A politely ferocious debate is being waged in America right now about the best place to launch a startup. This isn’t surprising post-Great Recession – especially with millions of mobile Millennials graduating into the workforce willing to cart their STEM and MBA degrees anywhere, some of them with the next Uber in their heads. There are major bragging rights in play. Billions in tax revenue, investment returns, and political capital are also at stake.
By sheer exit volume, Silicon Valley still rules. East coast cities like Boston, Philadelphia, and Miami dominate specific sectors like biotech and healthcare. In midwest and southeast boomtowns like Columbus, Cleveland, and Nashville, red-hot robotics and fashtech ecosystems are starting to froth. What this ongoing geographical debate obscures, however, is the bigger question of when to launch a startup – not where.
Burrow was designed to ship standard UPS or FedEx which makes it perfect for New York City walk up apartments
Stephen Kuhl and Kabeer Chopra, the co-founders of flat-pack furniture startup Burrow, are part of an emerging generation of young entrepreneurs and digitally-native vertical brands (DNVB) who are transforming their graduate and business school educations into real-life startup incubators by taking advantage of new university-funded entrepreneurship centers, accelerator programs, and graduating at “escape velocity” by putting business plans and capital in place before their caps and gowns.
“Kabeer and I met 10 years ago when I was visiting my best friend from high school at McGill University in Canada,” Kuhl recalls. “We ended up in the same Wharton entrepreneurship class two years ago and over drinks one night we were talking about a class project and complaining about furniture. Couches in particular were the biggest pain point we kept coming back to. So we decided to work on a direct-to-consumer (D2C) sofa for the class, which eventually turned into Burrow. We didn’t know it at the time. But the best time to start a company is when you’re in business school. You have everything you need at your fingertips. And nothing to lose.”
Kuhl and Chopra just graduated from University of Pennsylvania’s Wharton School of Business this past May. When they walked the commencement aisle, they already had $2.1 million in early-stage seed capital. Both are now 29, living and running Burrow from New York City with nine full-time employees. Neither of them had any experience in the furniture industry, textiles, ergonomics, or production supply chain management when they teamed up to launch Burrow last year in their spare time.
What they knew was their market. Kuhl herniated two discs in college while rowing. Chopra is always perfectly styled even in a T-shirt and sneakers. So when the duo launched Burrow’s first ergonomically-designed flat-pack sofa this past spring, fashion and function drove the ship. Burrow had to look and feel like it could cost three times the price. But it had to ship direct to consumer and compete toe-to-toe with IKEA on Craigslist.
“The furniture industry hasn’t evolved in a hundred years,” Chopra tells me. “So we didn’t approach it with preconceived notions about how it should work. We just looked at how things could work better to make sense both from an affordability and accessibility perspective. What’s ironic is that the first few people in the industry who we talked to thought we were crazy. But everyone at Wharton supported our vision every step of the way.”
That business schools and university STEM programs are providing deeper resources and a more supportive culture for students looking to launch a startup before graduating makes sense. Most MBA candidates and post-grads these days aren’t just checking the box on the way to a cushy desk at Goldman. They’re in it to make connections, build networks, surround themselves with mentors, learn through experience, and become better self-sufficient, self-motivated entrepreneurs. So why wouldn’t America’s leading universities and MBA programs provide the incubating resources to nurture a real-life startup ecosystem rather than just teach isolated classes from theory?
The flexible layout of the co-working space at the Martin Trust Center for MIT Entrepreneurship allows for multiple uses including speakers, workshops, and classroom for one of the more than 60 entrepreneurship-focused courses
Innovation and entrepreneurship in America’s higher education system is nothing new, of course. The academic-industrial brain trust embedded in America’s university research system has created the atomic bomb, rocket fuel, the computer, the Internet, the seat belt, toothpaste, chemotherapy, and virtually every technological innovation that you take for granted today. The major difference now is that the most transformative and lucrative innovations are coming from students, not professors.
MIT students use the Idea Paint™-covered walls of the Martin Trust Center to assist with meetings and brainstorming on their startups and ideas
“There have been universities that have had entrepreneurship centers for some time,” says Bill Aulet, Managing Director of the Martin Trust Center for MIT Entrepreneurship and professor at the Sloan School of Management, “But the number of them has increased dramatically in the past 5 years. Students are actively looking for these kinds of spaces when they choose universities and the assumption now is that they have them, rather than to be surprised if they do.”
When VCs from Silicon Valley, New York, and Boston talk up why their city is the next best place to plant your startup roots, they all speak the same vocabulary, celebrating their unique “ecosystem,” access to technical and creative talent, availability of seed capital and technology resources, and proximity to mentors willing to share their experiences and knowledge. What professors like Aulet and many others at the university level are trying to do is to develop those resources earlier on – and in the process make American entrepreneurship more globally competitive.
“At the Martin Trust Center we provide a full spectrum of offerings from low friction talks to evening maker events to weekend hackathons to short introductory to full semester advanced courses to competitions to a summer capstone full immersion accelerator,” Aulet tells me. “In addition we provide a common space with full-time Entrepreneurs In Residence (EIRs) who provide unbiased, honest broker advice. This creates a support community for the students to learn about entrepreneurship in a safe environment in a wide spectrum of ways with a constant emphasis on rigorous education and experiences as opposed to anecdotal and too theoretical.”
For Kuhl and Chopra – and thousands of other Millennials riding the student-entrepreneur wave – it’s precisely this access to startup resources that were once only available outside of school that makes laying down $60,000 on a Wharton or Sloan MBA worth it in the first place.
“Wharton’s faculty and students were incredibly supportive of us,” says Kuhl. “Dozens of professors advised us, we tested out concepts in classes, and had access to so many impressive alumni. The founders of Warby Parker, Allbirds, Harry’s, Helix, and a number of other companies came from Wharton, and we were able to speak with all of them. In terms of financial support, Wharton and the broader UPenn community have a number of competitions and awards for student entrepreneurs. We ended up winning the UPenn iDesign Prize, which came with $50,000. Subsequently, several members of the UPenn Design Board of Overseers personally invested in Burrow.”
Not surprisingly, the trend for startups launching from university incubator systems isn’t limited to MBA students in management programs. At MIT’s Martin Trust Center 65% of participants are pursuing degrees in engineering and they come from more than a dozen different countries.
“We see entrepreneurship as a skill set to help students amplify the impact that the skills they are learning otherwise in their STEM programs will have,” says Aulet. “We call this “action learning.” Entrepreneurship is a craft and it needs to be taught with a combination of theory and practice. Our mission at MIT is to have a positive impact on the world’s most pressing problems, and entrepreneurship is a fundamental part of helping to solve problems.”
For Kuhl and Chopra the problem with the furniture industry – and sofas in particular – was glaringly simple. Traditional sofas were: either 1) Cheap and flimsy, 2) Heavy and expensive, and 3) No matter how much money you spent, it inevitably never fit into your next space.
Kuhl and Chopra’s solution was to develop a smarter, higher quality supply chain, which meant sticking to three fundamental objectives. First, Burrow had to be able to ship D2C via UPS or FedEx – so they reverse-engineered their flat-pack, modular design to standard ground shipping dimensions to minimize the pre-assembled, over-sized extra costs. Second, it had to assemble with a few simple moves in less than 10 minutes straight out of the box. No tools. No IKEA vacuum bags of a hundred knobs, screws, and Allen wrenches. Lastly, it had to be adaptive to respond to the changing needs of its owner, which meant that it had to have the ability to morph into new environments with a functional modularity that wouldn’t compromise style or design over time.
“By delivering our couch directly to the consumer,” explains Chopra, “We’re able to remove all of the retail markups and over 70% of standard shipping costs. That’s over $600 in sofa savings that gets passed along to our customers. We also hand-select all of our materials to ensure sustainability and durability. All of our sofas are made from safe and environmentally-friendly components that will last a lifetime, and our fabrics are free from harmful chemical treatments so we’ve found a market with young professional families that we never anticipated.”
In less than a year since they’ve launched (five weeks before graduation), Kuhl and Chopra have sold north of $1 million in sofas. They’ve raised over $3.1 million in early-stage seed funding from Y Combinator, Red & Blue Ventures, Michael Seibel, Highland Capital Partners, Winklevoss Capital, Rough Draft Ventures, Justin Kan, David Bell, and Matt Bellamy, many of which came through Wharton alumni networks or are Wharton professor-angel investors. Most importantly, they got early momentum in an ecosystem that gave them the critical developmental resources that they needed early on.
“The biggest benefit to us (launching at Wharton) was that we had two years to try building a business with little to no risk,” Kuhl explains. “If the company had failed before we graduated, we’d still be graduating from Wharton and would have a great story to tell while interviewing. Most entrepreneurs have to either quit their job or build a company on nights and weekends neither of which are good for your health. To me, the name of the game in building a successful startup is to de-risk as many variables as possible, and starting a company in business school did that in a big way for us.”
For professors like Aulet who are championing entrepreneurship centers at universities nationwide, Kuhl and Chopra’s success is a textbook example of why they work.
“An educational accelerator is an outstanding opportunity for first time entrepreneurs to learn about starting a company,” Aulet explains. “It’s something they can try in an environment that is as close to “penalty free” as possible. Usually the first effort to start a company fails, but you learn the lessons and move onto the next. I call it the “first pancake opportunity.” The first pancake you make is usually not a good one, but it gets you warmed up to make better ones.”
So what’s the best place in America to grow a startup? Kuhl and Chopra say it’s a no brainer for Burrow at this point.
“NYC is home for us now,” Kuhl says. “It’s the mecca of consumer brands. But it also has the highest concentration of people who experience the ‘pain points’ of buying and moving furniture that were behind the evolution of Burrow in the first place.”
In New York it’s called a 4th floor walk up. Kuhl and Chopra also learned a thing or two from Wharton about the basic principles of supply and demand.