Small Business

The Young Entrepreneur Advantage

Julie Strickland
Photographer | Collection | Getty Images

Young entrepreneurs have it made. While most start-ups are struggling to find resources, funding, mentorship, and talented employees, college start-ups have no shortage of incubators, accelerators, college entrepreneurial programs, and a pool of super-talented classmates to help them get off the ground. And with a number of high-profile college start-up successes--Michael Dell and Mark Zuckerberg--the ranks of undergrad entrepreneurs continue to swell.

But, of course, every business won't succeed. There will inevitably be a few standouts that have that magic combination of skill, resources, intelligence, drive, and resilience to create and run a scalable business. Each year we take a deep dive into this space with the hopes of discovering these standouts--the most innovative upstarts with the most potential to succeed.

And my, what a difference a year makes! We received nearly 100 more nominations than we did last year, totaling just over 200. We also noticed an interesting trend arising: big corporations such as Microsoft and General Electric are competing with the Y Combinators of the world to align themselves with, potentially, the next Alexis Ohanian.

Coming to the Table

Large corporations and established companies, in the past more guarded and reluctant to share their resources with outsiders, are opening up and granting the next generation of entrepreneurs access to their infrastructure, hardware, and networks. What do they get out of the deal? Tapping early-stage entrepreneurs gives large companies access to fresh ideas, first dibs on amazing new products, and, perhaps, their next acquisition.

"Connecting to early stage innovation, they [the host companies] are able to speed up their own internal innovation, see things their competitors miss, and bring cutting-edge solutions to their customers," explains Unity Stoakes, co-founder of StartUp Health Academy, a Washington, DC-based program with the goal of helping to build 1,000 sustainable businesses in healthcare over the next decade. In conjunction with General Electric, the program will help early-stage consumer health companies by providing a customized growth curriculum, access to GE's executives, training on scaling business operations, and exposure to GE technology experts. There is no fee to participate.

Dan'l Lewin, corporate vice president of strategic and emerging business development for Microsoft, echoes the sentiment. "These days more than ever, everything is connected," he says. "As a result of that, it's ever more obvious that there are more smart people around the world than inside your corporate firewall."

There is also, of course, the possibility of a start-up being purchased by the host company, though all who contributed to this article said this is an exception and not the rule. "Over time we may buy some as well, if entrepreneurs are doing things that fill gaps in our product lines," Lewin says. "This is a byproduct as opposed to the purpose, but sometimes the outcome."

Newer and Younger

As these programs continue to grow and expand, corporate incubators and accelerators once only within reach of older, more established entrepreneurs are opening up to young early-stage start-ups.

Entrepreneurs like Tim Schwartz, co-founder and CEO of Uprise Medical, a data-driven start-up, who worked with Healthbox, a health accelerator with multiple locations across the U.S. and many different local partners, in the fall of 2012. Schwartz participated in the program in Boston, where Healthbox teams up with Blue Cross Blue Shield of Massachusetts. In addition to providing capital, Healthbox gave Schwartz strategic advice and access to mentors who helped him refine his business strategy.

He honed his product and direction, and started meeting with partners within only three months — milestones he says Uprise would never have accomplished on its own. "You have to understand an overlapping network of customers and operate within a complex regulatory environment," explains Schwartz. "Providers and other healthcare companies can be very skeptical of start-ups, and so we saw the combination of industry expertise and a stamp of credibility as significant potential benefits of going through the program."

A Wealth of Options

The types of entrepreneurial programs offered by large companies vary in terms of length, goals, and the extent of the host company's involvement. Typically, they are traditional incubators tucked into and nurtured by the established host company's existing infrastructure. Infrastructure, in this sense, can mean tangible materials such as software or physical space, or people, usually in the form of mentors or potential investors.

Microsoft's BizSpark, for instance, is a vast network serving more than 50,000 members in 100 countries. The program offers technical support, business training, and access to a community of over 2,000 partners. GE and StartUp Health Academy's Entrepreneurship program, by contrast, will work with only 10 start-ups this year.

Participants are introduced in two-day workshops, which reconvene once every quarter, where they collaborate with customers, investors, and advisers and map out 90-day plans. Between sessions, they consult with expert advisers (business executives, marketing leaders, talent scouts, lawyers, accountants, and healthcare professionals), have access to an online resource library, and participate in peer collaboration and networking.

How It Works

Generally, entrepreneurs will submit an application, and the host company selects participants based on how well the interests and goals of both sides align. Most set minimum or maximum benchmarks, a screening process that gives an indication of whether a start-up is capable of surviving the long haul.

Microsoft's BizSpark, for instance, only accepts start-ups that are less than five years old and have less than $1 million in revenue. It launched with roughly 5,000 start-ups five years ago, and now has more than 50,000. The company also hosts YouthSpark, a similar program that provides free software to students, and sees over 350,000 students participate in its annual Imagine Cup competition.

GE and StartUp Health, on the other hand, has no hard and fast minimum but requires accepted businesses to demonstrate that they are scalable. It will start by selecting 10 start-ups in 2013, the first year of the program. After that, the plan is to add approximately 100 companies per year.

"If you can feel their passion and they have an entrepreneurial spirit, then we usually know they will be able to figure it out and through the right guidance develop something bigger," says Stoakes. "But if someone is focused on one particular idea rather than why they are doing what they are doing, it can be an indicator that they may not even make the first pivot along the journey."

Riley Ennis, a member of the Kairos Society, an international student run organization of entrepreneurs and innovators from the top universities around the world, is working to develop partnerships between Kairos fellows and large science companies, including Johnson & Johnson, GE, and 3D design software company Autodesk, to work through major barriers such as clinical trials.

"When I started, I needed millions of dollars, patients, a whole process," Ennis recalls. "Under a parent company, you get to check all those boxes and not worry about it." His own biotech company, Immudicon, collaborates with research partners to develop new drugs and devices that aim to detect and treat cancer.

"Sometimes there is that perception that accelerators or incubators are a little bit out of the league of very early-stage companies, and a lot of the traditional accelerators and incubators will expect students to make the commitment to drop out or take time out to focus on their business," says Katie Sowa, director of operations at the Collegiate Entrepreneurs' Organization. "But they are starting to be more accepting."

The Downside

Even so, hitching one's wagon to a large company's program may not always be the best move for an early stage start-up. Sowa urges entrepreneurs to consider the restrictions such an association may place on their companies, and to think long and hard before accepting capital.

"Some programs automatically have certain expectations for giving you a percentage of capital, and this means a certain percentage of equity goes back to that accelerator," she explains. "For entrepreneurs, giving away equity is a very serious decision to be made. Handled incorrectly, it can be the founder's downfall."

John Gallagher, associate professor at Boston College's Carroll School of Management, also cautions that an explosion of quantity could lead to a decline in quality. Being in an accelerator with poor-performing peers, inexperienced mentors, and no track record, he says, can hurt an entrepreneur.

"There are only so many really good mentors," he warns. "You might be better off going alone while being plugged into the community via meet-ups and other programs, than accept the branding of an inferior program."