Risky Business

Alumni entrepreneurs use ingenuity, cutting-edge business smarts and often their Northwestern connections to build successful companies.

by Shradha Agarwal

Video: Northwestern's alumni entrepreneurs share a few secrets to their successes. For more video visit our channel on YouTube.

Guillermo Trias was a Madrid-based investment banker in mergers and acquisitions when he decided to get an MBA from the Kellogg School of Management.

"I knew that Kellogg had that human, social and flexible approach that could help me find a new direction in my business career," says Trias (KSM04).

His Kellogg classes in entrepreneurship and marketing literally turned his world around. "I realized my life was not going to be lived in a company," he explains. "I was in love with food and wine, and I wanted to create something that let me be true to myself."

So, during his second year at Kellogg, Trias founded Solex Partners, a Chicago-based company, to advance his goal of becoming an ambassador for Spain's finest foods to the U.S. market.

Within months of graduation he was driving a used truck to deliver olive oil and cheese to his first customers — his fellow Kellogg alumni.

Today Solex Partners imports and distributes authentic Spanish cheeses, dry-cured meats and olive oils to high-end restaurants, hotels and grocery stores in the Midwest. More than that, Trias believes passionately that his company's dual mission is to spread his country's Mediterranean diet and, through introducing these fine foods to Americans, the Spaniards' joy of life.

Trias says his second year at Kellogg was the "perfect laboratory" to incubate his business.

"We developed the business plan in one class and did in-depth marketing research in another," Trias says.

"I met my marketing agent at Kellogg, a guy who helped me to develop my brand," Trias adds. "I found my warehouse through a Kellogg alum whom I met at an alumni event at the John Evans Alumni Center. Even my lawyers are Northwestern law school graduates."

Trias may well be the poster boy for entrepreneurs who make use of alumni connections, but he is just one of hundreds of successful independent business owners Northwestern has educated over the years.

Today Kellogg offers more than 30 classes focused on entrepreneurship and some 50 programs and projects managed through the Larry and Carol Levy Institute for Entrepreneurial Practice.

A 2007 Kellogg survey of alumni who majored in entrepreneurship at the school revealed that these graduates had founded companies that had combined revenues of more than $1 billion and altogether employed more than 7,000 people.

The University also offers undergraduate and graduate courses in entrepreneurship through the Center for Entrepreneurship and Innovation at the McCormick School of Engineering and Applied Science and through the Weinberg College of Arts and Sciences' Business Institutions Program (see "Northwestern Nurtures Student Entrepreneurs").

"We saw the need to give our students more exposure to entrepreneurship and innovation," explains Mike Marasco, clinical associate professor of industrial engineering and management sciences and the center's director. "We want to be the catalyst for bringing together faculty, students and alumni with interests in these areas."

In fall 2007 the Center for Entrepreneurship and Innovation facilitated the launch of NUvention: Medical Innovation, a new interdisciplinary entrepreneurship course (see "Medical Innovators").

The increase in student demand prompted McCormick to offer five undergraduate entrepreneurship classes (up from the three currently offered) for the upcoming 2008–09 academic year.

"You can find out what is involved in going out and starting a business by taking an entrepreneurship class," says Marasco, "but you still have to go out and do it. Our job is to help students understand what is involved and get them engaged.

"Everyone has ideas, but we help them recognize business opportunities and how to pursue them."

McCormick professor William White (McC61), a pioneer of entrepreneurship education at Northwestern and former CEO of Bell & Howell, points to the array of resources the University can offer its students and alumni. For students, "the University can offer advice, coaching, incubators, mentoring, experiences in student-run businesses and also help with technology transfer," White says. "Our alumni traditionally come back to hire employees and interns and for consulting help, but now they also come back to learn about student inventions and evaluate their potential for commercialization."

From software development to telecommunications to food imports to oil services, Northwestern entrepreneurs have made their mark in various industries and markets.

We recently interviewed a group of alumni who have pursued their business dreams. Here they tell how they became entrepreneurs, the lessons learned along the way and what advice they have for aspirants in this risky business.

Different Paths

For Doug Cook (KSM98), who had spent 12 years in broadcasting, the Kellogg MBA program and his professors sparked an inner desire to be an entrepreneur. "I thought I was going to major in marketing, get into consumer packaged goods and work at a large corporation," Cook reminisces.

"During the homestretch I enrolled in a class taught by Professor Steve Rogers called Entrepreneurial Finance." The most distinct characteristic of this class, Cook says, is that it explores entrepreneurship beyond startups.

"Entrepreneurship is not just starting something yourself, it's a kaleidoscope of possibilities, done through startups, franchise agreements and partnerships," says Cook. "It's like a trip you take — you want to go from Chicago to Atlanta. To get there you can drive, you can fly, you can bike it or take a bus. Just as that road from Chicago to Atlanta has a number of ways you can take, so too with entrepreneurship."

Cook decided to look for a business to acquire instead of starting his own. In two years he inspected 150 companies, visited about 40 and finally made offers on four. The business he acquired was Feldco Factory Direct, the leading window replacement company in the Midwest.

Replacement windows might not sound like a red-hot business, but Cook had good reasons for buying Feldco.

"It was a solid company being sold for the best reasons: The owner was retiring, and the business was profitable," explains Cook. "In short, it was dusty rather than rusty, and I felt my skill set, combined with the existing staff, could help remake the company.

"It was a fantastic entrepreneurial opportunity," adds Cook. "Over the years this company has never lost its roots and continues to evolve in a magnificent entrepreneurial manner."

(Watch our video interview with Cook on our YouTube channel.)

For some students Northwestern is not only the realization point for starting a business but also the ground upon which they build their business — quite literally.

When he was a junior, George DeMet (WCAS98) won a web site design competition for his dorm, Willard Residential College.

DeMet had already created his own company,, in 1996 when he brought Tiffany Farriss (WCAS00) onboard as a partner. At the time she was a freshman astrophysics major. She later switched to mathematics during her junior year and dropped her research to concentrate on their joint venture.

University administrators who saw the Willard web site liked it so much that they started giving DeMet and Farriss several web development contracts.

Today the web site development company is thriving, with a 15-employee office in Chicago.

DeMet believes university life is conducive for entrepreneurs. Being a student at Northwestern allowed him to focus on starting up his own business. "The dorms already provide most of your basic needs — food, shelter, a workplace — at a cost that you know about and are dealing with from your personal finances."

(Watch our video interview with DeMet and Farris on our YouTube channel.)

Northwestern also provides its students and alumni with mentors. For School of Education and Social Policy senior Rishi Shah and Derek Moeller (WCAS06), who met through Nugget, the business club on campus (now the Institute for Student Business Education), Northwestern provided more than the initial employees and interns for their business venture.

Moeller and Shah developed an idea to educate patients about their conditions via digital media in medical office waiting rooms. After winning a business plan competition in White's Principles of Entrepreneurship class, they won his confidence as well. White now serves on their advisory board, along with other Northwestern professors and alumni, and is a personal investor in their Chicago-based company, ContextMedia. (The author of this story is director of media and marketing for ContextMedia.)

A Good Business Plan

All entrepreneurs start with a business plan. But Robert Chamberlain (McC81, KSM86), currently chair and chief acquisitions officer for Deep Down, an undersea oil and gas services company, scrutinizes other companies' business plans in search of management and investment opportunities.

"My business model is to identify interesting business plans with management teams that can take the company to the next level, and raise money for them," Chamberlain says.

When he first identified Deep Down, it had about $8 million in revenue. "I've been involved for about 20 months now," he explains. "Last year we posted $20 million in revenue, and this year should be around $65 million."

Some entrepreneurs recommend gaining experience in the industry if one is thinking of starting an enterprise of one's own. "It really helps to get experience in the industry with larger companies, so you get a vision of what success looks like for them. Then you can apply that knowledge to an organization of 10 people," says Kristin McDonnell (McC85), co-founder and CEO of LimeLife, which develops digital entertainment for the web and mobile phones for female users (see "Living the LimeLife"). "I value the big-company experience that I got at Electronic Arts and McKinsey & Co."

Make It Happen

While prior experience and idea development are key to a successful venture, they are just ideas until they are executed.

Spanish food importer Trias admits, "The idea is not brilliant. I'm not the first Spaniard who has thought of bringing our great food to the United States, but entrepreneurship is about execution."

Steve Olechowski (WCAS92), who studied computer and information systems and economics at Northwestern, agrees. "The road is littered with great ideas to start a company that just never had the full-time effort behind them to get them over a tipping point to success."

Olechowski was a co-founder and the chief operating officer of FeedBurner, a provider of web feed management tools to bloggers, podcasters and other web-based content publishers that was bought by Google for an estimated $100 million. FeedBurner is now integrated into Google, and Olechowski is product manager of Google AdSense.

The idea for FeedBurner was born during lunch one day when Olechowski and his three co-founders were brainstorming different ideas to start a company.

Here's his advice to aspiring entrepreneurs: "Jump in with both feet, and if you are going to fail, fail fast and move on."

Alumni entrepreneurs stress that execution doesn't happen in a vacuum. There are several important factors that determine whether a venture becomes a hit or a miss, and market timing is one of those.

"Know where the recession is," says Cook of Feldco. "This is something preached by Kellogg Professor Steve Rogers [now director of the Levy Institute]. Recession comes up on average once every seven years, so knowing where you are is very important to mapping your path. It's also important to understand where you are in the macroeconomic environment."

McDonnell believes that the success of LimeLife will be due to the readiness of its consumers. As a woman with an indispensable mobile phone, she wished her phone could do more — to store her shopping wish list or look up a recipe while at the grocery store, for example.

She soon discovered a potential market. Other women wanted similar functionality.

McDonnell says market timing is important because you don't want to be too early. She had previously worked at the ImagiNation Network, the first online multiplayer gaming system. Back in 1993, she recalls, the company had to first teach people how to use modems before it could attract users to its online service.

"Don't be so early that the enabling ecosystem is not already in place for your company to be successful," McDonnell advises. "Make sure your potential market is big enough when you enter as opposed to hoping you alone will grow your market organically."

Growing Pains

McDonnell is not the only Northwestern alumnus to recognize that sometimes something you want might be something other people want, too. Andy Dunn (WCAS00), co-founder and CEO of Bonobos, an online retailer of high-end men's pants, decided there must be other men out there who like to wear slacks that fit well but dislike shopping for them.

"We provide good-looking pants for men without the retail shopping experience," explains Dunn. "It's Silicon Valley meets New York — strictly online sales and shipping."

At first, the company grew strictly by word-of-mouth. Then one day its web site crashed after a New York web magazine posted the link online.

"Now most of our challenges are about growth," says Dunn, who started Bonobos with a classmate from Stanford Graduate School of Business. "Our customer base doubled from last October to December and doubled again from February to March. We have gotten to more than 2,500 customers in our first nine months. It's pretty exciting.

"Starting a business is an obstacle course, but it's also a labor of love."

Seed Money

For young entrepreneurs a large part of the startup focus is attracting investments for the venture.

Michael Lazerow (J96, GJ96) started his first business while he was in school. He had noticed that the Daily Northwestern relied heavily on the Associated Press newswire for its stories and wanted to experiment with an innovative newswire with better content.

He started UWire in 1994 with $10,000 out of his own pocket. UWire is now owned by CBS. Lazerow then went on to start a leading golf portal,, which was sold to Time Warner in 2006 for $24 million.

Currently Lazerow is CEO of Buddy Media, a technology company that helps major media and marketing brands leverage social networks such as Facebook and MySpace.

Viresh Bhatia (McC88) and Rick Harold (McC85) founded Stirling Technologies in 1987 with their own savings. They went to work on geographic mapping software, similar to today's Google Maps and MapQuest.

During their development process they realized they were ahead of their time and abandoned geographic mapping software in favor of another product, InstallShield. It is now the leading software installer on all Microsoft Windows platforms. The company rebranded itself and was sold for $100 million to Macrovision in 2004.

Young companies that need startup cash can also seek angel investors who typically invest up to a few million dollars.

"Finding the right angels can help entrepreneurs well beyond the capital they bring," says Shah. "You want to find angels who make the business more valuable by bringing strategic insight, new ideas and access to networks that you may lack."

Shah and Moeller, who received angel money from Northwestern professors and alumni, have been able to retain most of the ownership of their company, while growing into a multimillion-dollar operation in their first year.

Their company, ContextMedia, has already signed up 500 clinics and 1,500 health care professionals for its services.

Business plan competitions can be another source of small operational cash for startups, say several alumni entrepreneurs.

Subhash Bedi (KSM99) and Parry Singh (KSM99) started with $200,000 of seed capital from a Kellogg business plan competition. Their web site facilitated the search and delivery of Indian groceries. After raising some venture money they expanded their product range to Chinese products. They were riding the wave of the dot-com bubble and had raised $55 million from venture capital firms but quickly shut down after the tech bubble burst.

"We got caught in a rush of 'grow quickly, build revenue,' without looking at the bottom line," says Bedi. "And so the company went down."

While success never comes easy, true entrepreneurs never give up. Bedi and Singh have remained business partners since their Kellogg days.

"Either you are an entrepreneur or you're not," Bedi says, reflecting on the failure. "The lessons learned are more important than what we do. You have two options when your company goes under and you're broke: You either start another company, or you go get a job. We started American Capital Realty, which gave us some experience in real estate."

Bedi and Singh now manage almost $1 billion in assets through an investment management and private equity real estate firm called Red Fort Capital in India.

Venture capital has provided the funds for countless alumni entrepreneurs. Venture capitalists look for a company with focus, a product or idea that is not easily replicated and that fills a certain void, and a strong management team.

Neutral Tandem, a telecommunications company that facilitates telephone calls between carriers, is one company that used venture capital to get off the ground successfully.

Founder Ron Gavillet (KSM95) was a communications lawyer for a decade and partner at a prestigious law firm when he decided one day that he would prefer to be on the other side of the table, acting as the client rather than the client's lawyer.

To make this transition, he earned his master of management degree at Kellogg and began applying what he learned in various telecommunications startups. While working on a business plan for one of his startups, he realized there was an unmet need in the market. He created Neutral Tandem to address that need: Allowing competitive wireline, wireless and cable carriers to exchange telephone calls with one another without having to rely on their competitor, the incumbent local telephone company.

"The idea is so simple and potentially so easily replicated that the first thing I did was sit down and write a patent for it in order to protect it. Now the entire business model is patented. We also approached a very limited number of venture firms for funding because we wanted to limit the exposure of the idea," says Gavillet, who successfully pitched the idea for Neutral Tandem to two large venture firms, Doll Capital and New Enterprise Associates. (Northwestern trustee Peter Barris [McC73] heads NEA and sits on Neutral Tandem's board of directors.)

"We hired an extremely experienced management team," Gavillet says, "and we incentivized all of our employees with ownership. Neutral Tandem created millionaires out of all of its initial employees."

Neutral Tandem is now a publicly traded company serving all the major telecommunications carriers through facilities in 71 U.S. geographic markets, exchanging more than 4 billion telecom minutes every month.

Surviving the Fall

Northwestern alumni entrepreneurs have had their share of successes but failures as well.

Elizabeth Wald (KSM95) had to shut down her social entrepreneurship venture, Economic Development Imports, last March because she was unable to attract venture investment. The company imported household goods handmade by African women from economically depressed regions.

"There was — and still is — a lot of talk about social venture capital, which is supposed to be both financial and mission driven," says Wald. "As I researched the market, I realized there were just a handful of players who would fund a company like mine that is a for-profit (most recipients are non-profits), based in the United States (rather than a developing country) and that did not have an obvious exit such as a sale or the opportunity to go public."

When the capital she required did not come through, Wald was forced to abandon the venture, which she had self-funded for more than four years.

Annette Krauss, a senior lecturer in the Social Enterprise at Kellogg program, recently wrote Wald's story as a Kellogg case study for her students interested in social entrepreneurship. Wald came to the class the day the case was taught and fielded questions from the students. She also used her experience to mentor students at the Kellogg Alumni Entrepreneurship Conference last May.

"A lot of students talked about wanting to start companies along the same lines as I had done — fair trade wine from Asia or furniture from Africa," says Wald. "I really want to encourage them to follow their ideas, but I also pointed out I didn't do this until 10 years after Kellogg, and I had earned a fair bit of capital that I could use to finance my businesses.

"Cash flow is really important," she adds. "If you're just starting off, you've got to be prepared to have no income and to compete with few resources."

So what drives people to start their own companies and to keep doing it, despite the failures?

Bedi of Red Fort Capital loves the freedom and uncertainty of being an entrepreneur. "I wanted to work for myself," he says. "You get this fire in your belly to do something totally unique. When you look around at your friends and what they do for a living, it's hard to go back to entrepreneurship. A guaranteed paycheck is very alluring, but it's the excitement of waking up every morning and having no idea what you're going to do that keeps you going."

Many entrepreneurs say failures are a part of success. Bhatia of InstallShield recognizes that downfalls are routine on the path to triumph. He has this advice for budding entrepreneurs: "Be persistent. Most ideas fail not because they are bad ideas, but because the people behind them fail to persist. You should continue to work at it.

"Mistakes are part of life and part of business," Bhatia adds. "Make sure you take just enough risk and not more, so if you do make a mistake, you can survive it and live another day."

Shradha Agarwal (J08) is director of media and marketing at ContextMedia and lives in Chicago.

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