Summer 2016 – Educating Entrepreneurs

Want to increase prosperity by cultivating the next generation of wealth creators? Six things to consider.

Entrepreneurship as an academic discipline is just a few decades old, but it has exploded in popularity, with over 3,000 colleges now offering some form of entrepreneurship education. Strengthening these programs can bolster our economy—which needs more enterprising vigor in the next generation. But it is also possible to waste a gift.

Donations from successful business creators have built nearly all of today’s vibrant entrepreneurship programs, and donors will continue to be the major influence on where the field goes in the future. What should a potential giver look for? Following is our list of the crucial factors to bear in mind.

1. Entrepreneurship is a broad art, not a deep science

Entrepreneur education should be built horizontally across campus, as a creative discipline that can touch nearly any field. It must be about the art of innovating, not the science of commerce. There are potential entrepreneurs within medical schools, within sports programs, in flight training, among those being trained in the law, in schools of hospitality and culinary instruction.

Entrepreneurship departments and programs are often located in schools of business today. Occasionally they exist in engineering colleges. A movement is brewing to disperse entrepreneurship across campus and embed it within various forms of professional and technical training.

Donors should look for a horizontal, multidisciplinary approach. Entrepreneurship is not generally about deep specialized knowledge; it is about applying insights across fields. Flexibility, improvisation, and learning by doing are essential. A curriculum structured like a buttoned-down business administration curriculum is sure to yield suboptimal results. 

Be wary of curricula that effectively block students from sliding into parallel disciplines to work with scientists, artists, technicians, and other specialists. Venture thinking cannot be restricted to an isolated silo. Make sure students outside the college of business have an opportunity to take entrepreneurship classes. Encourage it as a minor, or certificate, or double major, or double degree—with entrepreneurship being fostered as a form of practical thinking that overlaps with other specific areas of knowledge.

In sum: Seek out programs willing to make entrepreneurship a campuswide option, attractive to faculty and students across a range of disciplines. Look for joint appointments of faculty across campus. Encourage entrepreneurship research in a variety of subject areas. Be wary of a curriculum that requires lots of prerequisite courses, a narrow range of study, or has a bias for classroom work over learning and engagement in real enterprises operated by entrepreneurs, which leads to our next point.

2. Practical experience is essential

Donors should support or create entrepreneur training that includes business-plan competitions, internships, mentoring by successful business people, student startups, business incubators, real investment opportunities, and other working experiences. It is important that the program develop close ties to the regional entrepreneur ecosystem. Classes have more impact if they can take place in affiliation with actual startups and working entrepreneurs, perhaps through offering local venture development services and student labor. A center run by a college may offer training, access to venture funding, help in the details of family business, idea hatcheries, mentoring programs, and venture prizes for startups in the community. Funding for such centers that bring together entrepreneurial students and working firms often comes from endowments provided by successful entrepreneurs, federal or state agency grants, or fees charged for useful services. It’s essential for centers to be autonomous from the bureaucratic policies of universities. Centers often have strong boards made up of successful entrepreneurs and investors committed to the next generation of business builders.

Academic study and research need to be balanced with practical, professional engagement with active innovators and functioning startups. Look for roughly equal numbers of clinical faculty (many of them entrepreneurs in residence or other rotating practitioners with real-world experience) and research faculty (tenure-track professors), and make sure they have equal status within the program. Faculty, clinicians, and mentors alike should foster the actual practice of entrepreneurship. Learning happens most effectively when participants “get dirty” working in, starting up, and growing viable operating ventures.

3. Let students reap the benefits of their inventions

Students often develop valuable ideas during their entrepreneurial education. University policies on the ownership of intellectual property should be structured to leave control of ideas in the hands of the students who originate them. If the university directly pays a student as an employee to invent, it is entitled to the intellectual property thus produced, but beyond that rare circumstance, university IP policies should not try to capture inventions which take place in entrepreneurship programs.

Unfortunately, many colleges try to do exactly that. University IP policies are generally one-sided, controlling, and punitive—policing rather than incentivizing creation of new commercial activity. They are generally focused on maximizing potential income to the university, not on fostering creativity and new ventures as a public purpose. Such policies strongly discourage active entrepreneurs from engaging with students or faculty—out of fear that, for instance, anything a student helps create during an internship or mentoring experience could end up being claimed by the university.

Aggressive intellectual-property claims are ultimately counterproductive. A recent study by the Association of  University Technology Managers reported that 87 percent of the top 220 research universities in the U.S. actually expend more to run offices policing IP than they receive in revenue from all IP. The vast majority of universities are not very good at commercializing innovation; they should leave this to entrepreneurs, and structure their campus policies around doing everything possible to help their students (and any entrepreneurs willing to come to campus to work with them) learn and thrive.

Donors should ask tough questions of universities regarding student IP policies. Make sure the policy encourages students to engage in real entrepreneurship without any risk of losing full ownership of the value of commercial ideas they produce. Donor funding can help remove this significant barrier to student entrepreneurship, resulting in more student ventures, a more successful educational experience, and a more vibrant economy.

4. Fund strong programs; don’t let all of the money get sucked into scholarships

Universities often push scholarships as the best way to build up a department. Scholarships make it easier to increase enrollments and maximize tuition receipts. But scholarship funds ultimately end up in the university’s general fund and do little to build up a particular program. 

Although to some it may seem counterintuitive, donors may best help students by helping to improve the quality of instruction. This is what ultimately attracts student talent and enrollment numbers. Because entrepreneurship can only be developed with a strong focus on clinical and professional practice, funds are desperately needed to get students out into startups, functioning businesses, and student ventures. Donors will usually get far more impact from funding internships or seed capital for new business creation. In this discipline, targeted support for efforts to encourage students in the field and help them engage in real-world commerce will often be the catalyst for excellence.

Although donors will surely feel resistance from administration, it is worth asking universities what happens to scholarship dollars after a student’s tuition is paid. Want to double the impact of scholarship funds? Insist they flow from tuition payment into program funding for the entrepreneurship program.

5. Tightly define the uses of the gift

Universities have been known to change the purpose of an endowment, insisting that evolving academic views, practical conditions, or university priorities demand it. A gift for entrepreneurship education that is only loosely defined will sometimes be used to fund activities far removed from what the donor had in mind. Gift agreements need to be crafted carefully to tie funds closely to the work of creating future entrepreneurs.

This will involve attention to details like spelling out the aims of the grant, specifying who has authority to spend funds, even reserving a right for the donor to further refine the intent and purpose of his or her gift in the future based on performance and results. Donors should focus on large intended outcomes, and avoid being overly controlling or prescriptive. Entrepreneurship is often highly improvisational, and flexibility in how funds can be spent is actually incredibly helpful to programs training the next generation of inventors. So focus on broad desired results, then insist on annual reports that spell out fund usage and actual impact. Outline in advance a means of resolving disagreements.

All giving is based on trust, and understanding that gifts will be used in a mutually acceptable way. Philanthropy cannot be successful if that trust is compromised. Donors should not be imperious, but university leaders also need to be disciplined and humble if they are to remain faithful to donor intent. Make sure that partners on campus are vigilant and willing to subordinate institutional interests and enthusiasms to the purposes spelled out at the time of the gift, not only today but in the future when administrations, boards, and staff may change.

To keep things on track, donors should make site visits, sit in on classes, and remain involved with administrators and students. To assess compliance and performance, donors may want to delay large lump-sum gifts and instead make smaller annual gifts for a period of time. Also, always keep in mind that a successful donor has a lot more than funds to contribute to the success of a  program, such as entrepreneurship expertise, knowledge, and networks.

The ultimate protection against disappointing compliance and performance is a good claw-back provision. An experienced attorney can help write a reversion clause into the donation agreement, stipulating that if the university no longer applies the gift as the donor intended, the gift reverts to another charity or is applied to another purpose chosen by the donor. Consider putting an expiration on the agreement—perhaps 25 years—that is long enough to accomplish the philanthropic goal but short enough to ensure that funds will flow out the door while there is still understanding of, and commitment to, the intended purposes.

6. Find partners

A final way to maximize the value of the donation is to encourage, or require, matching donations. These can come from other donors, from the university, or from state appropriations. Matching clauses can bring extra energy and commitment to entrepreneurship programs beyond what an individual donor can contribute. And the match doesn’t have to be in dollars. It could be time, opportunity, space, etc. A flexible matching requirement makes it likelier that interested parties will get involved and offer internships, provide mentoring, support student startups, and inject the other tangible and intangible supports from outside business partners that are more vital to entrepreneurship education than to other disciplines. 

Bruce Gjovig is the founding CEO of the Center for Innovation Foundation at the University of North Dakota. Timothy O’Keefe is the executive director and chairman of UND’s School of Entrepreneurship.

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