Commentary: Why we need a “Startup University” and how it would work

January 16, 2013

What is America itself if not the original start-up—a risky and jerry-rigged operation spun out of Britain. Our county’s founders risked death to build it. Helping today’s entrepreneurs thrive can’t be harder than that, right?

My start-up has hired eight people in the last two months, and we feed work (read: $$) to a hive of contractors. We started with very little, built a product, started getting user traction, raised a little cash and then started hiring. The value of our company grows monthly and we will very likely go on to generate wealth for our founders, early employees and investors.

This is a microcosm of how America’s economy can and should grow.

But founding and building a successful start-up remains incredibly difficult, and one of the primary barriers preventing people from founding their own businesses is that normal living expenses continue while you are raising initial funding for your venture.

It will likely take at least six months to raise a significant seed-funding round. Before that, you must build a minimum viable product that starts to gain user traction. Early-stage start-up founders are typically not able to take a salary until the seed round has been raised. And even after the seed round, founders tend to pay themselves just enough to scrape by. It’s the ultimate catch-22: how does the normal person without a previous exit or trust fund afford to even get past the first six months?

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Of course, food and rent money for founders is only part of the equation, and raising seed funding for the company is very, very hard. Most seed-stage venture capitalists still amount to a bit of an old boys’ club, angel investors often seem as ethereal as their namesakes, and “Investment Groups,” or paid pitches, typically fill rooms with real estate agents, dentists and insurance salesmen. It can be a bit of a tight rope act trying to find funding.

This is not all bad news, in that it creates a culture in which sub-par start-ups fail fast. The thin soil at the bottom means only the most tenacious—and worthwhile—ventures survive. However, a lot of great products fail due simply to a lack of access to sufficient capital. We have a great team, and each founder had successfully exited a start-up in the past. Should have been easy, right? It wasn’t. It took our CEO six months of spending 100 percent of his time fundraising to raise our seed round.

There is something to be said for difficult initial conditions, which separate the entrepreneurs from the wantrepreneurs. But the pendulum has swung too far.

That’s why I’m proposing “Startup U,” at once a solution to the early problems of early-stage businesses and an attractive alternative to the typical university education – as well as the ever-increasing student loans that come with it. Here’s how it would work:

Startup U’s “studentrepreneurs” would be loaned money and released on a two-week basis with sufficient funding for room and board. This loan would be repaid over the course of one to two years. Recipients would repay this loan in small monthly minimum payments, including interest; the same way student loans are repaid. Loans would come from the same sources they do now for regular continued education: a combination of government, banks, and other specialized institutions.

Startup U students would spend their first six months working as an apprentice at an existing start-up. The venture must be funded and “accredited” by Startup U. After the six months are up, the student would be connected to Startup Weekend and/or Lean Startup Machine to select an idea, validate a product concept and to build their first start-up.

Next comes accelerating the startup. Hopefully, we can connect the student with an accelerator program like 500 Startups, Y Combinator or TechStars. As with the apprenticed start-up, the accelerator program must be accredited by Startup U.

Think of both the start-ups they apprentice for and the accelerators they graduate to as “mini-universities”. As with universities, Startup U students must apply to get in; the more impressive their credentials, the better the start-ups and accelerators they will get into.

Startup U students will likely fail. This is awesome. We learn from failure, and those failures will make out students better, smarter, and faster. Hopefully the students fail fast and pivot a few times along the way. They will be better off for it.

As Startup U students, founders can afford to live while they gain invaluable expertise in starting and growing companies. Through a unique riff on traditional student loans, founders have money for room and board. The loans are less risky for lenders than existing student loans, since the average loan would be much lower than a comparable college loan.

Startup U wouldn’t make up for the dearth of angel investors, but it does provide for a way to funnel young people into the highly successful accelerator programs that already exist. Almost every single one of these accelerators has a micro-level mentoring program focused on fundraising, as well as at least one well-attended “demo day” at the program’s conclusion, with a room full of active and accredited investors.

One point that needs to be very clear: Startup U does not intend to be a replacement for traditional universities, but rather a complement to them. There are many professions, industries, markets, and careers for which an undergraduate and postgraduate education is key. But by taking the strengths of the university and applying them to the world of start-ups, Startup U creates a powerful alternative to the current start-up system.

Danny Boice is the CTO and co-founder of Speek, a Sterling, Va.-based start-up that provides simple conference call services with a visual interface.Previously, Boice founded Jaxara, a global software firm.

Do you think Startup U would improve the current start-up launch culture? Please share your thoughts in the comments below?

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