You're Funding Student "Startups" All Wrong

Penn State is a huge research university. That’s great - unless you don’t like research. In branching out into areas other than research, this strong history is creating a lot of problems - specifically in how Penn State is encouraging entrepreneurship.

Research is expensive. I’m not going to try and say that it isn’t. You need materials, equipment, subjects, there’s a lot there. You also need to maintain the labs. None of this is cheap. When people are looking to start new projects they need funding. This is the reality of research. This style of thinking is strangling the entrepreneurship ecosystem at Penn State.

Most student companies don’t need funding out of the gate. People think they do because the media highlights astronomical seed rounds and ignores those who are bootstrapping away - until they make it big. Startup life is also portrayed as this lavish party where investors bankroll you until you fall ass-backwards into success. This misconception lines up perfectly with the research mentality of needing money to get started.

As a result, in order to support entrepreneurship, the University is wrongly focusing time and energy into securing thousands of dollars to hand out here and there - most of the time it is distributed through pitch competitions (I could write a whole other post on these competitions, they are the fastest way for the University to squander away money. Most students do them just to pocket the money and never intend on moving forward with their ideas). The Summer Founders Program is the best way I’ve seen funding for early stage student ventures be done. Student teams go through a rigorous interview process, and then if accepted, are given $10,000 to work full-time on their idea. This removes all distractions and lets the teams move very fast.

These thousand dollars here, thousand dollars their efforts (pitch competitions) are not effective. I haven’t actually seen them achieve their desired outcome before. You get the vanity metrics of business cards, t-shirts, and Onward State articles, but after a few weeks, these teams disappear and are never heard from again.

Here is the assumption Penn State has made and not validated: student startups need funding to get up and running. Now I don’t think any faculty member would say, “yes, startups always need funding”. But that is how they are all acting. This causes a lot of harm. Resources are already incredibly limited, and are being handed out in large sums to a select few - so only a handful of students get to see any benefits. Of the teams that get resources, 95% of them are either doing it for the money and/or an ego boost. In order to win these competitions you just have to be the loudest, not the most qualified. As a result, the students that are busy building cool things get overpowered by the wantrepreneurs who just want to live the Hollywood depicted startup lifestyle. This is detrimental to the entrepreneurship community.

The wantrepreneurs and the University like vanity metrics, and that’s what they bond over, which creates a vicious cycle that will ultimately deplete the resources without creating anything - except business cards and newspaper articles. The students the University claims to and wants to support become marginalized and eventually disappear, often upset and demoralized.

The Solution

Students are stereotypically poor, and giving us a few dollars for our side-projects (usually mislabeled as startups) can be extremely useful. We don’t need $3000, but only $50 to cover 5 months of server costs or $15 to pay for a domain name. I bought a second monitor, a few months ago, for $40 from Lion Surplus. A little can go a long way if you really want it to. When students come knocking for these micro-grants, the University needs to push back a little at first too. Ask them “Why?” a whole bunch of times. You’ll be able to tell pretty quickly if they are just stealing $50 or are really trying to do something big with your money.

Students should also be taught how to write cold emails asking for discounts or free credits. Most companies have great student deals that no one ever seems to utilize.

Penn State could leverage it’s size to help students out and not even have to put up its own money. They should put together an “Entrepreneur Launch Kit”, or whatever they call it, which is a collection of free credits or downloads that the University has gotten companies to provide for their students - similar to the Github Student Developer Pack. The companies get students into their ecosystems early on and the University helps remove barriers for us students - it’s a win-win.

A $50 grant is more powerful than what it can buy. It shows students that Penn State cares and thinks they are worth investing in. It makes them feel like they are a part of something - this is huge for the entrepreneurship community! Now instead of 3 teams with $2000 each, we have 120 people who are excited to be a part of something awesome. But the University can’t see a direct return on investment in excitement, community, and belonging, so they’ll never invest in it. To them, it’s the companies that make money, not the students. They’ve forgotten that there are people behind those dollars.