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Despite tough economy, entrepreneurship alive and well at SMG

By Brian Fitzgerald

Entrepreneurial start-ups fail when the economy is down, right? Not necessarily. Of the 30 corporations comprising the Dow-Jones industrial average, 16 were founded during down business cycles. For example, Stanford University students William Hewlett and David Packard founded their electronics company in the Depression year of 1938. Bill Gates started Microsoft during the 1975 recession.

Ascend Communications founder Rob Ryan, who directs a high-tech business start-up “boot camp” at his Montana ranch, speaks to aspiring entrepreneurs in the SMG Auditorium on December 2. Photo by Kalman Zabarsky
 
  Ascend Communications founder Rob Ryan, who directs a high-tech business start-up “boot camp” at his Montana ranch, speaks to aspiring entrepreneurs in the SMG Auditorium on December 2. Photo by Kalman Zabarsky
 

In fact, entrepreneurs can fuel the economic recovery process -- as they did after the 1990-91 downturn, says Peter Russo, director of the SMG Entrepreneurial Management Institute (EMI). “A year ago, there was a general sense that funding wasn’t going to be available for start-ups, and I think people were just holding off,” says Russo. “Now there’s some sense that the economy is beginning to turn up again, so entrepreneurs are a little bit more optimistic about their ability to raise money to start a venture.”

Russo, an SMG lecturer in management policy, points out that start-up costs are low during hard times. At the same time, many unemployed graduates find that they make ideal entrepreneurs. “I think that a number of students who found it difficult to find work in the past year began exploring the possibility of starting companies,” says Russo. “They’ve come up with viable ideas and will be pursuing them.”

Russo’s goal as director of EMI is to help students and alumni develop start-up business proposals and bring them to fruition. EMI, founded in 1984 through a grant from the late Henry Morgan, a former SMG dean, sponsors a variety of programs and activities designed to help students further their entrepreneurial aspirations, including the Michael Bronner E-Business Center and Hatchery, an annual business plan competition, and a series of “boot camps” to provide condensed, practical assistance in entrepreneurial finance and developing a business plan.

In the last boot camp, on November 16, 20 BU students presented their start-up plans to an audience from the business community, which provided feedback and tips. “We went over many different aspects of starting a business, such as how to put together a proposal, how you should use that process to focus on your business plan, how to go about seeking financing, how to prepare yourself for meetings with interested parties, and legal issues,” says John Kaufman (SMG’03). “I didn’t have a specific business plan, but I have thought through a few, and I found the boot camp very useful for ones I may have in the future. It seems pretty clear that Professor Russo is personally motivated to make things happen.”

Russo certainly made things happen from 1983 to 1998 as CEO of Data Instruments. He is credited with managing an employee-owned corporation that evolved from a small manufacturer of industrial pressure sensors to a global company with sales of $54 million in 1997, the year before it was acquired by Honeywell. “As well as providing general education in entrepreneurship,” says Russo, “I feel that I am able to share with students my practical experience from my years as an entrepreneur.”

Still, all the education in the world can’t guarantee success without energy, drive, and a sense of adventure. He adds that although networking skills are equally important, young people starting a business often ignore this aspect -- to their peril. “If anything, students underestimate the importance of building a strong network and a strong team right from the beginning,” he says. “Networking skills in general are far more important than most students understand.” Russo points out that the Michael Bronner E-Business Center and Hatchery, launched in 2000, catalyzes the development of closer ties between SMG students and the Boston venture capital community, which invests in start-ups on behalf of institutions and individuals.

“Networking is key,” says Scott Hutchinson (SMG’02), president of BzzAgent.com, a company he formed last year while taking Russo’s Starting New Ventures course. “Between my business school and professional contacts, and [cofounder] Dave Balter’s marketing industry networks, we found that there was a world of information at our fingertips that was vital to how we developed our business model.”

BzzAgent.com is a collection of consumers who get an insider preview of new products. They receive points when they report back on how they helped spread the word about products such as books and CDs. The points they accumulate over time earn them prize rewards. Word of mouth marketing? If BzzAgent.com sounds like a pipe dream, consider the fact that the company recently signed Penguin Putnam Publishing and AT&T Broadband to its marketing campaigns. “Scott is a really bright guy with an interesting idea,” says Russo. “His company creates a ‘buzz’ for its clients’ products. It is an interesting technique.”

Russo says that new ideas can take off when the economy is slow -- today’s tough business climate simply reduces the margin for error. Contrary to popular perception, entrepreneurship is alive and well, but anyone wanting to launch a new company must do the necessary homework. “Nearly all MBA students at BU take at least one course in entrepreneurship, and each year more than 30 MBA students graduate with a concentration in entrepreneurship from SMG,” he says.

Is there a Hewlett, a Packard, or a Gates waiting in the wings at SMG? Perhaps we’ll find out soon: in May, the school’s first undergraduate class concentrating in entrepreneurship will graduate. “I think the picture looks good,” says Russo. “In the past year there has been a lot more activity, both among BU students and alumni, in getting new businesses up and running.”

       



6 December 2002
Boston University
Office of University Relations