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- Published 20.09.12
Can you build a technology entrepreneur from scratch in four months flat? Yes, contends a global training programme called the Founder Institute, which was started in 2009. For tuition of less than $1,000, students attend classes with one goal in mind: to create a fully operational company. In fact, they are required to incorporate before they can graduate.
To be accepted, students don’t need to have a fully baked idea, but they must take a test that the institute says can predict their entrepreneurial success. They can keep their day jobs while attending class, but that does not mean the programme is easy. The workload is gruelling, and 60 per cent of the students fail to graduate.
But this for-profit institute, based in Mountain View, California, says it has helped start more than 500 companies. It has done so by going global, with chapters in 14 countries, in a total of 27 cities. And it aims to make money partly through its equity stakes in the companies that its graduates create.
Boaz Fletcher, 44, a consultant to new companies in Israel, started the Tel Aviv branch this year. “Israel is amazing at technology but not great at building sustainable businesses, and that is one of the things the Founder Institute teaches: how to build an enduring, stable company,” he said.
The branch’s first class of nine students will graduate in September. The institute is the brainchild of Adeo Ressi, 40, who has started eight companies of his own. Back in the mid-1990s, he was a co-founder of Total New York, an online regional city guide that was acquired by AOL.
Ressi saw a need for nurturing entrepreneurs even before the idea stage. He set out to create a vocational school of sorts to teach the nuts and bolts of entrepreneurship, setting it apart from highly selective programmes that often support start-ups before the venture capital stage. One of the best known of these “accelerators,” TechStars, accepts only 1 per cent of applicants.
Ressi wants to reduce the failure rate for new companies. For every Dropbox, the popular file storage service, there are hundreds of businesses that never make it, he said, adding: “Why is that the case? And can it be fixed?”
He came up with the idea for the institute as CEO of TheFunded.com, a website where entrepreneurs and chief executives rate venture capital firms and investors. Through the site, he has a community of founders at his fingertips, and he was able to ask them: What would they have done differently at the beginning?
From Tel Aviv to Chicago, the curriculum is partly based on answers to that question from 2,000 executives. Classes often consist of around 30 students, with a much smaller number making it to graduation. In 15 sessions, students learn about topics like revenue, costs and profits; marketing and sales; presentation and publicity; and fundraising. Sessions are taught by chapter leaders and by local business people who can also serve as mentors. Fundamental to the institute is the belief that many aspects of entrepreneurship can be taught.
Jose Luis Senent, 43, had been a car broker in Paris for 20 years but had no previous experience with start-ups. He graduated from the Paris chapter in April 2011 and now runs Autoreduc, a group-buying site for cars. “I cannot imagine starting a company without knowing what I learned at the institute — there is so much to know about business models and raising money,” Senent said. The institute connected him with mentors who challenged his ideas and set his company in the right direction, he said.
Ressi says he wants to help budding founders avoid rookie mistakes — like bad Web design and off-key marketing, or creating the wrong corporate structure.
Carlos Rozo, 38, a graduate of the chapter in Bogota, Colombia, said the institute steered him away from a potentially fatal mistake — starting something big and complicated — and toward something more narrow that would fill a niche. He abandoned plans for a content-sharing platform in favour of Thotz.com, a provider of software that companies can use to share information among employees. Rozo says he has received $50,000 in seed funding from Wayra.
“Colombia is really behind this amazing opportunity to have great tech start-ups. It’s a desert down here,” said Alan Colemenares, 48, who began the Bogota and Medellin chapters last year.
The first semester in Bogota ended in the spring. So far, five out of nine graduates have secured $50,000 or more in outside funding, according to Colemenares.
Vietnam was similarly lacking in programmes to encourage technology start-ups, says Tuan Pham, 37, who began the Hanoi and Ho Chi Minh City sections there in 2011. The chapters have produced five companies.
Chapter leaders are generally seasoned entrepreneurs from the area, and they often find sponsors to cover costs of running the local programme, which can vary from around $25,000 to more than $100,000 a semester, depending on the number of staff members. Colemenares got sponsorship from .Co Internet, a company based in Bogota that sells domain names. About 80 per cent of chapters are sponsored by a law firm, where the students typically end up incorporating. The law firms usually charge students around $1,000 to incorporate.
Local chapter leaders acquire a stake in the companies they help nurture. Graduates put 3.5 per cent of their company into a shared equity pool that expires after 10 years. If a company is sold or goes public in that time, 30 per cent goes back to the mentors, 30 per cent to the entrepreneur’s graduating class, 25 per cent to the local chapter leadership and 15 per cent to the Founder Institute.
The institute says that 42 per cent of participants have received external funding in their first six months of operation and that 9.9 per cent of its companies have failed. As much as the Founder Institute aims to expand entrepreneurial opportunities, it also helps some people come to grips with the idea that they may not be in the right position to run a high-growth start-up.
Phil Libin, a mentor at the institute and founder and CEO of Evernote, the online software program, says he spends as much time discouraging as encouraging participants.
“I ask people, ‘If I could guarantee that you would spend the next 10 years developing a product millions of people will use but you will make no money for a decade and it will be a total financial failure, will you do it?’ Most people answer no,” he said.
Not surprisingly, he said, “some people drop out of the programme because of the question.”