The reading level for this article is Novice
Editor: Rich Battle-Baxter, Rutgers University
Publisher: Ryan P. Allis, University of North Carolina at Chapel Hill
Sponsors: Center for Entrepreneurship & Technology Venturing, The Entrepreneurs’ Coaliton
“Whatever the mind of man can conceive and believe it can achieve.” – Napoleon Hill, best-selling author and motivational speaker
1. Message from the Editor
2. The Best and Worst Parts about Being an Entrepreneur: An Alien’s Choice
3. A Day in the Life of a Young Entrepreneur
4. Important Definitions for Young Entrepreneurs to Know
5. Interview with Colin Wahl
Message from the Editor
Welcome to the fourth issue of ‘The Young Entrepreneurship Herald.’
In this issue we include two articles by young entrepreneur Ryan Allis and an interview with InvestorForce co-founder Colin Wahl. In our first article, ‘The Best and Worst Parts about Being an Entrepreneur,’ the pros and cons of being an entrepreneur are analyzed based on the responses of five successful entrepreneurs. In ‘A Day in the Life of a Young Entrepreneur,’ author Ryan Allis tells us about the entrepreneurial adventures he had last Tuesday in the place of his history, psychology, and macroeconomics classes. Finally, we end with a segment with important definitions for young entrepreneurs and a Distinguished Series Interview with entrepreneur Colin Wahl.
This issue, along with all past issues, can be found online in the Young Entrepreneurship Resource Center at http://www.zeromillion.com/young/.
I thank you for reading this issue and being a subscriber of The Young Entrepreneurship Herald. Please do forward this on to your friends and colleagues.
The Best and Worst Things about Being an Entrepreneur: An Alien’s Choice
by Ryan P. M. Allis
An alien lands on Earth. After a few days she finds out that she is going to need some money in order to purchase food and shelter. Daringdo has a choice. Should she become an entrepreneur or get a job? Let’s examine the best and worst things about being an entrepreneur so we can help Daringdo make an educated decision.
According to InvestorForce co-founder Colin Wahl, the worst thing about being an entrepreneur is the loneliness. He says, "You are on your own and nobody supports you because it’s hard for them to see what you see and feel the excitement that you feel in the early stages."
I would have to agree with Colin on this point. It can indeed be lonely sometimes. One can also become de-motivated after working so hard and so long on something for which the reward may be months or years away or perhaps never to come at all.
KendallTodd, Inc. CEO Todd Ballenger says that the worst thing about being an entrepreneur is that you often work 80 hours a week as an entrepreneur to avoid working 40 hours a week as an employee. Posed with the same question, Inspire Pharmaceuticals CEO Christy Shafer says the worst thing is that you are constantly busy and stressed out and have less time for family. Best Friends Pet Care founder Randy Myer says that the worst thing is the impact on your health and your family.
With cash flow problems, having to lay people off, working eighty hour weeks, the possibility of not ever being paid for your work, and loneliness, why in the world would anyone want to be an entrepreneur? An extra-terrestrial coming to this planet for the first time would surely choose the safety and security of a job in Corporate America. Or would she?
Before we can be sure, there is another side of the coin we must examine. Along with the negative, there are a number of positive things that go along with being an entrepreneur. While being an entrepreneur is not for everyone, let’s examine the upside before you make your final decision.
So what is the positive side? Well, first you have freedom. You have the opportunity to use all your skills. Significant financial reward goes to he who succeeds. You have control over your destiny and will never have to worry you or your family’s financial security. Respect comes from your peers. You have the recognition of being a visionary. You have provided hundreds or thousands of people with jobs and they respect and thank you. You have provided value and efficiency to a market and improved the standard of living of many. Finally, there is no worry about being laid off or not being able to take care of yourself after the value of your 401(k) plan evaporates.
MCNC Chairman Dave Rizzo says, "You have control over your destiny, your calendar, and the vision is yours." Christy Shafer adds, "You are constantly challenged and have fun." Colin Wahl notes, "You have much more control of your own destiny and your entire life!’ Randy Myer states, "The best part is the rewards — financial and psychological."
So what will you choose? Well, in the end this lies with you. However, do remember that we only live once. If you have a good idea, the trust in yourself to execute, a basic knowledge of business, can bring together a good team, feel you are at the right stage in your life, and believe you can afford the risk, I’d highly recommend going for it. But you must get going and start moving.
There is a certain law of inertia that I often reference. A body in motion remains in motion. And while in motion finds new people and acquires new knowledge that it would not have come in contact with if it was not moving. Once you begin on a quest, that quest will lead you to things unbeknownst to you at the beginning. Once you start on your quest, many new events and pieces of knowledge will fall into place. Inertia will take effect as new knowledge and possibilities create a snowball effect up the learning curve as you come closer and closer to your goal. Therefore one should not wait until all the traffic signals are green before he starts his journey.
In the end, it may take awhile to reap the benefits of being an entrepreneur. And you may experience much of the downside along the way. But if you get moving today and are adaptive, persuasive, self-confident, and a visionary, and have perseverance, have a bias towards action, and can inspire others with your leadership, you may just be able to enjoy this upside. As Colin Wahl says, “Go for it, it’s an incredible chance of a lifetime – as the saying goes, better to have tried and lost than never to have tried at all! The riskiest thing to do is not to try&ldots;then the chance of success is zero. The downside: even if things don’t work out you will gain amazing experience that will help you even if you end up having to go back to working for someone else.”
So what is the final decision? Will our alien friend decide to be an entrepreneur or an employee? Well, after thinking things over, she decides that she’d be better off applying for a few scholarships, going to school, working on her English and business knowledge, making some contacts, and developing some business plans while interning at a company in the field she is interested in, and then venturing off on her own. Smart alien.
A Day in the Life of a Young Entrepreneur
by Ryan P. M. Allis
Article online at http://www.zeromillion.com/young/entrepreneurial-day.html.
I had been wearing a suit for thirteen hours. I came in, unbuckled my belt, and let out a sigh of relief. I walked to the balcony and leaned, fending off my drunk suitemate. Finally, the day was over. I had a splitting headache, but it was worth it.
I woke up that morning at 8:45am, rather early considering I had gone to bed at 4am. I put on my new suit, brushed my teeth, and went down to the ground floor to meet my friend and business partner Aaron. I jumped in his car and we headed to Raleigh. Thirty minutes later we ended up at the entrance to my law firm. We waited in the board room for ten minutes before being greeted by Merrill, our attorney.
We told Merrill that we wanted to start a company. Both Aaron and I had incorporated companies before, so we knew the basics. But we had some questions on the proper vesting schedule, profit sharing agreements, and some terms in the shareholders agreement, so Merrill helped us with them. During the meeting we agreed to vest our stock over two years, which means that we would receive the stock gradually over time as it vested to the full amount. We also decided to incorporate the company as a Deleware C corporation due to the advantages in case law, added ease in raising investment funding, and advantage in the case of an exit event (selling the company).
To close the meeting, Merrill told us what we needed to get to him to get the company going. He needed the name of the company, the state of incorporation, the breakdown of ownership, the vesting schedule, salaries, the bonus schedule, the number of shares to create, the address of the company, and what we would define employment as for each person’s employment agreement. We agreed to have the ‘who gets what and what should we call this company’ discussion later on in the week and send everything to him then.
After the meeting Aaron and I drove back to Chapel Hill. I had already missed my History Recitation on Cardinal Richelieu and was not about to show up to my 12:30 psychology class in a suit. So I had Aaron drop me off at my dorm on south campus and then walked down to the Kenan Center where I work at the Center for Entrepreneurship and Technology Venturing (CETV). I had some prep work to get done for the next big event in my day.
In five hours the CETV Start-up Clinic would commence. I had been planning this event for a month and was excited that the day was finally there. Before then, I had a brochure and survey to create and a presentation to prepare. I finished these, and then went to the room to check that the A/V equipment was working properly.
At the clinic, six businesses run by UNC students would be presented to a panel of experienced coaches including two successful entrepreneurs, a venture capitalist, and two business professors. Each business would have five minutes to make a presentation and then ten minutes for feedback and advice from the coaches.
At 5:20, I went down to the McColl 2575 where the event was to commence in forty minutes. I met with the presenters and then welcomed the coaches. By 6:00pm about sixty audience members had arrived. We began at 6:05. A team representing MainBrain School, a company selling school administration software began their presentation at 6:15, followed by Alpha V, Inc., IntelliContact Corporation, UNM Solutions, LLC, VenturePresentation, and GMA Entertainment, Inc. I moderated the event and also presented IntelliContact, the email list management software company I am co-founding with Aaron. After the clinic we held a reception at which the presenters, coaches, and attendees were able to network and exchange advice and contacts.
Following the reception I cleaned up and then got a ride back to Ehringhaus Dorm. I had been wearing a suit for thirteen hours. I came in, unbuckled my belt, and let out a sigh of relief. I walked to the balcony and leaned, fending off my drunk suitemate. Finally, the day was over. I had a splitting headache, but it was worth it.
A note on incorporating
In general, when incorporating a company, one does not need to go to law firm. If incorporating a company in the U.S., one can do it online for about $220. One simply needs to know the name of the company, the number of shares they wish to create, and which state they wish to incorporate it in. Once incorporated, one will receive their Articles of Incorporation from the State Attorney’s Office and a set of by-laws and stock certificates. Once this occurs, you contact the IRS to get an Employee Identification Number (so you can open a bank account and hire employees) and choose whether to continue as a C corporation or file form 2553 to elect to be an S corporation.
It can be a good idea, however, to incorporate through your law firm however. Especially if it is your first time incorporating or if you have more than one founder. In our case, we wanted help because we had never incorporated a company with more than one founder and wanted access to the good connections of our lawyer. Incorporating through a lawyer can cost anywhere between $500 and $2000 depending in the services you need.
Definitions for Young Entrepreneurs to Know
In order to keep top management and founders around one can vest his or her stock over a certain period of time so that they receive. Putting vesting in the stock restriction agreement has been known to put ‘golden handcuffs’ on founders and top management and is generally a good idea for a company that wants to protect itself against a key person leaving and taking all their stock with them.
Equity is shares (ownership) in a company. The more equity you own, the more votes you will have to elect board members and the more you will benefit when the company is sold or has another exit event.
Stock options are options to purchase stock (shares in a company) at a future date at a specified purchase or execution price. They can be used to incent employees and management or as bonuses for performance. There are two types of stock options, Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NQSOs). ISOs can only be given to employees, whereas NQSOs are used for non-employees such as outside contractors or board members.
Distinguished Entrepreneur Interview with Colin Wahl
Bio: Colin is Vice-Chairman, Founder and Board member of InvestorForce. He wrote the business plan for InvestorForce and launched this firm in 1999. The company raised funding from strategic investors including CalPERS (California Public Employees Retirement System), Merrill Lynch, Mellon Bank, Thomas Weisel Partners and Internet Capital Group. Previously, he was Founder and President of Momentum Group, Inc., a company that specialized in providing strategic consulting for investment companies, including Morgan Stanley.
As Vice President, Marketing with SEI Investments, a rapidly growing entrepreneurial company, Colin helped launch the firm’s first institutional investment product securing nearly $1 Billion in assets. Prior to SEI, he was a Brand Manager with The Procter and Gamble Company responsible for managing the business strategy, pricing, product development and promotion for some of the company’s largest brands. Colin began his career with KPMG where he was managed engagements for a diverse set of clients including Volkswagen and General Electric. In his spare time, Colin has also actively participated in angel investing through an angel investing group based in Philadelphia, PA. Colin holds an MBA with distinction from the University of Michigan, Ann Arbor and a B.Com from the University of Toronto. He is also a Chartered Accountant (CA) and a Chartered Financial Analyst (CFA).
What attributes make a successful entrepreneur?
1. Persistence – the ability to bounce back from frequent disappointment
2. Passion – an ability to get excited and motivated by a higher purpose than money
3. Leadership – an ability to inspire others
What do you believe are the necessary elements for a business venture to succeed?
1. A Strong Management Team — that "really" works well together, sets the vision & strategy
2. An ability to execute – put ideas into action
3. Intellectual honesty – don’t fool yourself about what is/is not working
4. Market-driven approach – build the business by listening to customers
5. Continuous improvement – always strive to improve and get better
How essential do you see an undergraduate degree or MBA being for an entrepreneur?
Not essential, but I think having an undergraduate/MBA truly enhances your probability of business success by helping you "ask the right questions" and reduce the number of mistakes you will inevitably make as an entrepreneur.
What role has academic education played in your own life versus the role of experiential learning and what has been the relative importance of each?
Academic learning has exposed me to business building & management concepts/ideas and experiential learning has allowed me to put these concepts/idea into practice&ldots;I truly believe you need both equally – like taking lessons before playing golf/tennis or a chalk talk before a big game.
What are the three most important lessons you have learned about business and entrepreneurship in your lifetime?
1. Be persistent and never give up, pause think and keep going
2. The team is the brains of a business&ldots;it has to work like a well-oiled machine
3. Execute with excellence, many great ideas never happen or fail due to poor execution
4. Just get out there and do something&ldots;"let opportunity hit you"
What have been the keys to your success?
1. Finding great people to work with as part of a team
2. Being passionate about your ideas and getting others excited about it
What advice would you give to an aspiring young entrepreneur?
Go for it, it’s an incredible chance of a lifetime – as the saying goes, better to have tried and lost than never to have tried at all! The riskiest thing to do is not to try&ldots;then the chance of success is zero. The downside: even if things don’t work out you will gain amazing experience that will help you even if you end up having to go back to working for someone else.
What books would you recommend to aspiring entrepreneurs? Which books have influenced you the most?
Control Your Own Destiny or Someone Else Will, Noel Tichy and Stratford Sherman
Enthusiasm Makes The Difference, Norman Vincent Peal
Think and Grow Rich, Napoleon Hill
How to Win Friends and Influence People, Dale Carnegie
Describe some of the biggest challenges or obstacles you’ve have encountered as an entrepreneur? How were these overcome?
Being turned down repeatedly for funding – persistence, keep coming back in smarter ways (for example, building working prototypes, bringing potential customers to due diligence meetings)
Building a strong management team – great individual players did not work well as a team. Made hard decisions to prune the team and bring in new managers that played well together.
What memorable mistakes, if any, have you made in business? What did you learn from them and how can they be avoided?
Brought outstanding individuals onto the management team, but they did not work well as a team. Learning: just as the tallest basketball players do not necessarily make the best basketball team, the best individual managers do not necessarily make the best management team. How to avoid? – don’t just look for the best people&ldots;make sure the chemistry works
Grew the company too fast. Learning: lose focus and spread resources too thin. How to Avoid: pick a niche, focus your resources/energy, get successful and then expand.
What trends and changes do you see occurring in business today? What new technologies and industries will everyone be talking about in twenty years ?
Trends/changes – more people will opt for the entrepreneurial route for lifestyle reasons and financial independence vs relying on a large corporation where a job security is increasingly deteriorating and lifestyle choices are difficult to control.
Technologies/industries in 20 years – merging of technologies — Internet, TV, phone/fax and PDA’s.
Global Expansion – 3rd world countries will continue to grow creating huge business opportunities for U.S. companies.
What are the best and worst things about being an entrepreneur?
Worst: Loneliness – you are on your own, nobody supports you because it’s hard for them to see what you see and feel the excitement that you feel in the early stages
Best: Freedom – much more control of your own destiny and your entire life!
Would you rank the following attributes in order of greatest to least importance for an entrepreneur, and comment briefly on the importance (or unimportance) or each.
1. Persistence – need to get through tough times, you will never get to the good times without getting through the difficult times.
2. Motivation and Ambition – "you" have to be the business catalyst
3. Leadership and the Ability to Inspire – need to "work through others"
4. Confidence – get through the tough times
5. Being Able to Build a Solid Team – build brains of the company
6. Having a Bias towards Action – ideas mean nothing if not executed
7. Ability to Communicate Effectively – inspire people, focus them in tough times
8. Integrity – be ethical and fair always&ldots;this is the heart of your business
9. Being Able to Execute – business is about "making things happen"
10. A College Degree – helps build critical thinking skills
11.Having a Good Idea or Plan – need this to focus resources and people
12. Having the Right Advisors – get an outside perspective and prevents "tunnel vision"
13. Knowledge of Marketing – need this skill/insight to grow revenue
14. Knowledge of Accounting and Finance – know where $ is going, how and why.
15. Good Networking Skills – helps in hiring, raising money and business development
This concludes issue three of The Young Entrepreneurship Herald. We’ll see you in April.
"Nothing great is ever achieved without enthusiasm." – Ralph Waldo Emerson