A recent Kauffman Foundation poll found that 54 percent of 18 to 34 year olds have or plan to start their own company, but 19 percent of them said a barrier was not knowing how to run a business.
“Several years ago, I started a business and realized that I didn’t have something that really would have helped: someone to tell me what to do,” said Scott Gerber, founder of the Young Entrepreneur Council.
On Monday at the White House, Gerber rounded up the leaders of some of the country’s hippest startups to advise young CEOs as they take their startup ideas from their parents’ basements to the co-work spaces of Manhattan.
The heads of companies including social news site Reddit, Web video service Blip.tv, and dry-erase wall paint company IdeaPaint briefed a crowd of 150 high-school and college students from the D.C. area on the ins and outs of starting a business from nothing. Lest the prestigious setting make the gathering seem too buttoned-down, the organizers chose a moderator whom they considered edgy: MTV reporter and hip-hop icon Sway.
Himself an entrepreneur with his own record label, Sway said that in an early meeting with a venture capitalist, he didn’t exactly dress the part of a business owner.
“I looked like Sway from the block,” he said. “Needless to say, we didn’t make it to funding.”
Here are a few ways entrepreneurs can avoid Sway’s — and other’s — startup mistakes:
On finding mentors:
Dina Kaplan, co-founder of Web series platform blip.tv, said a chance meeting with Geraldine Laybourne, founder of the women’s network Oxygen, led to her startup’s first revenue deal.
Laybourne told her to “pay it forward some day,” and Kaplan does so by mentoring female entrepreneurs when she can.
“Immerse yourself in the economy of favors,” Kaplan said. “When you can do a favor for someone, do it. When you need a favor, don’t be afraid to ask.”
Tina Wells, a children’s book author and founder of Buzz Marketing Group, also cautioned entrepreneurs not to “make withdrawals where they don’t make deposits.” Mentoring should be a two-way relationship, she said, in which the mentee asks, “What do I need to learn from this person, and what can I do for them?” Then do it.
On dropping out:
Dropping out of college seems to be a common theme among famous entrepreneurs. Like Steve Jobs, Bill Gates and Mark Zuckerberg, Jeremy Johnson quit school (Princeton) to start a social network based around the college admissions process. In 2008, he co-founded his current venture, 2tor, which makes online higher education programs now used by colleges like the University of Southern California and Georgetown.
Should budding entrepreneurs leave college once they’re sure they’ve got a great idea?
Johnson said he’s happy he did, but it’s not necessarily the best route for everyone.
“People tried to convince me not to drop out,” he said. “But it was a calculated risk, and I knew this was what I wanted to do, so I decided to give it a try.”
He did say that young entrepreneurs who stay in school should look for colleges courses that teach them two things:
“One, that they can’t know everything, and two, how to learn.”
How to give back:
Alexis Ohanian, who co-founded Reddit, admitted that as a middle-class, 6 foot 4, white male with supportive parents, he’s playing the video game of life “on easy mode.” To help those who aren’t as fortunate, he founded Breadpig, a company that sells geeky wares and donates all its profits to social-good causes around the globe.
“We’re starting to see more upstart companies that are doing social good, and a lot more people are looking for more creative ways to start companies,” Ohanian said, “Our ethos at Breadpig is to make the world suck less.”
How to get money:
When asked about the best way to secure early-stage funding, Johnson threw a curve ball:
“Funding is often not helpful for startups,” he said. That’s because founders often start work on an idea and, months later, realize it wasn’t such a good idea after all. But in the process, they found the seed of a better idea — the one that should get the funding.
“The only way you can hit that inflection point is to not have enough capital to gloss over it,” Johnson said. “Money is useful when you know what you will spend it on, and that’s a sustainable business idea.”
And once you have that idea, the way to attract investors is fairly straightforward:
“Be compelling and make people feel like they’re going to miss the train if they don’t get on,” Johnson said.
In terms of how to meet funders, Kaplan suggested an 80/20 rule: Spend 80 percent of your time with your head down, working on your project. “Spend the other 20 percent with your head lifted up, engaging in the community that you want to provide value to,” she said. “You can’t be shy as an entrepreneur.”
How to manage failure
Failure is basically inherent in entrepreneurship, and each of the panelists shared at least one example of an epic defeat. (Ohanian was rejected from famed incubator Y Combinator with his earliest idea).
But Wells said failure is one facet of startup life in which being young is an advantage.
“Ignorance is bliss,” she said. “If I’d made some of my mistakes at 31, I wouldn’t have been able to handle it. If you’re 16, and everything falls apart, you just say, ‘Well, okay, I’m just going to try again tomorrow.’ There’s something to that youthful energy.”
Correction: An earlier version of this article quoted Gerber as saying he started his business a year ago. It was several years ago. It also said the panel consisted of the founders of the companies, but not all of the panelists were founders.