KAREN MAZURKEWICH
They come armed with ideas and chutzpah. There was the project to protect women’s stiletto heels from outdoor grates. A chain of long-term hotels in industrial districts of India. Fast-food breakfast kiosks. A social-networking site for running fanatics. And a plan to erect solar panels on the roofs of commercial real-estate space both for the property owner to use and to sell power to the grid.
Every year, dozens of business students enter school with dreams of entrepreneurial success. But do the ideas cooked up in the classroom work outside the ivory tower?
Ricky Zhang, an MBA student at University of Western Ontario’s Richard Ivey School of Business, has not yet graduated but he has already launched a financial-services company, Trans-Asia Investment Partners, with a plan to broker deals between Chinese investors and real-estate funds in Canada. Mr. Zhang, a former associate for AIG Global Real Estate Investment Corp., formulated a plan before starting classes in London, Ont., but he said school contacts were necessary to get it off the ground.
“The most difficult thing for me was in Canada, no one trusted me. I have no relatives here, so the school alumni is the only assets I could rely on initially,” he said.
Mr. Zhang spent months in the classroom honing the plan. He and his team have identified two sources of revenue: Chinese investors who will pay his company a consulting fee and developers and fund managers in Canada who will pay referral fees and have lined up contacts with immigration agencies and foreign-study consultants.
“Immigration would be the biggest source of clients,” he said. A close second are wealthy parents whose children are studying in Canada, although eventually he hopes the firm will attract pure-play investors.
There is no lack of ambition in business schools today, but not every plan translates to a new venture. “There are lots of good ideas that make bad businesses,” said Rebecca Reuber, professor of Strategic Management, at the Rotman School of Management at the University of Toronto. There are no statistics on success rates, but professors estimate only one in three projects get traction outside the classroom. Even fewer succeed.
“A couple of team leaders get religion about their idea and are excited enough to go out and try to raise financing,” said Ron Close, a professor of entrepreneurship at Ivey, who helps students find mentors and money. The advantage of incubating a project inside school is that you have the time to work through the angles whereas “most entrepreneurs are winging it,” he said. The downside is that some team members view it as an exercise and not a calling.
Jennifer Kluger and high school friend Suzie Orol turned their jewellery manufacturing concept into a case study during their fourth year of studies at Ivey. “Once you are out of school it’s hard to have the discipline to sit down and write a business plan,” Ms. Kluger said. While the duo couldn’t do the trade shows during the school year, “we knew we wouldn’t have as many experts in one place who could help us,” she said. They soft-launched their firm, Foxy Originals, while at school and haven’t looked back.
Today, the company’s pewter-based hand-filled enamel jewellery, priced from $20 to $48, sells in 500 boutiques around the world, and boasts an online subscriber base of 7,000.
Angie Mackie co-founder of The Donnee Group, a marketing agency for not-for-profit agencies, also convinced her 2001 classmates to do a competitive analysis for dream company. Ms. Mackie, who ran fundraising campaigns for the Red Cross Society and Canadian Diabetes Association prior to returning to school, had a strong concept. The problem with pedalling her project at school was “there were six of us with different opinions,” Ms. Mackie said. In the end, she and her partner Gord Muschett (an MBA graduate of Cornell University) did not use all the ideas that emerged from the school project, but the exercise made us modify our plan and “opened our eyes to things we hadn’t thought about fully,” she said.
But not all student projects—no matter how great the idea—end well.
Mike Russell’s (Ivey MBA 2006) mobile oil and gas rig company, Drill Works, started out well enough. He and his business partner raised $3.5-million in a management offering and had signed a three-year, three-rig deal with North American Oil Sands company. But then came the double-whammy: gas prices took a nose dive in August 2006, which was followed by the government’s Halloween income trust announcement.
Who could predict in the classroom bubble that a plan to fly in cottagers to Gravenhurst Bay at the Muskoka Wharf would be foiled by a cottage association worried about flights taking off and landing regularly at the town’s main dock? That put a damper on Ivey student Lindsay Cross’s original plan to launch Seguin Air, a private charter service to the luxury cottage area in Ontario. The young entrepreneur has worked around the glitch by flying cottagers directly to their private docks. She also partnered with Niagara Air Tours to sidestep all the red tape it was taking to secure an operating certificate.
“It was easy to write a business plan, but when you actually get out there you have to be prepared to adapt the original idea,” she added.
Prometheus Power Systems, a gem of a clean energy company formed by Ivey alumni Joseph Mocanu and two colleagues, included plans to install solar panels on corporate rooftops. Some of the power would be sold at a discounted rate to the real estate owner, and the rest would be channeled into the power grid.
The partners spent three months developing a business plan, power point outline, executive summary and 60-second pitch. They made a pact: They would see the project through if the first solar panels could be installed by the end of this summer.
But love, opportunity and political red tape got in the way: One partner moved to New York to be with his finance, another was offered a prestigious job with a consulting firm in Chicago, and an 18-month wait time for thin solar panels put a crimp in their launch plans, the government has still not lifted its freeze on its standard offer program which promised to pay a premium for electricity generated by small-scale renewable energy projects.
“It was a viable model, but it was a question of timing,” Mr. Morcanu said, about the project he shelved. However, he is pursuing other ventures. “Being an entrepreneur is in my blood,” he said.