The hands-on approach for entrepreneurs

In a high-ceilinged, light-filled modern classroom, filled with scribbled-on whiteboards and festooned with multicoloured Post-it notes, Stanford Graduate School of Business is sweeping away the last vestige of the old-fashioned notion that entrepreneurship cannot be taught.

Over two academic quarters, graduate students who choose to take its “Startup Garage” course conceive, develop, pitch and seek funding for ventures. Some end up becoming sustainable businesses in their own right.

Stefanos Zenios, director of the business school’s Center for Entrepreneurial Studies and architect of the Startup Garage, contrasts the course with the typical way of teaching entrepreneurship to business students by making them study successful cases.

Entrepreneurship

Unlike these more conventional courses, Startup Garage takes place in an environment that seems half laboratory, half nursery school. It also differs in two other important respects.

First, the course cross-pollinates the MBA students with people from other disciplines. Engineers, lawyers and graduate students from the design school and even the humanities department join the business school students to form small teams to work on entrepreneurial ideas. Second, the class was set up, in Prof Zenios’s words, “with the express purpose of giving our students the experience of what it takes to start something. Our philosophy is that you learn by doing”.

Stanford students have little need of encouragement. The Californian university is well-known for having incubated many of the entrepreneurs and computer experts who give Silicon Valley its buzz, part of a virtuous circle of skills, ideas and funding for the US and global technology sector.

Hands-on experience

But the Startup Garage also provides academic support, access to experienced entrepreneurs and investors and hands-on experience of many of the basic “test-and-iterate” techniques that real start-ups use to innovate.

James Cameron, a Stanford MBA, cultivated BipSync – a software tool for organising research for investment managers – through Startup Garage in 2012-13. Now working in London for a US west coast venture capital fund, he says he went to California knowing he wanted to launch a business. His team’s idea was “probably one of the furthest developed” at the start of the course, but the instructors “forced us to go back to the basics”.

Most ideas, though, start from scratch. Students begin by finding a potential market, interviewing likely customers and trying out a rough prototype using design school techniques.

Halfway through the course, some teams will have found a compelling unmet customer need and be confident they have a viable business; others will have identified a need but not a strong business case; and about a third of the teams will have found neither. This last group usually drops the course. But “It’s part of the process,” says Prof Zenios.

Decisions taken by the teams at this point replicate the classic “persevere-or-pivot” moment experienced by many Silicon Valley start-ups, says TJ Duane.

His team – which includes another MBA student and two engineering students – is now at the halfway stage of the 2013-14 course. They have already decided the need for their first idea – a network for lawyers sharing expertise – “wasn’t as intense as we originally hypothesised”. Instead, they have “pivoted” to a new project, a graduate student knowledge exchange called GradExperts.

Mr Duane, a graduate of Harvard Law School, says that Startup Garage is similar to the “clinics” law schools use to give students practical experience. He says “being able to see what other teams are doing and giving them feedback is incredibly useful”.

Some of the experiences can be chastening, however. Prof Zenios says that when the teams take their first prototype out to customers, “the first contact is always a disaster”.

Investment

Teams who make it to the end of the second quarter then have the ultimate test of viability, when they have to pitch their ideas to angel investors in a mock session of the funding process all start-ups go through – and that a growing proportion of these students will eventually experience for real.

Prof Zenios concedes “there’s a safety net in the classroom [that] disappears when you leave”.

But he adds: “Entrepreneurship is a search process: you’re entering the Amazon for the first time and you’re going to get lost occasionally. You want some basic survival tools, so you can come out alive.”