Monday, October 12, 2009
For our fifth annual roundup, BusinessWeek readers nominated a record number of young entrepreneurs. Meet the 25 most impressive
Welcome to our fifth annual roundup of the country's most promising young entrepreneurs. Before we get started examining the new batch, consider this question: Who is more likely to start a business: A college student or a worker with a few decades of experience? Yep, you guessed it: the experienced worker.
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It turns out it's boomers, not twentysomethings, who start the most businesses in the U.S. Over the past decade or so, the highest rate of entrepreneurial activity belongs to the 55-64 age group. The 20-34 age bracket, by contrast, had the lowest rate. That's according to a recent report by Dane Stangler, a senior analyst with the Kauffman Foundation, based on data collected from 1996 to 2007. It echoes research by entrepreneur-turned-academic Vivek Wadhwa, who found that twice as many tech entrepreneurs create ventures in their 50s as do those in their early 20s.
So not only are these entrepreneurs navigating the toughest economy many of us have ever lived through, they're also vastly outnumbered by older, more experienced competitors, who usually have more contacts and capital. That's even more reason to continue to give young entrepreneurs the encouragement, respect, and awe that they've received since becoming cultural icons during the dot-com boom.
Stangler says he's not suggesting young people aren't entrepreneurial or won't be. "The cachet of large, established companies has taken a hit. Job tenure has been falling for a long time. Employment is not going to recover in the very near future. People across all age groups are going to take the future into their own hands."
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Dorm Room Beginnings
Brian Ruby, 25, is just one entrepreneur who is following through on Stangler's prediction. He founded molecular imaging equipment maker Carbon Nanoprobes in 2003 in his Columbia University dorm room and has since raised about $4 million from institutional and private investors. After six years doing research, Carbon Nanoprobes is now transitioning to equipment sales, and Ruby expects about $1 million in revenue in 2010. The nine-person company based in Pike Malvern, Pa., sells its equipment to universities, semiconductor firms, and material sciences companies.
Husband-and-wife team Eric Koger, 25, and Susan Koger, 24, launched indie clothing e-tailer ModCloth in 2002, near the end of their freshman year at Carnegie Mellon University. They've managed to raise a little over $3 million from angels such as StubHub co-founder Jeff Fluhr and venture capital firms First Round Capital and Maples Investments. Eric says the 104-employee, Pittsburgh-based company is profitable, with around $1 million in monthly sales, and forecasts more than $15 million total in 2009.
Logan Green, 25, and John Zimmer, 25, started Zimride in 2007 to allow carpoolers to connect online. Its 35 clients are mostly colleges but include corporate customers such as Cigna (CI) and Wal-Mart (WMT). Universities pay about $10,000 per year to use the platform, although pricing varies. Zimmer says the Palo Alto (Calif.) firm, with six employees, expects revenue of $400,000 this year and is now profitable.
These are just a few of our finalists defying the odds. To assemble the group, as in previous years, we asked BusinessWeek readers to nominate candidates aged 25 and under who were running their own companies that showed potential for growth. Given the severity of the recession, we were pleased to receive a record number of nominations this year -- more than 600. After the call for nominations ended in mid-August, our staff sifted through the nominees looking for the most impressive.
Not surprisingly, the majority were Web-based businesses, where barriers to entry continue to fall. There were a smattering of more traditional companies, including an aircraft seller, a specialty mushroom grower, and a machinery lubricant vendor. Compared with last year, more women were nominated, more businesses were profitable, and more had secured equity capital.
You can flip through this slide show for profiles of each of the 25 finalists, then vote for the business you feel holds the most promise. We'll announce the top vote-getters on Nov. 9. Then check out our slide show on where last year's finalists are now. For more elements of the special report, including a feature on selling to universities and a video interview with a standout alum, visit the related items box at upper right side of this overview.
U.S. Entrepreneurs Ages 25 and Under
This summer, BusinessWeek set out on its fifth annual search to find the country's most promising young entrepreneurs. As in previous years, we asked readers to nominate candidates ages 25 and under running their own companies. After the call for nominations ended in August, our staff whittled the batch down to 25 impressive businesses. To read profiles of the finalists and vote for the business you feel holds the most promise, click on. We'll announce the top vote-getters on Nov. 9.
Note: Revenues and traffic numbers are self-reported. To be considered, founders had to be 25 or under when the nomination form was posted in late June.
1. Ascension Aircraft
What It Does: Aircraft sales and leasing
Founder: Jamail Larkins, 25
Web Site: http://www.ascensionaircraft.com/
Based: Augusta, Ga.
Jamail Larkins has been hooked on flying ever since he took his first flying lesson at age 12. The Augusta (Ga.) native completed his first solo flight at 14, performed in an aerobatic air show four years later, and earned a bachelor's degree in aviation business administration from Embry-Riddle Aeronautical University. But instead of following a traditional career path and going to work for Boeing (BA) or Lockheed Martin (LMT), Larkins decided to channel his passion into his own business. It came naturally. At 15, he had started Larkins Enterprises, selling flight training books and videos to local pilots, to pay for his flying lessons. "I promise you we started off selling a lot less than we do today," he says. Though he continues to run Larkins to do marketing and consulting for clients that include his alma mater, the National Business Aviation Assn., and Michelin Aircraft Tires, he says 90% of his revenue comes from his aircraft sales and leasing company, Ascension Aircraft, which he started in 2006. Larkins says four-employee Ascension is profitable and had a little over $7 million in revenue in 2008, despite the downturn. He expects revenue to increase slightly this year. He continues to fly for fun every chance he gets and is planning to get back into aerobatics in 2010.
What It Does: Online collaboration tool
Founders: Aaron Levie, 24, and Dylan Smith, 24
Web Site: box.net
Based: Palo Alto, Calif.
Aaron Levie and Dylan Smith started Box.net in 2005, when they were both college sophomores, as a tool to collaborate on projects with fellow students. The pair -- childhood friends from Seattle -- soon saw business potential in an online platform to let companies share information securely. Nine months after launching, they both left school (they were at University of Southern California and Duke, respectively) and moved to the Bay Area to work on the company full time, with an initial $350,000 investment from Mark Cuban. (His stake has since been bought out.) The service, targeted toward companies with fewer than 100 employees, has 3 million users representing 50,000 businesses. Individuals can try a limited version for free, but businesses pay $15 per user per month for the premium version. The company, now based in Palo Alto, has 50 employees and has raised $14.5 million in venture capital from Draper Fisher Jurvetson and U.S. Venture Partners. The firm is not yet profitable, though Levie says revenue is in the "mid-to-high single millions," and he expects it to turn a profit soon.
3. Click To Client
What It Does: Online marketing agency
Founder: Shama Kabani, 24
Web Site: http://clicktoclient.com/
While completing her master's degree in organizational communication at the University of Texas at Austin, Shama Kabani wrote her thesis on why people use Twitter and other social networking sites. She became convinced businesses could use the tools to market their products and services. But when Kabani made that pitch as she applied for jobs at big management consulting firms such as McKinsey and Bain & Co. in 2006, she was rejected. "At that point, nobody really cared for social media knowhow. They were just thinking, 'This is a fad. Our clients don't really need it.' " Undeterred, Kabani, whose parents are both entrepreneurs, founded her own full-service online marketing firm in March 2008, to build Web sites, handle SEO, and create and manage social media campaigns. The six-employee business now takes on about 25 one-off projects a month and also acts as an online marketing department for six regular clients on a retainer basis. Fees range from a few hundred dollars for a newsletter design to $2,500 for a Web site project; monthly retainer fees start around $2,500. Kabani says Click To Client had about $120,000 in revenue in 2008, expects $280,000 for 2009, and is shooting for $1 million in 2010. Her first book, The Zen of Social Media Marketing, is due out in April.
What It Does: Renewable energy consulting
Founders: Jesse Gossett, 23 (left); Jayson Uppal, 23 (center); and Chris Jacobs, 21 (right)
Web Site: http://www.emergentgroup.com/
Two years ago, three Tufts University students and one Babson College student attended the Energy Security Initiative at Tufts (now the Tufts Energy Forum), a group whose mission is "to spread and enhance the discussion surrounding all aspects of the transforming, global energy industry." It was there that Jesse Gossett, Jared Rodriguez, Jayson Uppal, and Chris Jacobs decided there was a need in the consulting sphere to help guide municipalities and private businesses toward using renewable energies and setting up sustainability practices. The quartet spent their final year in college researching and readying a business to do just that. Before they graduated, they landed their first consulting contract. Emergent now has about 30 clients, mostly municipalities, including the towns of Yates, Shelby, and Orleans County in western New York. The firm had $108,000 in revenue last year, and estimates it will reach $250,000 in 2009 and become profitable by 2011.
5. I Bec Creative
What It Does: Web development and graphic design
Founder: Becky Stockbridge, 25
Web Site: http://www.ibeccreative.com/
Based: Portland, Me.
While a senior at the University of Southern Maine, Becky Stockbridge wrote a business plan to start a Web and graphic design business for medical professionals, a group she found was in need of logos, brochures, and informative Web sites -- and who also had the money to pay for them. She got started in 2006 with a $4,200 grant from the Libra Future Funds, a Maine-based group that helps entrepreneurs under 25. The Maine Center for Enterprise Development awarded her free office space for one year. However, Stockbridge says she found it difficult to get through to the decision-makers in medical practices. While she struggled to make contact, Stockbridge began designing Web sites and logos for other small businesses. By 2007, she had more business clients than doctor clients and shifted her focus. Last year the five-person company had about $225,000 in revenue and Stockbridge expects $350,000 in 2009.
6. Intern Queen
What It Does: Internship placement consultancy
Founder: Lauren Berger, 25
Web Site: http://www.internqueen.com/
Based: Los Angeles
While earning her degree at the University of Central Florida, Lauren Berger says she completed 15 internships in four years. After graduating in 2006 she began helping the children of her parents' friends land internships. Soon, the idea to start a consulting business was born. But first Berger had to pay the bills, so she moved to Los Angeles and worked as an assistant at top talent agency Creative Artists Agency. While there, Berger met movie producer and director Marshall Herscovitz (Thirtysomething, The Last Samurai), who liked her concept and backed her financially for one year.
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Last September, Berger launched her company -- Herscovitz has a 12% stake -- offering to vet potential applicants and match them with more than 500 companies from across the country that pay to list on her Web site. Berger says what sets her service apart is the personal attention -- she and her small band of interns review every application and Berger calls each company to make an introduction. Potential interns can apply for one slot gratis to get a feel for the service. They pay $3 for every subsequent application; employers pay an annual fee of $50 for unlimited listings. In the four months the firm was running last year, Berger says she had about $100,000 in revenue and expects to double that to $200,000 next year. A regular on the college speaking circuit, she is also planning to expand into Canada and is exploring endorsement deals with Microsoft (MSFT) and Payless Shoes.
What It Does: Online marketplace for indie designer fashion and decor
Founders: Eric Koger, 25, and Susan Koger, 24
Web Site: http://www.modcloth.com/
You might not expect an indie clothing e-tailer to get the attention of equity investors. But Eric and Susan Koger, the husband-and-wife team that launched ModCloth in 2002, near the end of their freshman year at Carnegie Mellon University, have managed to raise a little over $3 million from angels like StubHub co-founder Jeff Fluhr and venture capital firms First Round Capital and Maples Investments. ModCloth's inventory strategy helps explain its success. Eric says Susan and her buyers build rapport with independent designers, try to get payment terms of net 30, and normally sell 70% to 90% of the goods within the net-30 period. "We can turn our inventory faster than we have to pay for it. That's enabled us to scale as fast as we have." Being online only and located in Pittsburgh keeps operating costs low, too. ModCloth employs 104 people -- mostly young women who, Eric says, "come at it from a perspective that's truly aligned with the customer, because they are our customers" -- up from 22 people a year ago. The company became profitable in 2007 but wasn't in 2008, largely because it spent a lot of money to redesign its Web site -- which now gets more than 1.25 million unique visitors a month. Eric says ModCloth has around $1 million a month in sales and forecasts more than $15 million total in 2009.
What It Does: Online marketplace for class notes
Founders: Sean Conway, 25 (right); Justin Miller, 21(far right); B.J. Stephan, 24 (left); Fadi Chalfoon, 23 (second from left)
Web Site: http://www.notehall.com/
Based: Tucson, Ariz.
Launched in 2008, NoteHall is an online marketplace for college students who want to buy and sell class notes. Sean Conway, who has ADHD and finds it difficult to comprehend a lecture and take notes simultaneously, says the impetus to start the company came when he noticed fellow students shared his frustration. For initial funding, the founders used $70,000 they put together from Conway's inheritance and Miller's bar mitzvah money. To access documents, users purchase credits via the site's virtual currency system ($3 buys 100 credits; notes from one lecture cost 25 credits; a study guide costs 100 credits). When a student purchases credits and redeems them, NoteHall receives a commission that varies based on the product. According to Conway, 20 colleges and universities are participating now, including Drexel University and the University of Arizona, and an additional 30 will be by December. Last year, NoteHall had $40,000 in revenue, will be profitable this year, and expects to reach $900,000 in revenue in 2010.
9. Trunk Club
What It Does: Online clothes shopping service for men
Founder: Joanna Van Vleck, 26
Web Site: http://www.trunkclub.com/
Based: Bend, Ore.
When Joanna Van Vleck graduated from the University of Oregon in 2005 with degrees in psychology and business, she worked as a style consultant, taking men and women clothes shopping. No surprise here -- most men disliked shopping but enjoyed the new duds. So Van Vleck decided the shopping process should be turned on its head. Instead of accompanying men to the shops, she would take the shopping to them. In January 2008, she opened a location she describes as a "swanky man hang-out spot," where hesitant shoppers were sized up and regaled with advice and brand-name picks. Within a month of opening, an angel investor approached her and offered to commit $500,000 to expanding the concept to other locations. But after Bear Stearns failed that March, he changed his mind.
Convinced her idea had potential, Van Vleck searched for another source of funding. During a meeting via Webcam with a new would-be investor, Van Vleck decided to shift gears. Instead of opening physical locations, she would operate the business virtually, using Webcams to meet with clients, assess their needs, and then ship a box of clothing to them. Clients would only pay for items they liked. With zero retail experience, she launched the site in November 2008, buying marked brands wholesale from suppliers and selling them retail. Trunk Club now has six employees, 36 independent contractors who work as fashion consultants remotely, and around 2,000 members. Van Vleck says the company is close to breaking even and is on track for $2.3 million to $2.5 million in revenue in 2009. She expects to close her first venture capital round with a Bay Area firm within a month.
What It Does: Microblogging platform
Founder: David Karp, 23
Web Site: http://www.tumblr.com/
Based: New York
In 2005, David Karp was running his software consulting business, developing new media for big media companies. He got the idea for Tumblr after becoming captivated by a new form of blogging known as "tumblelogging" that presented material of various formats (such as text, photo, and video) in a stream. While building a tumblelog for himself, the programmer realized other fans of the form would want to use a simple tool that would allow them to create their own. So during a two-week window between consulting jobs, Karp, who first started coding when he was 11, created the first iteration of such a tool designed with speed, ease of use, and customization in mind. Launched in 2007 for general consumption, the Tumblr platform now has 1.8 million users and has landed $5.5 million in venture capital from two rounds of funding with Union Square Ventures and Spark Capital. Karp, 23, says the 10-person company is not making money yet but will be experimenting with revenue-generating features this quarter. "Goal No. 1 is growth. We're aiming this thing for a mainstream audience."