the end, eRetirements saw three times growth in returning users and user engagement on the website is up 40%.”

“Wildfire and a new focused on prioritized learning offered Jared and the team behind eRetirements the tools and skills to identify processes, shift focus when needed, and winnow ideas down to offer a streamlined, user-friendly service with a plan. But like many entrepreneurial ventures, progress is just the beginning and the team is pressing forward to gain even more insight.”


Help eRetirements learn faster by asking loved ones to submit a unique and compelling retirement location to help optimize their service here.

Curious what your dream retirement destination might be? Take the eRetirements free personal assessment here.

 

Mitchell Posada heads up product at TangoCode.com building the future of Marketing Automation. Mitch has spent most of his career launching digital products and helping businesses leverage technology and process innovation to transform brands and increase ROI. Mitch is known for his Product and Growth strategy and execution consulting to dozens of start-ups covering mobile, IoT, digital marketplaces, and SaaS. 

Chicago Inno 50 on Fire: Congratulations Melissa Kaufman!

Chicago is buzzing with innovation, talent, and inspiration across every industry from education to marketing. Chicago Inno selects 50 of these people and organizations each year, celebrating the best of the best in our communities. According to Chicago Inno, 50 on Fire is about honoring the people and organizations that are heating up the Chicago innovation economy, including professors, non-profit organizations, executives, entrepreneurs, co-working spaces and more.

The Garage’s resident visionary and Executive Director, Melissa Kaufman, was named one of Chicago Inno’s 2016 50 on Fire in the Education category this year, and The Garage couldn’t be more excited! As The Garage’s strategic leader, Melissa has curated a modern co-working space to act as the hub for entrepreneurship and innovation at Northwestern. The Garage opened its doors in June of 2015, and has since grown to be home to 60 resident teams per academic quarter and more than 100 student-founded startups. She also personally mentors students pursuing their own ventures at The Garage, referencing her wealth of experience in the tech and startup world. Melissa said that being “in the company of so many innovators in Chicago is very exciting,” and she is thrilled to be an integral player in the Chicago entrepreneurial scene.

Innovation is in Northwestern’s DNA. Melissa is among ten other affiliated with Northwestern as alumni, students, or faculty. Join The Garage as we congratulate:

B2B Category:

NuCurrent

PageVault

B2C Category:

Badal Shah: TurboAppeal

Education:

David Schonthal: Northwestern University’s Kellogg School of Management

The Graide Network 

Lorena Mesa: Sprout Social 

Lifestyle:

Crafty

Marketing, Advertising, Design, and Development: 

Signal

Supporters: 

Michael Sachaj: Hyde Park Angels 

 

 

 

 

Top 3 Reasons All Northwestern Students Should Experience The Garage

As you may know, The Garage is the new entrepreneurial hub for all Northwestern students on campus.  But you ask yourself, I am already so busy with classes and clubs, why should I get involved with something else? Here are the top three reasons to come to The Garage and work on a startup.       

1. Learn Real Teamwork.

Whether you hope to build innovative technology, discover the next medical breakthrough, or participate in the next Broadway sensation, you will be part of a team at The Garage.  While working on your idea, you may need to hire and fire employees, manage difficult team dynamics, and learn to communicate in new ways.  Edmond Lau, Quora Engineer explains, “Working effectively as part of a team is incredibly important for output quality, morale, and retention.”  

You might already take classes that have team projects, but this is different. All team members on a class project have the same goal: getting a good grade, on both the content and team player aspects of the project, thus you might hold back and be more diplomatic because you are concerned about grades.  In comparison, you come to The Garage because you are passionate about a project, so team dynamics can get hairy. Each team member’s goals may not be in sync, as team members may have differing visions and priorities to make the startup successful.  Also, the class project ends after ten weeks, but the startup does not end unless you take action, and taking that action could be hard from both an interpersonal and financial perspective.

Motivational speaker Brian Tracy explains that, “Teamwork is so important that it is virtually impossible for you to reach the heights of your capabilities or make the money that you want without becoming very good at it.” So having the tools to work well on a team and to help build a team where opposing ideas are considered and yet all members are valued and work collaboratively will serve you well in any 21st century career.

2. Learn to Pitch. 

Whether you are pitching your idea to fellow students to convince them to come work on your team, persuading your professor to be your mentor for your startup, or selling your idea to investors to raise capital, you will be practicing your pitch over and over.  This is a great example of “practice makes perfect.” At The Garage, you will have plenty of opportunities to practice your pitch, from informal sessions  at our Family Dinners and Office Hours, to the intensive-feedback sessions during Wildfire.  You will learn to take facts and weave them into a story that engages the audience and ends with a call to action.

For some, pitching comes naturally and for others it is very uncomfortable, but it is an important skill that you will need in your career.  You will need pitching proficiency to sell yourself in a job interview, to convince the team that your idea is the one the team should pursue, or even to sell your boss on giving you a raise.

Dan Schawbel, a New York Times bestselling author, describes why honing your pitching or sales skills is important: “If you don’t have sales skills, it’s hard to succeed at work because we are always selling. You have to sell yourself, your products and your ideas constantly. You have to influence those around you to take action or you won’t get very far … Selling is something we all do naturally but we can all improve on it.”

3. Learn to Fail, Recover, and Succeed.

At some point in your life, you will fail at something and it will be devastating.  How will you cope?  The Garage is a safe place to take risks, leave your comfort zone, try new things, struggle and then fail.  Not just fail, but fail miserably–a huge colossal fail.  It will feel bad, but you will be supported by The Garage community and we will celebrate that failure together.

During the process, you will learn the skills to evaluate the failure, develop a method to manage the uncomfortable feelings and learn the steps needed to improve.  As Carol Diener, professor at University of Illinois and former graduate student of Carol Dweck, explains, “Failure is information—we label it failure, but it’s more like, ‘This didn’t work, I’m a problem solver, and I’ll try something else.’”

The skills to make any failure into a positive learning experience will serve you well throughout your life, no matter what career path you take.  The former CTO of PayPal, Max Levchin, had the resiliency to fail multiple times and learn from each experience: “The very first company I started failed with a great bang. The second one failed a little bit less, but still failed. The third one, you know, proper failed, but it was kind of okay. I recovered quickly. Number four almost didn’t fail. It still didn’t really feel great, but it did okay. Number five was PayPal.”

While learning to cope with failure, collaborating with team members and honing your pitching skills you will get a taste of entrepreneurship.  Not only are these skills important for whatever career path you choose, but at some point in your career, if you are working for someone else, you may wonder, should I go out on my own?

You tell yourself that you will have more independence and freedom, but know that entrepreneurship is risky. If you worked on building an idea during your time in college, you will have a sense as to whether entrepreneurship is for you and whether you have the risk tolerance and the drive to be an entrepreneur.  Paul Graham, co-founder of Y Combinator compares entrepreneurship to parenthood: “Like having a child, running a startup is the sort of experience that’s hard to imagine unless you’ve done it yourself.”

Come to The Garage and work on your ideas.

We look forward to seeing you soon.

Elisa Mitchell is the Operations Manager at The Garage and enjoys helping each student start a unique entrepreneurial journey.  She is an accomplished attorney and CPA and brings strong organizational skills, attention to detail and a can-do attitude to every project. She is thrilled to be a part of The Garage.

Find Your Calling In Life – Be An Entrepreneur

There has never been a better time than now to become an entrepreneur. Thanks to the growth of the Internet and the power of technology and global connectivity, a great product or idea can come from anywhere, anyone and at any time. And with the proliferation of incubators, accelerators and a myriad of other resources to support a budding entrepreneur’s ideas, I’m constantly asking myself: why would any college student not attempt to start a company today?

There are traditionally three types of career orientations: a job (about the paycheck), a career (achievement through money and advancement) and a calling (passionate commitment to work for its own sake) (Seligman, 2002). My argument is not only that every person should strive to find the latter (a true calling in life), but also that starting a company is the best way to find it.

Why? Because entrepreneurs, more than anyone else, have to ask themselves: what am I good at? What am I passionate about? And how can I bridge those two answers together to build something?

Take Gary Erickson, founder of Clif Bar. Before founding Clif Bar, Gary worked at his bakery, and when he wasn’t working at the bakery, he was on his road bike, either around his home in San Francisco or on biking trips in Europe. During a 175-mile ride one weekend, he got sick of eating flavorless energy bars, so he decided to try to make a new one that tasted good and was also nutritious. The rest is, as you probably know, history. Gary Erickson is an exemplar of an entrepreneur finding their calling by marrying what they love doing in their free time (biking trips) and starting a company (healthy, tasty snacks for bikers) (Erickson, 2004).

My own story isn’t so different. When I graduated from college and moved to Boston to work as a CPA, I was fired up, ready to live in a big city, build a career and conquer the business world. A week later, I was absolutely miserable. I didn’t feel like what I was doing was meaningful (i.e., I was just pushing paper around). I soon decided to switch gears and start a company doing something that I loved, was passionate about and would mean something to others.

In 1993, I found what I thought were the 10 best unsigned bands and put together a compilation called, “The Aware Compilation.” My purpose when I started was to help artists/bands have the careers they wanted and increase their following, so that they could make a proper living as artists. Many of the bands quickly got signed (Hootie & the Blowfish, Matchbox 20, among many others), and I soon entered into a partnership with Columbia Records. Years later, the list of artists I’ve signed and/or managed now includes household names like John Mayer, Train, Five for Fighting, The Fray, Brandi Carlile, Mat Kearney and many others.

A calling is a job that is intrinsically rewarding, has meaning and is a major part of what you stand for (Wrzesniewski, Berg, & Dutton, 2010). Further, if your work is your calling, then you probably believe that your work is contributing to a greater good, or improves the world in some way (Cameron et al., 2003). Work is such a big component of our time, and it should be a proper reflection on our values, ideals and passions. In a perfect world, your work is a true extension of yourself.      

The barriers to creating and building a company have disappeared and a shift of power from big companies to the individual has changed everything and enabled anyone with a computer/phone and an internet connection to build a successful business overnight. Not all students will have the passion, determination and grit to become successful entrepreneurs, but those that do will have a higher chance of finding their true calling in life, taking control of their destiny and living a life of purpose and meaning.


Gregg Latterman is a music and entertainment industry entrepreneur. Upon graduating from Kellogg, Gregg negotiated a joint venture with Columbia Records and signed Train, Five for Fighting, John Mayer and Mat Kearney to his independent record label, Aware, founded in 1993. In 1999, Gregg built A-Squared Management that directed the careers of artists such as The Fray, Michelle Branch, Liz Phair, Brandi Carlile, Jack’s Mannequin, Mat Kearney and Five for Fighting. Gregg has a Masters in Positive Psychology from The University of Pennsylvania under Martin Seligman and now teaches “Positive Entrepreneurship” at NU. Gregg has, both formally and informally, mentored most of The Garage resident teams.

Photo credit: Markus Latterman

Dear Bay Area Friends

I know many of you want to “change the world” even though it’s gone out of favor to say so out loud. The good news is that it’s possible, and you have so much to share with the world! The bad news is, you’re going to have to leave the Bay Area.

Eric Weinstein, Managing Director of Thiel Capital explained it like this: “Sometimes I refer to the Bay Area as the innovation ghetto. [Bay Area technologists] have been given the nicest piece of real estate, an ungodly amount of cash, and the pleasure of each others company, but they’ve been told that the terms of [the] probation are that you have to stay within the Bay Area. So what I’d love to see is more of us violating our parole and going into the rest of the country and trying to bring that irreverent spirit.”

I violated my Bay Area parole last summer when I moved to Chicago for my husband’s job. I asked several of you in the Bay Area VC community about the Chicago tech scene, and most of you thought that there wasn’t one. (I’ve since learned this isn’t true. There is an emerging tech community here in Chicago, but it is much smaller and younger than what you’re used to. More on that later).

Before I moved to Chicago, I decided, in true Valley spirit, that if the tech community I was looking for didn’t exist, I would have to build it. Lucky for me, Northwestern was already building The Garage, the university’s new hub for student entrepreneurship and innovation. What it was missing was a leader with a vision. This was the perfect opportunity to distill my decade of experience and observations from working at Google and founding my own company, and to transplant that innovative DNA 1,800 miles away in Evanston, IL.

In our first year, a vibrant and diverse community of student entrepreneurs has flourished at The Garage. The students are brilliant. What they lack in experience they make up for in curiosity and the willingness to try, learn and iterate. Kellogg MBA students work alongside undergraduates, and music majors sit next to electrical engineers. The community is bonded over a desire to build their ideas, and students encourage each other to take risks. They are each other’s first beta customers and share knowledge and resources.

Of course, I miss San Francisco. I miss Blue Bottle mochas, weekend trips to Sonoma and hikes in the Marin headlands. And I miss my friends, colleagues and living in the epicenter of the tech community. That said, the experience of joining Northwestern has taught me that more of us need to leave the Bay Area and help other cities and towns develop a culture and attitude that welcomes innovation and entrepreneurial thinking and doing.

If that’s not incentive enough, time and time again it has been shown that it is easier and more financially feasible for your startup to succeed outside of the Valley. Consider Hudl, who recently raised $72.5M from Accel Partners, a prominent Palo Alto venture capital firm. Hudl is headquartered in Lincoln, Nebraska where the media software developer salary is ~$55,000 compared to over $100,000 in San Francisco.

My particular path led me to The Garage, but there are many ways to participate in “the expansion of Silicon Valley.” Robert Hatta, a mentor at The Garage, is an ex-Apple and Netflix executive who returned to his home state of Ohio to join Drive Capital. Carter Cast, on faculty at Kellogg, was a senior executive at Electronic Arts, Blue Nile and Walmart.com before joining the Pritzker Group Venture Capital in Chicago.

Imagine a future where every city in the world is bustling with creativity and innovation. That’s the world I want to live in, but I need your help. So pack up all of your free t-shirts, can-do attitude and join me. You won’t regret it.

Melissa is a startup veteran and entrepreneur with a decade of experience at consumer technologies companies in Silicon Valley. She has worked in-house at Google, YouTube, Polyvore (acquired by Yahoo), and Luvocracy (acquired by WalMart Labs). Most recently, she built her own influencer marketing agency called Storylark. Melissa received her BA in computer science from Dartmouth College in 2003.

I Hear the Entrepreneurial Sizzle, But Where’s the Steak?

 

When I started my first company in 2003, I didn’t consider myself an entrepreneur. Heck, I can still barely spell the word correctly. The Lean Launchpad was a zygote, and the tools and resources available today were nowhere to be found—and I certainly didn’t have a map to follow. Like a mouse lost in a maze, I ventured down one hallway until I ran into a wall and then changed direction until I found a new path. Lather, rinse, repeat. It was, and still is, a game of endurance. And it was lonely. I had yet to learn the value of social capital. Finally, being far from a large metropolitan area, mentors were in short supply to act as a sounding board and sensei for my entrepreneurial journey.

When I look around today, I am awestruck by the deluge of resources available to the brave souls willing to risk everything for their idea. The barriers to entry have never been lower: the free tools and mentor networks, the number of incubators and accelerators springing up seemingly everywhere. Wherever you look, everything you read seems to belie this notion of Startup, Inc. sweeping the nation.

But my fear is that the hype is more noise than actual sound.

I began working at The Garage back in January. The energy in the space was, and still is, palpable. Assiduous young students are pursuing their passions on top of a full course load. At our peak in the spring, we had around 250 budding entrepreneurs calling The Garage home. Out of a student population of about 7,500, that number represents just 0.33% of the total student body. If you add in the other pockets of entrepreneurship from around campus, perhaps you can argue that number is closer to 1% or 2% at the most. It’s the equivalent of dumping a glass of water in Lake Michigan.

On top of that, based on observations of the graduating students, those either working on their own startup or working for one of the teams, the majority opt for a traditional wage-paying job with a company that is not a startup. The reasons span many categories from parental pressure, to suffocating levels of student debt, to risk-aversion, to the difficulty of starting up and maintaining an early stage company to the need to be able to pay the rent and avoid moving back home with said parents, to name a few. We will explore some of these in depth below.

 

Earth to Millennial Entrepreneur – Are You Out There?

John Lettieri of the Economic Innovation Group said at a recent testimony to the US Senate that “[m]illennials are on track to be the least entrepreneurial generation in recent history.” According to The Atlantic, the number of people under 30 who own a business has fallen nearly 65% since the 1980’s and now sits at a 25-year low.

What’s most surprising, I think, is that 60% of Millennials consider themselves entrepreneurs and 90% recognize entrepreneurship as a mentality—but mentality doesn’t necessarily translate into activity. The current average age for a successful startup founder is 40 years old, according to the Kauffman Foundation. Even more, the only age cohort with rising rates of entrepreneurial activity since the turn of the millennium is 55 to 60 year olds.

So what’s going on with millennials? Are Mark Zuckerburg, Bryan Chesky, Travis Kalanick, Evan Spiegel—the successful “spotlight” entrepreneurs—the exception to a declining trend or do they portend something different? Is entrepreneurship just more media hype promoting the select few while ignoring the contravening trends below the surface (and headlines)? Here are three possible answers to why they may currently be more the exception than the rule:

 

Problem #1 – Exploding Student Debt

Many have heard about the escalating costs of higher education, which has grown two and half times the rate of the consumer price index and has done so for decades. More and more people are returning to school a second time to earn a master’s degree. Fortune magazine cites a Department of Education study showing advanced degrees are as common today as bachelor’s degrees in the 1960’s. Today, more than 16 million people, or roughly 8% of the population, now have a master’s degree—an increase of 43% since 2002. While you can argue that the return on investment for an MBA pays off, the cost of acquiring that degree is out of reach for most Americans, and those who graduate do so with staggering levels of debt (sadly, those who do not graduate fall into something akin to the debtor prisons of a previous century, but that is article unto itself – see here).

According to Forbes, total student debt now exceeds $1.3 trillion (yes, with a “t”) eclipsing auto loan and credit card debt, combined. Today, more than 80% of those graduating with a bachelor’s degree are in debt—double the number just 20 years ago. Add it up and we have over 40 million Americans saddled with an average of $35,000 in student debt.

What does this mean for our economy still grappling with the effects of the most recent Great Recession? Fewer and fewer millennials are buying homes and cars – two major drivers of economic growth. And fewer and fewer are starting businesses and instead opting for the safety and security of a stable job with a large company. The implications of these choices act as a drag on our economy—money that could be going for investment, R&D or wages is instead being used to pay down debt that was supposed to be a means to earning a higher income. Most small businesses are funded with personal debt such as credit cards or small loans from banks and family members. If our future business leaders are paying off student loans, their ability to afford a $10,000 line of credit from a bank or credit card company is slight.

 

Problem #2 – Monopolies and Industry Concentration
Since 2008, large American firms have gone on a 10 trillion dollar shopping spree, one of the largest in corporate history. Unlike previous bouts of merger-mania that focused on global reach, these acquisitions have been fueled by a different set of strategies. They have been driven first by a need to consolidate the home market. From here, driven by the fallout of the Great Recession, these companies are pursuing a near insatiable desire to increase market share while simultaneously dramatically cutting costs.  The primary result of these efforts: propping up their elevated profit margins which continue to reside at historical highs. Sadly, few of these cost-savings have been flowing into the pockets of consumers (or their rank-and-file employees).

Here is a short list to illustrate the concentration at the top of corporate America:

  • In 2004, the top eleven airlines controlled 96% of the domestic market and sustained losses of over $5 billion; by 2015, following a wave consolidation, four airlines control a similar amount of the market and earned profits in excess of $20 billion.
  • In addition to the airlines, hotels and online travel services have been on a buying binge with the acquisition of Starwood Hotels by Marriott creating a hotel behemoth with over 1.1 million rooms scattered across 5,500 hotels worldwide.
  • CVS, Walgreens and what’s left of Rite-Aid control 99% of the national market for pharmacies.
  • In 1983, 50 companies controlled 90% of all U.S. media; by 2011, that same percentage was controlled by just six companies.
  • Amazon and Barnes & Noble account for more than 50% of all books sold in the US.
  • Almost every cruise line is owned by one of three companies: Carnival, Royal Caribbean or Norwegian Cruise Lines.
  • At the end of 2015, the eight of the top ten downloaded apps were owned by either Facebook or Google.
  • The health insurance industry is dominated by four companies—Anthem, Cigna, Humana, and Aetna—with further consolidation being discussed.

This is hardly an exhaustive list. The chart below illustrates this trend across all industries.  Consumers now have fewer choices and face higher prices, while companies enjoy fatter profits and significantly less competition. The net result is deeper and wider moats making it harder and harder for new entrants to compete for any length of time.

 

 

Why is this a Problem for Entrepreneurship?

According  the Kauffman Foundation, “…in any given year, new and young business create nearly all net new jobs in the U.S economy…Older, established companies tend, on balance, to be net destroyers of jobs.” Yet, since 1990, companies more than a decade old account for half of all firms and employ over eighty percent of all American workers—up more than ten percent in the same time period. This concentration of companies and jobs squeezes out smaller businesses who cannot compete at scale or scope, let alone keep up with the ever changing regulatory environment.

Lobbying and tax avoidance are two other pernicious outcomes of this Gilded Age level of consolidation. As companies grow, the urge to stay on top inevitably leads to efforts to have the rules defined in their favor. As profits rise, more and more funds are available to pay an army of lobbyists to write these rules. According to The Economist, the last 20 years have seen an enormous increase in lobbying with corporations leading the way at 70% of all dollars spent. Back in 1998, an organization had to pony up $2.4 million to crack the top 100. As of 2012, that number has almost doubled to $4.4 million. Tech companies are not averse to this trend. Following in the footsteps of the financial industry, they have begun recruiting former government officials to join their lobbying efforts – former Obama press secretary Jay Carney works for Amazon while former campaign manager David Plouffe is helping write the rules for Uber.

With all of the corporate concentration above, plus their fierce lobbying efforts to define the rules and protect their moats, there are fewer and fewer opportunities for new entrants to thrive, let alone survive. We can continue to hype the few unicorns that are creating tremendous wealth and lots of new jobs, but looking under the hood, the trends are alarming, the competition is lacking, and the obstacles confronting aspiring entrepreneurs are growing. Where are you Teddy Roosevelt?

 

Problem #3 – It’s Too F%&king Hard to Start a Company

Congratulations. You’ve come up with an idea to start a business. Now, the fun part: setting up your company. If you are lucky enough to live in Illinois, forming an LLC will set you back $500. If you want to do it online (gasp), there is another $100 expediting fee. Some people like to file in states like Delaware or Nevada where it is cheaper. However, what they forget is that you still have to register and pay taxes in the state you are doing business in. Plus, you need to hire an Agent of Record and pay the annual filing fees. In Illinois, that is an additional $250 per year (don’t be late or that will turn into an extra $300). Adding it all up, in Illinois, during your first 12 months and a day, you have shelled out $850 just to set up your business. Oomph.

Great. You have your LLC. Next, you might want to trademark your company name. Depending on how much you want to do yourself, that will run several hundred dollars. You could pay your lawyer to do it, the same one drafting your Operating Agreement. Legal fees can add up quickly.

If you have an employee, you need Workers Comp Insurance. If you have more than one employee, you need to register with the state to collect and pay Unemployment Insurance. You also need to collect and pay payroll taxes since labor regulations make it difficult to hire contractors over employees. By the way, full-time employees cost around 30% more than contractors and that’s before the new overtime rules come into play.

Next, let’s talk regulation. The “great recession” of 2007 to 2009 can be largely attributed to the actions of the finance industry (with regulators looking the other way). Following widespread deregulation in the 1990’s, specifically the repeal of Glass Steagall and the passage of the Commodity Futures Modernization Act of 2000, the casino on Wall Street rolled up its sleeves and started betting on everything that they could slice, dice, repackage and sell to the next sucker down the line. Inevitably, the bubble spectacularly burst, taxpayers bailed out the feckless and got stuck with the tab. Nevertheless, a recovery ensued (for some).

Cleaning up the mess and trying to prevent recurrence required new regulations and, like the mortgage market since, the pendulum swung too far the other way and the impact borne by small business has been the greatest. During Obama’s first term in office, the cost of federal regulations rose by $70 billion, not counting Obamacare. Nicole and Mark Crain of Lafayette University estimate that the per employee cost of compliance for businesses with fewer than 20 employees is $10,585 versus $7,755 for companies with over 499 employees. Larger companies have the benefit of spreading these costs over a much larger revenue base. Smaller companies do not. Another drag on competitiveness and an entrepreneurial headwind.

If regulation wasn’t enough of a deterrent, let’s talk taxes. Zachary Slayback writes that “[o]ne of the most nefarious taxation schemes to small business and entrepreneurial growth is the capital gains tax.” When you do the math, once you make a profit, almost half go to pay federal, state, and capital gains taxes. And if you make a mistake, ouch, the penalties hurt. So yeah, in addition to that lawyer, better get an accountant too.

No wonder many opt for a traditional salaried job instead. When you add up the risks and the costs, can you blame them? If we want to reverse these trends, we need to radically rethink how we support those brave souls striving to start their own business and simultaneously find ways to level the playing field so they, like a baby turtle, have a chance to make it from the beach to the big, bad ocean.

 

Conclusion and What’s Next…

In the next piece in this series, I will look back at some of the historical background that has brought us to this point—namely the effects of globalization and the changing nature of work in the new economy. The final installment will explore how we can right the ship and prepare our children for the world ahead of us, not the one behind. In addition, we will explore a few areas of hope including the explosion in classes on entrepreneurship that may portend a Cambrian explosion of startup activity in the years ahead. Stay tuned!

Billy began his career in his family business—a diversified forest products and steel manufacturer. He launched his first startup, M-Tec Corporation, in 2003, and a second one, Reach360, in 2007 after leading the successful sale of his family business. Billy works with Design For America, advises numerous startups, sits on several boards, was an adjunct professor at Northwestern prior to starting at The Garage, and currently owns two other companies. Billy received his BA in history and political science from Northwestern in 1998 and his MBA in finance and strategy from Indiana University in 2003.

Entrepreneurship at Northwestern This Fall!

Looking to learn more about entrepreneurship and innovation this fall? You’re in luck! Northwestern offers a variety of entrepreneurship classes across the schools. This post will give you a summary of all the courses offered this fall:

Farley Classes

  • NUvention: Medical
    A two-quarter interdisciplinary course designed to create opportunities for students to create new medical technologies and then build businesses around their innovations.
  • NUvention: Therapeutics
    A pilot class that will focus on Lean Startup methodologies in the therapeutics industry.
  • NUvention: Transportation
    An interdisciplinary, experiential course created in collaboration with the Transportation Center, designed to teach students about creating businesses in the transportation space.
  • NUvention: Advanced Materials
    A new partnership between the Farley Center for Entrepreneurship and the International Institute for Nanotechnology (IIN).
  • Engineering Entrepreneurship – ENTREP 325
    A core course for the Undergraduate Certificate in Entrepreneurship.
  • Special Topics In Entrepreneurship: Growing and Monetizing your Fanbase –ENTREP 395
    Are you a singer, actor, musician, comedian, writer, graphic artist, fashionista, or dancer that wants to promote your career? This course is designed to expose artists to the entrepreneurial thinking necessary to build careers and grow personal brands.

BIP Classes

  • BUS_INST 301 (formerly BUS_INST 260): Accounting
  • BUS_INST 302 (formerly BUS_INST 239): Marketing Management
  • BUS_INST 394 – Professional Linkage Seminar: Ethics and Leadership
  • BUS_INST 394 – Professional Linkage Seminar: Investment Banking
  • BUS_INST 394 – Professional Linkage Seminar: Non-Profit Management (campusCatalyst)

SoC Classes

  • Creativity and Innovation (Comm St.)
  • Power in Entertainment (Comm St)
  • Nonprofit Communication Management (Comm St)
  • Understanding Media Markets: Users, Makers and Metrics (Comm St.)

SESP Classes

  • SESP 303: Designing for Social Change

Kellogg Classes

  • KIEI-462 | New Venture Discovery
    Students interested in pursuing entrepreneurial careers learn to navigate the earliest stages of starting a new venture, beginning with the identification of a market problem that is worth solving.
  • KIEI-903 | Corporate Innovation and New Ventures
    This course addresses the emerging practice of “corporate entrepreneurship,” or “intrapreneurship,” the game-changing innovation generated by large, established corporations.
  • KIEI-924 | Introduction to Software Development
    This course, now expanded to 10 weeks, targets non-programmers who will be founders of, employed in, or consultants to “tech-enabled” companies.
  • KIEI 942-5 | New Venture Launch
    Students whose tested business concepts offer compelling product-market fit fine-tune their business models, build out financial projections, look at funding options and prepare investor pitches.
  • KIEI-965 | Global Corporate Governance
    This course examines actions that aren’t shareholder friendly against standards you should know when you become an officer or director of a U.S. or foreign company, or a consultant or financial advisor to such an entity.
  • KPPI-452 | Social Innovation: Designing for Change
    In this experiential lab course, students explore – in class and through quarter-long consulting projects – innovation as a mechanism for social problem solving.
  • MKTG-961-5 | Entrepreneurial Tools for Digital Marketing
    This hands-on, tactical class focuses on use of the Web/mobile channel within the framework of the customer relationship funnel.
  • MKTG-962-5 | Entrepreneurial Selling: Business to Business
    This course uses a blend of frameworks, structured content and practical experience to delve into such topics as developing an impactful message for various targets, handling sales calls and navigating a deal to close.

Medill Classes

  • JOUR 301 & 390 / Media Innovation and Chicago’s Startup Scene.
    The students come from Medill and from the Segal Design Institute. This class is for students who will be part of the Bay Area Immersion Experience program in San Francisco during the winter quarter.

Bienen Classes

  • MUSIC 360 Career Innovation in Music and the Performing Arts
  • MUS TECH 259 Introduction to Music Technology
  • MUS TECH 300 Foundations of Music Technology for Music Majors
  • MUS COMP 339 Sound Installation Art

And, of course, make sure to continue your learning outside of the classroom as well… like… at The Garage! Learn more about our quarterly Residency Program, open events and workshops, or just stop by and see the space for yourself. The Garage is open to NU students 9am-5pm, Mon-Fri.