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The Five Reasons Why Business School Was Right For Me

Posted on May 16, 2013 by Megan Kauffman

By David Klein, Wharton Alumnus; Co-Founder, CommonBond

“If I want to start a company, do I really need to go to business school?” is a question I get a lot.

Frankly, I think it’s a misguided question. If you want to start a business (as I did, heading into business school), then the real question is, “What do I have to do to maximize my chances of being a successful entrepreneur?” For some, that answer will mean going to business school, and for others, it won’t. 

For me, going to business school was the right move. There are several reasons why, and I’d like to share five with you now.
1. Adam Grant. Wharton professor Adam Grant is something of a burgeoning national treasure with the runaway success of his recent book Give and Take (#2 on the New York Times Best Sellers list in April, second only to Sheryl Sandberg’s Lean In). But before he began shaping the national conversation on how we think about success, he was Wharton’s highest rated professor who remembered every one of his students’ names while citing research seamlessly into conversation (all of which he still does). It is this Adam Grant on whom I feel incredibly fortunate to be able to lean when heading into an important negotiation or needing to reflect thoughtfully about any resistance the company is facing. The funny thing is I never took a class with Adam Grant while at Wharton. In fact our paths never really crossed while there. Because I went to Wharton, and students there told us we had to meet, Adam and I ultimately connected and have been able to engage in meaningful dialogue ever since.

2. Neil Blumenthal, Wharton MBA 2010. Co-Founder and Co-CEO of Warby Parker, Neil Blumenthal, came back to Wharton in August of 2011 to speak to a hungry, wide-eyed group of students during pre-term. Telling his story strengthened and further inspired my desire to build a company with a strong social mission. He was gracious enough to accept an invitation to coffee, and we began an ongoing dialogue. A year later this turned into hosting my company’s very first offsite at the Warby Parker headquarters in New York. I could think of no better a setting to inspire my team. It was just two years prior that Warby Parker came out of the Wharton Venture Initiation Program (VIP) from which we had started. Inspiring footsteps to follow.

3. Wharton San Francisco. I didn’t participate in the Semester in San Francisco that is available to second year MBAs, but my co-founder, Michael Taormina, did. It was there that a chance encounter with a former colleague led us to connect with the former head of a major U.S. investment bank, who would go on to become one of our company’s most valued advisors. Mike was also able to work with some of Wharton’s best professors – Karl Ulrich, Len Lodish, and David Wessels – in the service of our growing start-up.

4. Founders’ Club. Some of the smartest and grittiest people on campus were active members of Founders’ Club. I first learned about the club at Wharton’s Welcome Weekend in April 2011 from Davis Smith, (Wharton MBA 2011) Co-Founder/CEO of Baby.com.br, one of the most respected start-ups in Brazil. Hearing his entrepreneurial story and the power of plugging into an entrepreneurial community inspired me to join the club he founded. It was in the Founders’ Club’s weekly workshop-style get-togethers that I solidified my entrepreneurial knowledge base and mental frame in evaluating good businesses from bad. I also consider myself incredibly fortunate to call many of my fellow Founders’ Club entrepreneurs both good friends and continual inspirations, such as Samir Malik (Wharton MBA 2013), Co-Founder & CEO of 1DocWay, Austin Neudecker (Wharton MBA 2012), Y-Combinator grad and entrepreneurial energizer bunny, and Derek Kleinow (Wharton MBA 2013), Founder of Tiger GPS and current investment committee member in First Round Capital’s Dorm Room Fund.

5. Wharton Social Venture Fund (WSVF). I didn’t have enough auction points to get a David Wessels VC course while in school, but I was part of WSVF – an organization that not only taught me how to think like a venture investor, but gave me access to Wessels’ ingenious teaching (ingenious in his ability to turn complex topics into easily understandable pieces). It was also through WSVF that I learned about and was encouraged to attend a weekend-long Training the Street training on LBO modeling. Between Wessels’ involvement in WSVF and the LBO training, I probably learned more about advanced structured finance than I did in any of my courses.  A year later, my company closed its first alumni-backed student loan fund.
What’s the point?

The point is: business school is an insanely fertile environment.

Will you have a different experience than I did? Absolutely. Will you find your versions of Adam Grant, Wharton San Francisco, and Founders’ Club just the same? Let’s put it this way: if you approach business school with the right amount of purpose and focus and grit, then my money says there is no doubt that you will.

That’s the beauty of business school.

 

Common Bond co-founders Michael Taormina (left), David Klein and Jessup Shean

Common Bond co-founders Michael Taormina (left), David Klein and Jessup Shean

Bio: David Klein is Co-Founder & CEO of CommonBond, an alumni-backed student lending platform that lowers the cost of loans for student borrowers while improving financial returns for alumni investors. David founded the company while at Wharton, along with his two co-founders, Michael Taormina (Wharton Class of 2013) and Jessup Shean (JD/Wharton Class of 2012). The company is an alumni member of Wharton’s start-up incubator, the Venture Initiation Program.

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Startups, Ethics & Regulation

Posted on May 15, 2013 by Megan Kauffman

By Rick Thompson, Wharton MBA 1996; Partner, Signia Venture Partners

A few years ago I sold some Montana lakefront land to an entrepreneur by the name of Steven Sann with the grand vision of building a youth camp to foster “self-reliance, cooperation, and problem solving in America’s future leaders.”  ‘Great to see an entrepreneur giving back,’ I thought to myself.  I was stunned when I recently learned that this supposed altruist was now charged by the Federal Trade Commission for running a $70M phone scam – charging customers for services they did not order. While I never met the man, I was intrigued by how an apparent do-gooder could be such a dirtbag, so I dug deeper. Turns out Steven Sann worked with third party marketers known as offerwalls, who in turn worked with destination websites, to deliver package ‘offers’ to consumers.  Ouch.  Much to my horror, I realized my real estate transaction may not have been my first dealing with Mr. Sann.

Most consumer applications attempt to deliver users a low friction experience in getting them into the top of the sales and conversion funnel.  In the ‘free-to-play’ model of social and mobile gaming, for example, users are then monetized through the selling of virtual goods or services.  Users can pay real money for these goods or obtain them by completing what are known as offers in the industry.  An offer could be something benign such as signing up for Netflix, in which case an affiliate fee is earned, or it could be something more insidious such as providing your phone number in exchange for a ‘free ring tone.’  Somewhere buried in the contract for a free ringtone may be something like an agreement to accept a voice mail service along with an auto-renewing phone bill.  Steve Sann had hundreds of thousands of paying customers with only about a dozen actually using his voice mail service.

I first became aware of the offerwall industry in early 1998 when Playdom, a Signia portfolio company in the games space, signed on with OfferPal to handle both credit card processing and offers for its free-to-play games.  Playdom and other data driven companies viewed the offerwalls as a commodity to be optimized for maximum revenue.  The result was a race to the bottom, with offerwall providers resorting to increasingly dubious schemes aimed towards monetizing users and maximizing revenue.  By the end of 2009, offers were delivering about 30% of total revenue to games on Facebook and Offerpal, the most aggressive of the three major offerwalls, dominated the business.

This scammy offer practice only came to a halt after a major public outing from Michael Arrington of Techcrunch (Scamville: The Social Gaming Ecosystem of Hell).  The most serious offender, Offerpal, was booted off the Facebook platform, and Trial Pay, the most legitimate of the offerwalls according to Arrington, was granted de facto monopoly status.  

In this case, the need for regulation was averted, justice prevailed and the company taking the high road was rewarded.  However, I cannot help but wonder how much damage was done in the interim, not just to the users whose trust was betrayed, but to the ultimate potential of the industry.

Entrepreneurs pioneering new business models and platforms can suddenly find themselves facing ethical dilemmas they are unprepared to handle.  Do you pursue each and every underhanded tactic in the book to maximize revenues? Or do you sacrifice your business to those that do?  In established lines of business, where innovation is slow, the rules of conduct are pretty well established.   However, in emerging business and in areas of innovation, I suspect this dilemma is played out all too often and the good guys do not always win.  In the case of TrialPay, the company emerged victorious only because their competition was eliminated and they received a de-facto monopoly.  If instead Facebook had decided to act as a regulator, introducing and enforcing rules of conduct, it is likely that OfferPal would have continued to dominate since its lead was just too great.  In that event, TrialPay may not have even survived. In retrospect Facebook made the right decision.  By establishing a monopoly, Facebook removed competitive pressure that would have inevitably pushed the boundaries of ethical behavior.  Granting monopoly status, not to the leader, but to the company that had exhibited the most restraint, was also the right thing to do.  Even though Facebook wasn’t necessarily proactive, it deserves kudos for having created the right structure and incentives.

Emerging industries are best served when its leaders articulate a vision for the industry.  When building out an ecosystem, the platform’s values help guide the development and behavior of the ecosystem.  Facebook has yet to communicate vision or values and the ethos of its current ecosystem reflects that.

In the past year, the social casino category has been one of the few growth areas on Facebook, attracting entrants from the casino industry as well as traditional free-to-play Facebook developers.  This will be an interesting test for the platform as two very different worlds collide.  The land-based casino industry has long lived under very strict regulations designed to protect the consumer.  The free-to-play gaming industry on Facebook, on the other hand, has no such rules.  It is widely suspected that certain social casino games made by developers from outside the land-based casino industry do not use random number generators to generate ‘luck.’  Rather, they find that they make more money with scripted outcomes designed to maximize addiction and revenue.

It is a welcome development that leading representatives from both the gaming and land-based casino worlds – including Caesar’s and Zynga – find common ground in joining together to fend off regulatory efforts and ‘self-regulate.’  As a first step in this process, Jeff Hyman, CEO of Idle Games (creator of Fresh Deck Poker, a company in which I invested) has called for self-disclosure, transparency, and making the data stream available for external verification.    It is in everyone’s interest to avoid another Scamville as well as governmental regulation.   This credible move by the industry toward self-regulation is a welcome initiative.

For further reference please see the following articles:

Steven Sann case: http://www.huffingtonpost.com/2013/01/21/bogus-phone-bill-charges_n_2521334.html

Jeff Hyman’s opinion:  http://www.socialcasinointelligence.com/tag/jeff-hyman/

 

ThompsonBio: Rick Thompson is a Wharton MBA ‘96 and partner at Signia Venture Partners. Signia is an early stage fund dedicated to helping passionate entrepreneurs realize their vision and build impactful, high-growth ventures.

Follow Rick on Twitter: @rl_thompson & @SigniaVC

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Thoughts On Starting A New Company

Posted on May 10, 2013 by Megan Kauffman

By Rob Coneybeer, Wharton MBA 1996; Co-founder, Shasta Ventures

Together with two co-founders, I started Shasta Ventures from scratch.  Questions like “When did I decide to start a new company?” “What was that like?” and “Where did it begin?” are often asked. Here’s where it begins.  

A startup is a product of your imagination, fueled by a burning desire to serve your customers and create something new.  When I teamed up with Tod Francis and Ravi Mohan in early 2004, Google hadn’t gone public yet,  Amazon was about to go out of business, and eBay was at historic lows in the stock market.  At the time, no one thought the consumer mattered in the technology world.  Venture firms were openly abandoning their consumer practices.

When we started Shasta, the three of us took a deeply contrarian view.  We believed in the importance of the end-user and started with a core belief in the power of consumer-driven technology businesses.  We wanted to serve entrepreneurs (our customers) who shared that same point of view.

Our early slide decks talked about the rising influence of consumers in technology.  Computing technology was originally used in the 50′s by governments to compute ballistic missile trajectories, and then in the 60′s by large companies to automate payroll.  Next came minicomputers in the 70′s for medium-sized business, and the rise of client/server technology in the 80′s led to the adoption of PCs by millions of small businesses.  Then came the consumer, with the Internet in the 90′s, but hype outpaced reality, leading to the boom of 1999 and bust of 2000.

Despite the aftermath of the Internet bubble, the underlying consumer demand for technology was clear to us.  Consumers loved technology as it became cheaper, more powerful, and far easier to use.  Internet traffic continued to grow rapidly.  Based on our convictions, and a strong investing track record, we went on the road in 2004 to raise a $210 million inaugural fund based on an end-user-oriented strategy for investing in technology startups.  We had well over 120 “first meetings” with prospective investors.  Thanks to our track record, most institutional investors wanted to meet with us, but because the three of us hadn’t worked together before, and consumer startups were completely out of favor, many prospective investors found it easy to quickly say “no”.  The “no’s” rolled in faster than we expected. Would we ever be able to raise the fund?

As you might imagine, we had quite a few sleepless nights in 2004.

Raising a first-time venture capital fund requires a LOT of investor due diligence, so each “yes” took longer than we hoped, after a litany of “maybes”.  Eventually, we closed the fund after six months of active, full-time fundraising.  In 2005 we started to invest, and since then we’ve built our firm by helping entrepreneurs build great end-user oriented companies – both consumer and enterprise focused – with early investments in companies like Mint.com, Lithium, Apptio, Nextdoor, Zuora, RelayRides and Nest Labs.  We’ve also had our share of failures, with plenty of investments in companies that haven’t succeeded.

I must say that I’ve found it interesting how accurate we were about the skyrocketing influence of the consumer in technology start-ups.  I’ve also been surprised by how rapidly other firms pivoted back into the space.  Even enterprise technology has been redefined by the widespread consumer trend of “bring-your-own-device to work” instead of company-issued phones and laptops.  Being correct about this trend certainly helped us, but our strategy wasn’t contrarian for long.

Reflecting on the last nine years, I’ve often thought about when exactly I decided to found a company. The answer is, I don’t really know.  I think most entrepreneurs will tell you the same thing.  There wasn’t a single moment in which the company was started – it was a continuum of events, starting with leaving my former firm.  In fact, I still feel like it hasn’t ended yet.  We still have so much to build and prove at Shasta and we work every day like our lives depend on it.  Most entrepreneurs feel the same way about their companies, even after an IPO or other liquidity event.

 

Rob photoBio: Rob Coneybeer brings to Shasta Ventures deep experience in building startup companies. Prior to co-founding Shasta, he was a general partner at New Enterprise Associates (NEA) where he led 15 early-stage investments in core infrastructure technologies spanning semiconductors, software and networking equipment. Prior to joining the venture-capital industry, Rob served as a lead integration and test engineer in the Astro Space division of Martin Marietta. While at Martin Marietta, Rob helped build the first EchoStar spacecraft. Rob earned a master of science in mechanical engineering from the Georgia Institute of Technology and a BS in mechanical engineering from the University of Virginia. He also holds an MBA from the Wharton School, where he was named a Palmer Scholar.

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Delayed Gratification: Building A Product-Based Business For The Third World

Posted on May 9, 2013 by Megan Kauffman

By Samuel Reeves, Wharton Undergraduate 2005; Co-founder, Humanistic Robotics

I co-founded Humanistic Robotics, Inc. (HRI) in 2004 while I was a student at Penn and taking great classes like Ian MacMillan’s Societal Wealth Venturing (MGMT 212). In contrast to some of the more famous stories of dorm room entrepreneurs whose ventures grow so fast they have to drop out of college, mine has taken its time. Fortunately, we’ve survived the valley of death that many companies fall victims to between invention and adoption, (fingers crossed) and have some great things on the horizon.

While at Penn, I got caught up in the idea of doing well and doing good by using business school frameworks like Ian MacMillan’s Discovery Driven Planning to make a difference in the world. My business partner just got back from the Balkans, where he saw the landmine problem firsthand, and sketched out an idea for a small robot that would detonate mines by applying pressure to the ground. We hatched the concept of HRI as a technology company that would tackle the world’s nasty problems, the first being landmines. Even now, when we’re much more commercially focused by necessity, our original orientation towards our mission, “making the world safer with engineering and design,” still stands out in the way we talk about ourselves and develop product.

We set out to make an impact on the landmine problem by first learning about what exactly was keeping it from going away. All I knew at the time was that Princess Diana was involved in the issue, so I called her NGO and asked them why they couldn’t go faster. After a short education and a little head scratching, they passed me off to some folks in Geneva that ran a think tank doing exactly what I was doing – trying to figure out new ways to solve the problem. After a few months of conversations, they decided a new study had to be done…and who better to do it than the guys asking the questions already? They hired my partner and I for a summer-long study of demining operations worldwide, with plans to send us to Afghanistan, Thailand, Bosnia, Croatia, a few of the Ministries of Defense, and back to Geneva. They apologized that they could only pay me the equivalent of about four times what I would have made in a New York finance internship, and I decided that I had to come clean that I was a college student, not the older entrepreneur with whom they thought they were working.

After spending the summer in Afghanistan, I graduated Penn with the best customer research I could have done, and seed money in the form of profits from the consulting work. We poured the cash into prototypes, engineers, lawyers, and trips to convince people to give us more money. By 2006, we were about to run out of money, and we had seen how hard it was to raise capital as entrepreneurial neophytes for a physical product that would take teams of engineers and an assembly line to produce, for a problem that only exists on the other side of the world. Fortunately, we met some folks in the US Army that thought our ideas were smart, and they had some cash lying around to try new things. After years of avoiding the military side of the landmine issue in favor of the humanitarian crowd, we quickly realized that all money was green and became a defense contractor. Over the next few years, our Army funding, team, floor space, and technology all flourished.

It took about six years to finish our first product – a mine roller – which is an attachment to a vehicle or robot that puts pressure on the ground to trigger landmines and improvised explosive devices (IED’s). Unfortunately, the threat of these munitions is growing as conflicts continue to bubble up in regions with poor governance and anemic economic opportunity, but we’re trying our best to help.  In our first big deployment, the UN bought several containers of the product for use in South Sudan, and we traveled to Juba, the capital, in December 2012 to oversee deployment of our rollers. Along the road to finishing the roller product, we developed some innovative robotic technologies for safe remote control of big machinery. The original purpose of the robotic technology was landmine clearance, but we see a lot of opportunities to provide innovative remote products in domestic industries like healthcare, firefighting, construction, and manufacturing. As we expand into these industries that are a bit less dangerous and more domestic, we still look for opportunities to mix our mission with our profit. These are all areas where our products can help save lives.

In reflecting on the road to fielding product, I’m struck by how we complicated our task, just by our choice of industry. We chose to develop a product for a niche market that only exists in the most chaotic countries, with a technology that required massive front-end engineering and testing, whose export is controlled by the US State Department, with a purchasing process that is influenced by a global cadre of characters with incentives that are not always aligned, with usage scenarios that are sometimes classified, and if you’re lucky, the ship with your product on it doesn’t get taken over by pirates. But now that the product is in the field and we get the chance to think about how to expand our impact, the end result is extraordinarily satisfying.

There are a lot of innovative thinkers out there coming up with new ways to improve societies in war-torn and under-developed countries – the world needs this more than ever. For them I hope this serves as a motivator, as well as a cautionary tale…you can make the impact you seek, but don’t think it’s going to be easy.

 

Samuel HeadshotBio: Samuel Reeves is Co-Founder and President of Humanistic Robotics, Inc. Samuel got his start in the landmine clearance field as a researcher for the Geneva International Centre for Humanitarian Demining, a multilateral think-tank that is a leading innovator on the global landmine issue. Previously, Samuel worked at the Wharton Small Business Development Center (SBDC), was an active member of the Wharton Venture Initiation Program (VIP), and won the PennVention competition. Samuel has also held positions at financial firms Apex Capital Corp and Texas Pacific Group (now TPG Capital). Samuel Reeves earned a B.S. in Economics with concentrations in Finance and Management from the Wharton School of the University of Pennsylvania.

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Can You Leverage A Social Enterprise In The Era of Crowdfunding?

Posted on May 8, 2013 by Megan Kauffman

By Ron Ben-Zeev, Wharton Undergraduate 1986; Founder, World Housing Solution

That is the question I asked myself a few month ago, while listening to Brian Meece, Founder and CEO of RocketHub, the third largest such platform in the US, who was speaking at a Startup Weekend event I co-organized in Orlando, Florida. Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding, or hyper funding) describes the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations. As Brian was speaking, my mind was spinning in many directions. Can this help my startup? How? Can the funds raised make a real difference or is the potential exposure enough?

I had heard and read about the outliers, the companies who had set out to raise a certain sum only to exceed that sum by a huge factor, millions in some instances. The majority of those seeking to raise funds, even if they raise their target amount, raised only a modest sum. However in 2012, these small sums reached an excess of $2.7 BILLION and have funded more than 1 million campaigns worldwide. A study by Massolution forecasts an 81 percent increase in global crowdfunding in 2013 to $5.1 billion, the hockey stick growth rate everyone seeks. With that knowledge in hand, I approached Brian and discussed my current venture (yes once an entrepreneur, always an entrepreneur) called World Housing Solution (WHS).

The earthquake in Haiti catalyzed the founding of WHS. My partners and I had just developed the concept of our structural insulated composite panels and the tragedy that was unfolding just a few miles off our coast was the perfect place for us to launch our concept. Using Space Age composite-sandwich-construction methods we developed rapidly deployable and reusable shelters and structures that are a solution to today and tomorrow’s emergency, temporary and affordable housing needs.

After reading report after report about the lack of safety and deplorable living conditions in tent villages, we knew we could come up with a better way to help the displaced, both here and abroad, by natural and man made disasters. The reusable shelters can also be used to respond to military deployment and temporary labor housing needs. Movable factories that create the structures can be quickly built anywhere. Although we made some headway in getting noticed by the government and won a few contracts, we were starving for exposure and capital. With that in mind, we dove headlong into a crowdfunding campaign.

So how did we do?

The campaign is still on going. However, on the exposure side, we hit the jackpot. RocketHub was quietly working with the cable TV network A&E TV to establish a strategic partnership affording both an interesting storyline for the network as well as exposure for nascent organizations on RocketHub. Together they launched a multi-platform initiative called PROJECT STARTUP and selected WHS, as one of the first projects to be featured. We are still trying to figure out exactly what it means, both in the short and long term.

One thing is certain; crowdfunding has come through on its promise of exposure. Like anything that comes up along the entrepreneurial journey, it is what you do with opportunities that truly matter. We were given a spark and we are trying to turn it into a raging inferno.

 

Ron Ben-ZeevBio: A 1986 alum of the Wharton School, Ron is recognized for successfully applying his unique blend of diplomacy skills, expertise in entrepreneurship, negotiation, strategic forecasting and planning, and sales and marketing. He currently resides in Central Florida with his wife and three children.

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From Code to Carrots

Posted on May 3, 2013 by Megan Kauffman

By Lucinda Duncalfe, Wharton MBA 1991, Arts & Sciences BA’85; Founder, Real Food Works

After getting my undergrad degree (University of Pennsylvania’s School of Arts & Sciences, Department of Psychology) in 1985, I worked for a San Francisco-based startup then called Dial Info. Twenty six years and six startups later, I sold ClickEquations, a paid search management platform. I played the tech startup game a long time.

Yet after many years of driving very fast in a very straight line, I took a left turn in 2012 and founded Real Food Works, a healthy food subscription delivery company. The idea grew out of my own experience getting healthy by eating better. I saw the trend towards healthy eating, personally experienced the power of it, but also saw how impractical it is. There just weren’t any great tasting, convenient options. I spent almost a year looking for a technology opportunity but kept coming back to the fact that the real problem is with food. Having no interest in being in the food business, I dropped the idea.

Then, in a chocolate-peanut butter moment, while pondering Uber and its “excess capacity” model, I thought: “Why can’t I use restaurants to make healthy food, during their downtime early in the week?” And that’s what we do.

Now I’m in the technology business and in the food business. We’re a mash-up of Uber, Airbnb, Etsy, Warby Parker, and Nutrisystem. And man, is it fun! Strategically, we have to think about the business in two ways: we make (modest) infrastructure and scale investments like a tech company, and manage our partners and margins like a food company. We have a huge vision and work in a grueling weekly production cycle, ensuring that our supply chain gets the right food to the right person in the right condition. Cycle times in the physical world are way longer than I’m used to and margins on food aren’t 90% like they can be on software.

There are challenges, but there is tremendous upside too. We spend all day every day thinking and talking about food. Our partners are wonderful (yes, and sometimes wacky) chefs. We eat, a lot. Most importantly, we’re changing people’s lives. Our customers have more energy and reduced cholesterol; they lose weight and sleep better; their acid reflux, joint pain, and allergies are reduced; and their sex lives improve. It’s only been a year, but so far, this is the most fun I’ve ever had at work.

Lucinda DuncalfeBio: Lucinda Duncalfe, C’85; WG’91, is a serial entrepreneur having founded and/or run 5 venture-backed companies, including TurnTide and ClickEquations. Most recently she founded Real Food Works, a healthy food delivery service.

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Neil Blumenthal Shares the Warby Parker Story

Posted on May 2, 2013 by Megan Kauffman

By Megan Kauffman, BA’11; Administrative Coordinator, Wharton Entrepreneurship

Neil Blumenthal stood at the front of the Ambani Auditorium in Huntsman Hall in a casual stance that made it nearly impossible to distinguish him from the students filling the auditorium. Despite his laid back demeanor, the crowd quickly silenced as he approached the podium. The success of Warby Parker is legendary among students and the audience anxiously waited to hear the story directly from one of the co-founders.

Prior to coming to Wharton, Neil worked in public policy and became disheartened as his visions of change got lost in layers of bureaucracy. Determined to make more of a direct impact, Neil worked at VisionSpring, a non-profit company aimed at serving the one billion people worldwide who are without glasses. With the purchase of prescription eyewear, underserved consumers were empowered with as much as a twenty percent increase in income.

Neil’s experiences there stuck with him as he started his MBA program at Wharton and met Jeff Raider, Dave Gilboa, and Andy Hunt, three other first year students. How could prescription eyewear, something that enabled a sense as essential as vision, cost over $700? The four co-founders of Warby Parker knew this was their way to make a direct impact on the lives of others.

By “leveraging the University to the till,” Neil, Jeff, Dave, and Andy were able to develop a game changing business with only $120K. Countless surveys of Wharton classmates helped the team hone in on the top three priorities for the brand: first, as a fashion brand; second, offering value and service; and third, having a social mission. In their initial business plan, they wanted to price their glasses at $45 per pair, but helpful advice from Professor Jagmohan Raju in the Marketing Department changed their minds. As Professor Raju anticipated, their cost of goods doubled, making the $45 price completely impossible.

Through market research, they were able to determine that $100 was the point at which people thought the product was not too expensive, but was still made with quality. The Warby Parker team reached out to classmates and faculty to lend their expertise as they continued finalizing their business concept. They also took advantage of programs and centers within the University, such as the Jay H. Baker Retailing Center and Wharton Entrepreneurship. The Wharton Venture Initiation Program (VIP) offered them a platform to engage with other student entrepreneurs and the Wharton Venture Award (WVA) helped fund the team one summer, enabling them to focus on Warby Parker full time.  

By February of 2010, they were ready to launch and within four weeks of opening, Warby Parker had a waitlist of 20,000 people. Success continued as savvy marketing built into the product, such as the “try five” concept, lead to a networking effect and brought more customers to the site. Today over half of their sales are driven by word of mouth. Their explosive growth was not without its hiccups, like when they had to negotiate with fourteen different banks before they were able to secure a loan to finance expansion. Through the online store, pop up shops, the Warby bus, and a new flagship store, the brand continues to grow despite any obstacles. The reason? They have a strong sense of who they are as a company. With every decision they make, the key stakeholders, from customers to investors, are in the front of their minds and they have an open environment that allows for honest reviews and learning opportunities to improve.

They also stay true to their social mission by making monthly donations to vision charities and ensuring their company operates at 100% carbon neutral. As a brand, self-imposed constraints allow for greater creativity within their literary aesthetic. This is evident from their unique launch show at the New York Public Library to the new brick and mortar store inspired by great libraries, which saw over 4,000 customers during its opening weekend. As Neil Blumenthal said, “Customers can sense authenticity,” setting Warby Parker leagues above its competition.

Three years after launch, Neil, Jeff, Dave, and Andy have not let their success tear them apart and continue to be friends. Conscious decisions made early on, such as dividing the company equally, helped to ensure their continued friendship. Knowing all four co-founders may not stay with the company indefinitely, they created a monthly vesting schedule to allow an escape valve for anyone who wanted out. They also met regularly at Roosevelt’s, the bar where the idea for Warby Parker was born, to openly discuss any frustrations they had. Neil stated, “You are the biggest impact to your success,” and their willful decision to not let relationships be side tracked by the business ensured their success. From the way they operate as a team to their commitment to making eyewear affordable for consumers everywhere, Warby Parker proves a successful company can do good things for the world.

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Reflections on Judging the Wharton Business Plan Competition Venture Finals

Posted on April 30, 2013 by Megan Kauffman

By Rich Riley, Wharton Undergrad 1996, CEO of Shazam

Just last week, on Wednesday April 24, I had the privilege of being a judge at the Wharton Business Plan Competition Venture Finals.

As I was told by the other judges, The Wharton Business Plan Competition continues to grow and plans keep getting more sophisticated.  This academic year more than 300 plans were initially submitted and I imagine the thousands of hours invested by some of our best and brightest over the course of the competition.  After the three prior rounds, and the contributions of more than 200 participating judges, last Wednesday we were down to the Great Eight Finalist teams.

The day starts for us with a judge’s lunch, which for me is just yet another ‘Wharton Moment’ where you sit in awe of the people you are talking to, the facility you are sitting in and the topics you are discussing.  Richard Perlman (Wharton Undergrad 1968), Maxine Gowen (Wharton MBA 2002) and David Cohen (Parent to Wharton Undergrads 2014 and 2016) were my fellow judges and the kinds of accomplished entrepreneurs whose bios are amazing. There is nothing like sitting with them and hearing them tell their stories.  This year, Richard and Ellen Perlman took the competition to the next level by endowing the Competition’s Perlman Grand Prize so that $30,000 will be awarded to the winning plan each year, forever.

After lunch it was time for the competition.  We had read the plans and had our questions ready.  Each team had 10 minutes to present followed by a Q&A with the judges.  The quality of the plans was exceptional, spanning ventures from healthcare to the automotive to the fashion sector.  The plans were so good and so well thought through that it was very challenging selecting the winners.

After the presentations, the judges met and discussed the merits of each plan.  They were all so good, but we had to pick a first, second and third place winner.  While we each had our own opinions, we were able to converge relatively easily on the winners. 

During our deliberations, the audience was watching the Great Eight Finalists deliver their two minute elevator pitches as they competed for the Michelson People’s Choice Award of $3000. This award is the only one during the Venture Finals that’s driven by audience voting.

Once our deliberations were completed, the awards were presented.

The Perlman Grand Prize was awarded to Zenkars – which helps consumers buy used cars online directly from fleet sales. We liked that it is innovative solution to the real problem of buying used cars–currently a generally unpleasant and inefficient experience. Their exceptional presentation showed very clear thinking around how to solve this problem and launch this business. We were very impressed with the team.

The second prize went to MacuLens – They are using a proprietary coating for glasses to reduce glare for night driving. We liked the merits of the proprietary technology to solve this real and growing problem.  We also appreciated the potential competitive advantage. The team had a very scrappy go to market plan and, if anything, had underestimated their potential sales – which is a rare thing to see!  They also took home the Michelson People’s Choice Award. 

The third prize went to Top Trender –They are using smart phone games to help retailers understand consumer demand for fashion.  We liked that this was leveraging two powerful trends: the adoption of smart phones and the use of gamification to provide insights to fashion brands. This would replace the typical data currently gathered by most retailers through tactics like focus groups. This was a very scalable business and an extremely well written business plan.

I’m always so impressed at how world class Wharton is overall and how strong it has become in Entrepreneurship.  It just keeps getting better and better.

 

Rich RileyBio: Rich Riley (@rriley17) is CEO of Shazam with more than 17 years of experience as an entrepreneur and leading Internet executive. Most recently, Rich was EVP Americas for Yahoo! where he was responsible for billions of dollars of revenue and managed a team of thousands, overseeing sales, account management, ad operations, B2B marketing, research and business development across the US, Canada and LatAm. Prior to that, Rich held a variety of roles including MD & SVP of the EMEA Region, SVP of the Small & Medium Business Division as well as corporate and business development roles.

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The Dorm Room Fund: Helping Student Entrepreneurs Thrive

Posted on April 26, 2013 by Megan Kauffman

By Ryan Marschang, Wharton Undergraduate 2014

What is The Dorm Room Fund?

Over the past several years, more and more students have been turning towards entrepreneurship. As a student founder, you usually have a few options for raising seed stage financing. If you’re looking at taking financing from an angel or VC, chances are you’ll need to take a leave of absence from school or drop out entirely. Similarly, if you are aiming to join an incubator or accelerator like YC or TechStars, you’ll also need to get out of school. While those may be excellent ways to seriously pursue entrepreneurship, they shouldn’t be the only way.

The Dorm Room Fund (DRF) is a great resource on campus that supports students building their companies while staying in school. At its core, the DRF is a VC fund run by students, for students.

I first joined the fund as a member of the founding investment team when the first fund was launched in September 2012 in Philadelphia. Since then things have been moving quickly – DRF PHL has made nine funding commitments to date, we recently expanded to NYC and are currently launching a third fund in San Francisco. With $500,000 from First Round Capital, each fund aims to invest in student-run companies in their respective geographies. This means that DRF PHL aims to support student entrepreneurs not just at Penn, but at all college campuses in the Greater Philadelphia Area.

The Investment Team

As a member of the investment team, I have been actively involved in sourcing student-run companies, making investment decisions alongside the team, supporting our growing portfolio and helping support the Philly entrepreneurship community. The investment team at DRF PHL is comprised of 11 students from both Penn and Drexel with varying backgrounds. Many of us are leaders of different entrepreneurial organizations on campus ranging from the Founders Club to the Entrepreneurship Club to PennApps. Many of us are also fellow entrepreneurs and builders. Members on the committee range in age from 19 to 30 and everyone brings something unique to the table. Members have worked in industries ranging from ecommerce to edtech to cleantech, and some students have worked in VC. This diversity of backgrounds, I believe, allows us to make highly informed investment decisions on a wide range of companies.

When it comes to making investment decisions, one of the toughest challenges has been taking a definitive stance, either in favor or against funding a company, with the imperfect information typical of such an early stage. While we factor many things into our decisions, it isn’t uncommon for one or two really strong data points to end up swaying a vote. Each member of the team contributes different data points to our discussion. For example, a team member might have worked with one of the entrepreneurs before and knows the founders really well, or might know a particular market from previously building a company in that space. When it comes to taking a stance, we rely on one another. I think we’re able to do that because of the high level of trust and regard we have for our team members.

Working with Entrepreneurs

Besides the opportunity to work alongside an awesome team, I joined Dorm Room Fund because I fell in the love with the idea of students helping students build their companies. Since joining the fund, I’ve had the opportunity to work with amazing entrepreneurs, both undergrads and grad students, building companies in markets ranging from health IT to ecommerce to biotech. Students in Philly are working on some disruptive ideas and each week I look forward to hearing pitches and working with these entrepreneurs.

Sourcing

A lot of our sourcing at DRF PHL comes naturally. Members of the investment team have strong relationships with entrepreneurs in the area. Mainly because:

(1) We too are entrepreneurs in the same ecosystem.

(2) We work alongside them in different classes/organizations/clubs on campus and in the city.

(3) We hang out with them outside of class and attend the same events throughout the year.

Our first two investments, Firefly and Dagne Dover, are great examples of how members of the investment team knew the founders well before any investment was made.

While we have seen most of our applications to date come from Penn and Drexel students, we are actively reaching out to Temple, Villanova, Swarthmore and several other campuses in the area.

Moving Forward

As we continue to expand and make investments, we are working hard to build a network in which student entrepreneurs can really thrive. With the launch of DRF, students now have access to capital that will allow them to remain in school while they build their businesses. With funds already launched in Philadelphia, NYC and San Francisco, and the possibility of further expansion, we hope to connect and support the top student founders across the nation.

If you have any questions about DRF I’d love to hear from you. If you’re on campus come drop by our office hours every Monday from 5:30 to 6:30 p.m. @ 4040 Locust!

Ryan MarschangBio: Ryan is studying Chemical Engineering and Finance in the Management and Technology Program at Penn. He is a fellow entrepreneur and is passionate about energy and education. In addition to DRF, he is the Chair of the Weiss Tech House Innovation Fund and has interned previously @KhanAcademy. You can reach Ryan at rmarschang@dormroomfund.com or follow @RyanMarschang.

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Innovation: Driven By The Individual, Supported By The Organization

Posted on April 25, 2013 by Megan Kauffman

by Jeffrey Babin, Associate Director, Engineering Entrepreneurship, Wharton MBA 1991

There is a lot of attention today on innovation and entrepreneurship as people, companies, and even universities try to capitalize on innovation. This is especially true in a challenging economic environment with reductions in funding sources. We’re all looking to do more with less (the hallmark of the entrepreneur). After almost thirty years of practicing, consulting, and teaching innovation and entrepreneurship, one truth remains: Innovation is driven by the individual, and supported by organizations.

As Henry Chesbrough (http://bit.ly/YzBck8) discussed in Open Innovation (http://amzn.to/YzB44f), the university is playing an increasingly important role in innovation. Universities  are moving from conducting basic science and research to assuming responsibility for the commercialization and translation of that research. Corporations are increasingly looking to universities as potential research collaborators and sources of technology. Universities may help expand and enhance corporations’ portfolios in the short term, and lead to new products and increased returns in the long term. More and more, universities and burgeoning entrepreneurs must bear the responsibility (and cost) of bringing technologies out of the lab and toward the market place.

Over the last two decades, the University of Pennsylvania has introduced a robust offering of courses supporting many aspects of entrepreneurship throughout its diverse schools, degrees, and curricula. Penn, and especially Wharton Entrepreneurship, provide extensive resources well beyond the classroom to encourage and support innovation and entrepreneurship among students and alumni (and sometimes faculty and staff). Through a variety of clubs, competitions, extracurricular programs, mentoring and networking opportunities, Penn offers many of the resources an entrepreneur might need. However, the ambition and motivation necessary to build a startup and navigate it to success still lies with the individual. Students that succeed in starting ventures seem to have one thing in common: They begin with a concept about which they are passionate and to which they are committed, and they leverage all available resources to get it done.

It is much the same in high-tech ventures and corporate innovation. High-tech ventures are based on a series of innovation activities, typically driven by the founders and supported by the ecosystems of resources on which they draw. Many large corporations spur innovation with R&D, idea generation competitions, innovation initiatives, and activities designed to encourage employees to identify, propose, and capitalize on opportunities. Successful innovation initiatives within a corporation combine creative, ambitious, and motivated people with dedicated resources, and bring them together in a supportive culture that recognizes and rewards innovative behavior and accepts some failure in the process.

When consulting with corporations to implement innovation systems, I proactively identify and engage the people that are able to make innovation happen. I label them the Ministers of Magic, and they have several common traits. They are able to cross departmental and hierarchical boundaries, find and secure resources, engage others to pursue their vision, and ultimately capitalize on an opportunity. Similar to the most entrepreneurial students, they deliver results through their actions and drive to accomplish their objectives.

There is great news for today’s innovators and entrepreneurs inside industry or academia– these organizations are increasingly committing tremendous resources to support innovation. However, the challenge remains the same: The innovator/entrepreneur must provide the motivation and drive to pursue the opportunity.

 

Jeffrey BabinBio: Jeffrey Babin (@jbabin, @profbabin) is a practitioner, educator, and consultant in innovation from the dorm room to the board room. He serves as a senior lecturer and associate director in Engineering Entrepreneurship (@EngEntrep) at the School of Engineering and Applied Science (SEAS) and is the senior project advisor and Australia, India & Israel country manager for the Wharton Global Consulting Practicum, both at the University of Pennsylvania. Jeffrey also is a managing director and founder of Antiphony Partners, LLC, a strategic consulting firm that specializes in helping companies create sustainable value through innovation.

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