Andrew Levine knew he wouldn't find a job in investment banking when he graduated with an M.B.A. from the University of Miami in 2008. Wall Street was in the midst of a financial collapse. So instead the 24-year-old focused his efforts on launching a start-up. "I figured that starting my own company was the best use of my time while I waited for the market to thaw," says Mr. Levine.
Faced with an unemployment rate of 16% for 20- to 24-year-olds, a growing number of recent college and grad-school graduates are launching their own companies, according to anecdotal evidence from colleges, universities and entrepreneurship programs around the U.S.
For his part, Mr. Levine built upon a business plan for a niche social-networking company he had created for an entrepreneurship class the prior year. He showed the plan to the father of a college friend who was an angel investor and got $40,000 in seed money in exchange for an equity stake in the business.
Armed with start-up cash, Mr. Levine created audimated.com, an online social-networking site for musicians and their followers. It serves as a forum for the independent music community—both fans and musicians—to discover and promote new music. The site is in beta testing now with a launch expected in January.
This push toward entrepreneurship among young people is likely to continue as employers plan to hire 7% fewer graduates from the class of 2010 than they hired from the class of 2009, which saw a nearly 22% drop in hiring from the class before, according to a recent report from National Association of Colleges and Employers. The annual average percentage of all job seekers starting their own businesses increased to 9% through the third quarter of 2009, according to Challenger, Gray and Christmas, a global outplacement consultancy. That's compared with 5% at the end of 2008.
"Given the state of the economy, and the state of the job market, many young people are getting the push they needed to become entrepreneurs," says Bo Fishback, vice president of entrepreneurship at the Kauffman Foundation, a nonprofit that promotes entrepreneurs. "It's a lot easier to decide to launch your own company when there aren't a lot of jobs out there."
School career-service officials say it makes sense for new grads to go the start-up route. Young adults are often well-suited to put up with the long hours start-ups demand. They don't have the responsibilities and financial obligations that burden older adults. What's more, these graduates grew up on the latest technology and easily adapt to technological improvements.
Of course, young entrepreneurs also are likely to face their own hurdles. "Having the skill set to become an entrepreneur is different than any thing you learn in school," says Susan Amat, the executive director of the Launch Pad at the University of Miami, an entrepreneurship-support program based out of the campus career center.
To that end, it's important for young entrepreneurs to seek the necessary help to get started. For current students or recent graduates, it might be easiest to reach out for assistance on campus. Many schools have campus incubators or offer start-up competitions, like Babson College's annual Entrepreneurship Forum, which offers cash, consulting, legal and Web services to winning business plans. Other schools have business incubators that help students—and sometimes outsiders—hone business ideas and, in some cases, support them financially or with other resources.
Mr. Levine turned to the Launch Pad before he sought out an investor to him sharpen his business plan and investor presentation The program also gave him guidance for creating a revenue strategy and trademarking the site's logo.
A boot-camp training program or organized group for aspiring business owners also can help. The Kauffman Foundation's FastTrac, a 10-week boot camp offered throughout the country, trains aspiring entrepreneurs. And Y Combinator of Mountain View, Calif., and TechStars in Boulder, Colo., offer cash and mentoring to young founders.
The biggest challenge, though, might be convincing investors and customers that a young 20-something has the experience needed to deliver on a plan. One way to clear that hurdle is with strong advisers. "Recruit the right advisers who will vouch for you, who are experts in your field, will let you use their name and are beyond refute," says Mr. Fishback.
Brooks Morgan, a 2009 graduate of University of Kansas, did just that. Mr. Morgan wanted to work in venture capital, but jobs were scarce, so he found work on the other side—at a start-up. As vice president of business development for Infegy, a start-up enterprise social-media analytics company, Mr. Morgan's first order of business was to attract advisers. His last two years in college, he had worked part-time with Richard Caruso, a venture capitalist , who introduced the three Infegy principals to people who could help them land deals with corporations.
"Because we were passionate about what we were doing, [our advisers] were excited to be with and help the younger generation," says Mr. Morgan. Infegy was launched earlier this year and has 20 employees and several Fortune 500 clients.
COMMENTARY: It doesn't surprise me that "twenty somethings" or Generation-Y's, disappointed with the unemployment situation, are forming their own startups. I call them the "I Want It Now" generation, because they are not patient enough to put in their time like their parents did. They got a taste of Mark Zuckerberg, and all of them want to become billionaires.
I encounter a lot of Gen-Y's, and most have social networking sites, trying to become the "Next Facebook". They come to me looking for capital, but I have yet to find one that knocked my socks off.
Even though I use social networking sites and believe in the potential for social media, I am not necessarily high on social networking sites from an investment angle, because I don't know of a single one, and I am talking Facebook, YouTube, MySpace and others, that have made a profit. Most of them rely solely on advertising, and I don't buy that you can make a profit solely from an ad-supported revenue model. That model is busted, and I am not the only one who thinks this.
I wrote in a previous blog of the potential for a "Second Internet Bubble" and you are starting to see a lot of evidence of this already--industry consolidation, sites shutting down, less funding in the social networking sector. Just too much hype and not enough profits if you ask me. The incredible valuations for Facebook and Twitter, are kind of scary, and remind me of the last Dotcom Bubble.
I try to encourage these youngsters to keep hammering away, and often provide some free advice and some pointers, but the social networking war is already won, and Facebook is declared the winner. However, even Facebook has not generated a profit yet. I keep hearing that they have 350 million members. Wow, that's impressive, but like I said before, where are the goddamn profits? I rest my case.
Courtesy of an article dated December 22, 2009 appearing in The Wall Street Journal Careers Blog
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