Findings from Micro-business Funding Query on ENTREP-L and
Other Sources (e.g., University Websites)
Funding Amount and Time
Amounts ranged from $5 to $15,000 and ranged from short- (e.g., a few weeks) to longer-term (e.g., 2 semesters)
Sources of Funds
Primarily donors, but some professors had students self-fund their projects. For example, Professor Jeff Lowenthal noted that he did not require a text book for his course, so students could take the $150 they saved and use it to start a business.
Optional/Required
Some professors make this an optional assignment, whereas others have it as part of an elective or even required course.
Business Screening
Some professors carefully screened student businesses whereas others allowed students to start just about any business they wanted (e.g., as long as it didn’t violate the law). Some of the horror stories told related to not screening businesses (e.g., having students choose to market underwear with the school’s logo on it as a business).
Matching Funds
A few respondents noted that they allowed students to match funds provided.
Payback Rate
All respondents noted that payback rates were high because of student competitiveness and/or belief that their efforts would benefit others (e.g., proceeds would be donated to charity).
Use of Proceeds
Some programs donate any profits to charity or use them to fund student activities; others allow students to keep the profits.
Examples
http://www3.babson.edu/babson2ndgen/Ugrad/Academics/Curriculum/fme.cfm
http://www.udayton.edu/business/crottycenter/sophomore_entrepreneural_experience.php
Micro-business funding at the Brock School of Business at Samford University
We began our program this year when a donor provided the funds. We have this as an assignment worth 20 percent of each student’s grade in our ENTR 304: Entrepreneurship and Small Business Concepts course, a junior-level course required for both Entrepreneurship and Management majors. Details include:
· Students must obtain approval for their businesses, and then they receive $100 each. They can combine into teams of up to five and can provide matching funds, allowing them to invest $1,000 in their businesses.
· Students have to turn in a balance sheet and income statement every 2 weeks during the 10-week life of their business.
· All profits are turned in at the end, and businesses are dissolved from the School’s perspective. Students can continue with their business beyond the shut-down and keep any unsold inventory after they have paid back their loan and provided their profits, to date.
· Profits are divided at 60, 30, 10 percent among the top 3 teams, based on ROI. Students can choose to donate the money to charity or take the funds as a scholarship.
Responses from ENTREP-L:
We've been running a 2-semester capstone course for the past 4.5 years in which 2-3 businesses are conceived, launched and operated by a class of 30 students. Each business receives up to $15K and we've generated over $225K of revenue and $60K of profits for the University. Our businesses typically have 15 students working on them and require capital for product development, web site development, inventory and receivables.
1) Capital typically isn't the constraint - even if it is only $100/student for a shorter 1-semester exercise. Time is a much bigger constraint.
2) Setting the expectation that it is a collective class effort (only aggregate profits are paid out) should cover for any businesses that lose money. We emphasize learning over profits, but the students have a strong sense of obligation to repay the loan and naturally become competitive with the other team(s).
3) The first round of ideas typically includes a broad range of beer pong accessories, happy hour marketing and other questionable ventures. We believe it is vital to allow the students to select the businesses the want to pursue, but strongly impress upon them that they should create a business they would be proud to talk about with their parents and potential employers. This has always taken care of itself (after a couple of discussions). Other issues to watch out for include existing University agreements with exclusivity rights (contracts with Coca Cola, banks, etc.), University trademarks and the sale of unpackaged food items.
Best of luck!
John
John D. Stavig (612-625-2485)
Professional Director, Gary S. Holmes Center for Entrepreneurship
Carlson School of Management - University of Minnesota
www.entrepreneurship.umn.edu
Franz,
I'm glad you're trying this...it's a great exercise. I have done this several times, though with much lower dollar amounts. At Puget Sound, I give students $50 per team--and allow them to match funds up to $100. My exercise only lasts 3 weeks, so this amount seems to work well. I have not had problems with repayment. Only once have I had non-payment and that was because all their proceeds were stolen. With a larger seed amount you may have more problems. Just something to consider. I would advise giving them guidelines about raising additional funds. They are sure to ask. You asked if $100-$500 per team is sufficient to meet learning goals--it depends. I have a learning goal aboutcreativity and I think $500 per team is too much in that they won't have to get that creative. My related thought is that 5 is too many on a team. I find my best teams are teams of 2-3. Even teams of 4 usually end up with slacking problems.
In terms of embarrassment, it hasn't been a big problem, but it is always a potential problem. I would really stress that this is the first time you've done this and they need to use good judgment so that others can do this in the future. That approach usually works well for me.
Finally, is there a reason you're not letting them keep part of the profits? It does increase their motivation to keep part of the profits.
I have attached the guidelines I distribute to students. Feel free to use whatever might be helpful.
All the best,
Lynnette
Lynnette Claire, Ph.D.
Nat S. and Marian W. Rogers Professor
Assistant Professor
School of Business and Leadership
University of Puget Sound
1500 N. Warner #1032
Tacoma, WA 98416-1032
(253) 879-3576 phone
(253) 879-3156 fax
Hi Franz,
I saw your post on the ent listserve and thought I would respond directly.
I have been giving students $100 for the past five years or so in my Intro to Entrepreneurship course. An alumnus donated $2500 and it is in a restricted funds account. I access the $ to give to the students and then they pay back $100 plus 10% of their profits at the end of the course. The fund now has $3353
Students are given $100 at the beginning of the course. They may form teams and pool their resources or start their own business independently. The students start their businesses and write business plans. Most businesses disband after the semester but a number have continued. To date, 86 students have formed 31 businesses. Only 2 students failed to pay back the $100 and I asked the business office to put holds on them until they paid. The money is great to get things started but in my opinion, the best result is that students really experience entrepreneurship firsthand.
We post the results on our website – under Todd Nelson Seed Fund. www.berryentrepreneurs.com. The website also features several success stories from students who continued their businesses after graduation.
Summary of Class Business Performance 2005-2009
Class of / Sales / Expenses / Profit / $ back to Fund2005 / $2845.44 / $1940.06 / $905.38 / $90.54
2006 / $6541.98 / $8963.40 / $1098.51 / $109.85
2007 / $2995.50 / $1737.50 / $1403.50 / $140.35
2008 / $6187.45 / $4184.10 / $2003.35 / $200.34
2009 / $6717.25 / $3592.97 / $3124.28 / $312.43
Totals* / $25287.62 / $20418.03 / $8535.02 / $853.51
We have a tiny entrepreneurship program at Berry but we have had a lot of success with this class in attracting students from across campus.
If you are interested in more information, I would be happy to send you a syllabus.
Best wishes, Paula
Dr. Paula Englis
Associate Professor of Management
Campbell School of Business
Berry College
P.O. Box 495024
Mount Berry, GA 30149-5024
www.berryentrepreneurs.com
Office: 706.290.2683
Fax: 706.238.5843
Associate Professor, Nikos
Dutch Institute for Knowledge Intensive Entrepreneurship
The University of Twente
The Netherlands
www.venturelabtwente.com
Hi Franz,
I do this in my classes both at the undergraduate and MBA levels.
I attach all my materials for you (i.e., syllabus, grading guides, team member evaluation form, receipt of start-up capital). Use anything you find helpful--
I am making one change this semester-- This spring, I am not giving the teams any money. I found that the $100 I gave them (+ the $100 I enabled them to use of their own money) created artificial boundaries-- this was inconsistent with my goal of having them engage in an actual business start-up.
A few thoughts:
I hesitate to have the teams donate the money they earn-- I think having them get to keep the money is more realistic.
I did not screen the businesses-- they could start whatever they wanted.
A quick note-- I had no trouble with repayment. Across my classes all the $100 loans got repaid on time!
Feel free to call me on my cell (below) to talk if you'd like!
All the best, Jeff
Jeffrey M. Pollack, Ph.D.
Assistant Professor of Management
Robins School of Business
University of Richmond
1 Gateway Road
Richmond, VA 23173
Telephone: 804- 397-0818
E-Mail: <mailto:
Franz,
I do something nearly identical, except they have to come up with the $100. Additionally, they have to find matching funds from an outside investor. So a team of five would have to find $500 in outside investment money. The first part is hardly ever a problem for them, but screwing up the courage to ask for an outside investor to risk his/her money is hard. That makes it a great opportunity to address the emotional reluctance many people have of ACTUALLY taking a risk rather than just talking about it in class.
Terry
Terry Noel
Associate Professor of Management and Quantitative Methods Illinois State University Follow me on Twitter twitter.com/terrynoel
Hi, Franz:
Happy new year! If I were going to do something like this, I would have each student start his or her own "business" for $10 or less and try it out for two to three weeks. I would then have students form into teams to write a business plan to pursue the more promising ventures and encourage them to continue the same boot-strapping approach. They could enact the plan and then refine it if necessary. The first time I used the $10 business approach in an entrepreneurship class I loaned $10 of my own money to each of 40 students (the rest declined to accept my investment). Out of this group of 40, only one student failed to pay me back (she dropped the course mid-semester and ignored my emails requesting the payback).
I've become a big believer in the enact, plan, refine, and enact approach, especially after teaching a class of students from several different universities in the study-abroad program here in Italy - the students don't do thorough market research, don't know who their first customers are, and think they have can't-fail plans.
I look forward to seeing what other response you receive and wish you luck on your project.
Kind regards,
Craig
Craig E. Armstrong, Ph.D.
Assistant Professor of Management
Department of Management & Marketing
University of Alabama
327-349-6299 Italy cell phone
(39)0444-913483 (Home from US)
Mailing address:
CMR 427 Box 2486
APO AE 09630
http://sites.google.com/site/cimbavantaggio/
http://cimbavantaggio.blogspot.com
http://profcraigarmstrong.blogspot.com/
http://newventuredevelopment.blogspot.com
Brock School of Business Micro-Business Opportunity Guidelines
ENTR 304: Entrepreneurship and Small Business Concepts
This course is unique to Samford University in that it provides you the opportunity to start a micro-business while you are still in school. Beginning the first week of class (or before), you need to think (quickly and intelligently) about a business that you can start and run profitably in ten weeks. This must be a new business, and the business must be both legal and ethical.
The Brock School of Business will (provide $100 start-up capital, interest-free, per student to be repaid in full at the end of the semester. You may match this start-up capital with up to $100 per person of your own funds (if you want to do so-- this is NOT required). You may form a venture team with up to four other people (five, total).
As micro-business managers, you must keep accurate financial records for your venture, retain all receipts of revenues and expenses, and be prepared to report on earnings to the class each week during the semester. Financial statements (balance sheet and income statement) must be filed every two weeks (including receipts) following the official launch date. These filings will account for half of each student’s micro-business grade, and late filings will receive a zero.
Managers will be run their businesses for 10 weeks and then shut them down. Performance will be evaluated in two ways. First, each business’ return on investment will be calculated based on the standard formula:
ROI = (Revenues-Expenses)/Invested Capital.
Thus, larger teams will have an advantage in that they will have more start-up capital, but they will have to earn more profit than smaller teams to obtain the same ROI.
Second, at the end of the semester, micro-business managers will present final results of their business efforts to the class. This presentation will last 15-20 minutes and will account for half of each student’s micro-business grade. Presentation details will be provided later in the semester.
All revenues must be turned in to Dr. Carson once businesses have been shut down. Revenues will be allocated in the following order: (1) to repay the business’ $100 loan, (2) to cover a percentage of any losses by other businesses, (3) to fund a class scholarship or charitable donation. Managers in the top three businesses (in terms of ROI) will be eligible to decide what to do with the class’ profits. These profits will be allocated among the top 3 teams with the first-, second-, and third-place teams receiving 60, 30, and 10 percent of the class profits, respectively, to be split evenly among team members. Each team member can decide to either receive the profits as a scholarship or to donate his/her portion to charity (any students graduating at the end of the current semester must choose the charitable donation option).