U-M’s Faley on Entrepreneurial Programs’ Explosive Growth, and Ending the Midwestern Shame Game
“Entrepreneurialism is a virus that must be spread.” So said Samuel Zell 12 years ago as he and Anne Lurie (on behalf of her deceased husband Robert) gave the University of Michigan Ross School of Business $10 million to establish the Zell Lurie Institute for Entrepreneurial Studies.
Since then, the Institute has extended its reach beyond U-M, playing an active role in the management of several statewide initiatives, and supporting regional entrepreneurial organizations that serve as a catalyst for economic development. Just last week, the Princeton Review named U-M as having the fifth best graduate entrepreneurship program in the country.
“What we’ve done in 12 years is codify what entrepreneurs really do,” says Tim Faley, managing director of the Institute and adjunct professor of entrepreneurship. “We have broken it into logical and learnable steps that span from ideation to success and that involve both classes and action-based learning.”
Faley says he collaborated with an unnamed serial entrepreneur in Ann Arbor to vet the steps he had in mind to teach his students. He said at first, his friend scoffed at him, saying entrepreneurialism was all instinct and couldn’t be learned. But as Faley explained his theory, the serial entrepreneur looked down at the notes pertaining to his latest project scattered all over the table and realized Faley’s methodology matched the way he was going about turning his “problem” into a fully realized business.
“We knew we got it right when the steps applied to both the family business entrepreneurial model and the technology entrepreneurial model, and all other entrepreneurial models in between,” Falhey says.
Faley says now is the perfect time for students to delay their entrance into the workforce for a few years while they work on bringing an idea hatched and honed in college to business fruition. To that end, in 2008 the Institute “blew up” the way they did their annual business-plan competition, doing away with the typical format where students form teams, make pitches, and are awarded prizes, all in the matter of a few days or weeks.
“We created a crazy, insane system that turned the competition into a four-month process. I compare the format to an extended March Madness,” Faley says.
In Round One, students articulate the problem that needs solving, who their potential customers are, a solution to the problem, and how their idea will make money. In Round Two, they perform market analyses. Round Three is the classic pitch round. Round Four has the final four teams sitting down with investors.
“The investors give the students three minutes of uninterrupted pitch time, but then they’ll jump in and ask anything,” Faley says. Throughout all rounds, members of teams who are eliminated are encouraged to re-combine with successful teams.
Faley says winning teams are not only introduced to venture capitalists, but they’re sent on the road to compete in business plan competitions across the nation, which allows them to refine their business plans as well as expose them to an array of investors outside of Michigan.
Although the prize money is welcome, Faley says students routinely tell him that the feedback they get is the most valuable part of the experience.
He cites one student project, Mobius Microsystems, which racked up $200,000 in prize money while traveling on the business competition circuit. The students used the $200,000 as pre-seed money. Venture capitalists contributed more, and Faley, speaking like a proud papa, says that in 2010 Mobius was acquired by Integrated Device Technology.
Faley points to Mobius as proof that the entrepreneurial climate in Michigan right now is much better than it was even a few years ago. He says it’s now a legitimate career option for students, as these entrepreneurial programs are “exploding” nationally, to take a few years off after graduation to try their hand at starting a company. The only hindrance he sees is Midwesterners’ tendency to look at entrepreneurial failure with shame and quit, whereas in Silicon Valley, failure is seen as a badge of honor one acquires, sometimes more than once, along the path to success. Faley says he’s working to overcome the seemingly inborn Midwestern inferiority complex.
“Eight years ago, with the Big Three, it used to be the students’ perspective that you either start a company or join Ford, GM or Chrysler and have a 30-year career. That’s no longer true. And if you’ve been involved in [business plan competitions] and exposed to so much, you’ve really expanded your knowledge base for the next opportunity. The risk playing field has really been leveled.”