Editor’s Note: This is part one of a two-part series on Dartmouth graduates and entrepreneurship.
In the current financial climate, with corporations laying off employees and declaring bankruptcy, the entrepreneurial world is one of the only fields that is expanding, according to Gregg Fairbrothers, an expert on entrepreneurship and a professor at the Tuck School of Business.
In a recession, “there are a lot of people who are hungry and looking to take chances,” he said.
It is an ideal time to start a company, according to Maia Josebachvili ’05, who recently started her own company, Urban Escapes, which she said provides “[Dartmouth Outing Club] trips for adults.” Josebachvili started the company after spending two years working in the corporate world and one year traveling.
“The opportunity cost is a lot lower — you’re not giving up a job to do this,” she said, adding later, “Cheap labor is really available right now.”
Starting a company in a downturn prepares the business to survive on the lowest possible operating budget, according to Fairbrothers.
“If you grow up in bad times, even when times get worse, your cost structure is resilient,” he said. “One, you have higher profitability, and two, you’re much more survivable.”
Dynamic Clinical Systems, which sells data collection software to health care organizations, was founded during the 2004 recession, a factor which has helped limit costs, according to president and CEO Chris Weiss ’84.
“If you’re in an environment where resources aren’t readily available, you have to be more careful, you tend not to spend money on fancy offices,” he said.
Ricky Joshi ’01, in an interview with The Dartmouth, emphasized the importance of choosing a business that can generate a steady cash flow. Joshi launched his own web site — Fandome — six months ago. The site connects sports fans through videos, news and a social networking community.
Describing Fandome as a “cash business,” Joshi said a company that can generate its own capital from the beginning will be more successful than a company based on a good idea that requires substantial amounts of investment from the start.
“If you can start a business that’s making money from day one and grow it, then that’s the smartest way to go forward,” he said.
Starting a business that does require extensive amounts of capital investment can also result in long-lasting financial dependence, according to Mac Dougherty Tu’09.
“Venture capitalists have a nose for desperation,” he said at a Career Services panel on entrepreneurship in April. “Once you’ve been hooked up to the IV of venture capital, it’s going to take you a long time to break free.”
While Rodrigo Ramirez, outreach and program coordinator at Career Services, said that he thought there are more members of the graduating class interested in becoming entrepreneurs than in the past, he said he will not be able to confirm the trend until at least 10 months after the students have graduated.
Interest, however, can be extrapolated from attendance at events offering information on entrepreneurship, which has been “phenomenal,” according to Yang Wei Neo ’12, public relations and marketing intern at Career Services.
The opportunity cost of starting a business has increased over the past few years with the increase in wages of highly educated individuals, but the ability to start a business on the Internet allows for entrepreneurs to keep their “day jobs” while starting their own companies, according to Neo.
“Online business doesn’t require you to spend a lot of time on it during traditional hours,” Neo said.
The Internet, however, has also led to a surge in the number of start-ups and a more competitive market, according to Ramirez.
“It’s a lot easier to start something, but in a lot of ways the market is flooded,” Ramirez said. “So unless you have a really great idea, it’s really hard to differentiate yourself and make [a start-up company] a viable living.”
The financial capital required to start a business in today’s world is essentially “zero,” according to Robert Price, executive director of the Global Entrepreneurship Institute, a California-based think tank. Starting online provides even further benefits to entrepreneurs because that means “you’re global from day one,” he said.
Additionally, the rise of the social networking sites has made advertising and recruitment easier, according to Josebachvili.
“I’ve used Facebook like you have no idea,” she said.
The most significiant question, however, is often what students should do directly after graduation. Dartmouth alumni interviewed by The Dartmouth gave different perspectives on the advantages of attending business school, going into the corporate world or starting a business immediately.
Getting a corporate job directly after graduation can provide a better understanding of big companies, which entrepreneurs will have to interact with at some point anyway, Fairbrothers said at the Career Services entrepreneurship panel.
“You’re either going to compete with them, buy from them or sell from them,” he said.
Lisa Kable ’90 spent 12 years working for different retailers before starting her own company, Artemis Woman, which sells “affordable alternatives to going to a spa,” she said at the panel.
“I knew buyers in retail,” she said, adding that it gave her a “definite advantage.”
Starting a company straight out of college, however, has advantages, according to Dougherty, who started his first business, a tutoring software service for college students, while an undergraduate at Harvard University.
“There’s no better place you can go after [college] that will provide the supportive launching platform that the university will,” he said at the panel.
People inside of big business are much more willing to talk to students about their companies, he added.
“It’s amazing what people will tell you when you’re a student,” Dougherty said.
The choice between attending business school or starting a company tends to depend on the personality of the entrepreneur, according to Price.
“It depends on how skilled and determined the entrepreneur is,” Price said. “You don’t need to go to business school to start something.”
Price added that while business school is not necessary, attendance is also only going to help.