TEACHING & LEARNING
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OUTREACH
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Brand Called Donny
PLUS: Video Interview with Donny Deutsch
Faces of Wharton Entrepreneurship
RESEARCH
Risk-free
Reward?
Experimental Entrepreneurship: Removing the 'Tin Cup Dependencies'
Startup Stipend
New
WEP Fellowship Supports Entrepreneurial Internships.
Nirmal Saverimuttu knew that taking an internship with a South African startup would mean earning a lot less money than friends who went to Wall Street for the summer.
But Saverimuttu, a second-year Wharton MBA candidate, was eager to explore working in an emerging market. He imagined himself following his father's path. Though his parents are Sri Lankan, they'd moved to Zambia, where Saverimuttu was born and where his dad had started several companies.
Last summer he signed on for nine weeks with Red Five, a Johannesburg, South Africa, software company. "They make middleware — applications that fit between other applications,” he explains. "They were developing one for smart phones — mobile phones that also give the benefits of a PDA.” The company had four employees, including the two founders.
His entrepreneurial dreams made the financial sacrifice worthwhile, he says. Plus, spending the summer in Africa, which he'd left in 1991, let him test-drive his career plans.
Future Wharton students eying an entrepreneurial future won't have to give up as much as Saverimuttu did. Starting this summer, Wharton Entrepreneurial Programs will award $1,500 fellowships to several students who choose to pursue internships in firms with less than $25 million of sales and fewer than 200 employees. (Students may apply by visiting WEP's Awards page.)
The fellowship grew out of discussions with the Wharton Entrepreneurship Club, a student group, says Emily Cieri, WEP's managing director. ""We want to help make startups a serious option for students,” says Cieri. "This fellowship signals WEP and Wharton's support of entrepreneurial careers and could make a difference as students consider their summer jobs.”
In return for the fellowship, students will act as ambassadors of entrepreneurship during their second year, she adds. They'll sit on an entrepreneurship career panel early in the next school year, help promote the program, mentor future candidates and serve on the committee that reviews the next year's applications.
If Saverimuttu's experience is any guide, that could prove small recompense for the experience they gain in their entrepreneurships.
Before coming to Wharton, Saverimuttu had worked in investment banking, so the Red Five founders asked him to lead their negotiations with a venture capital firm. Thanks to his stint in banking, he realized that the venture firm wanted more equity than was reasonable. It was demanding anti-dilution provisions atop that. "The terms would've made it very hard for the company to raise money going forward,” he says.
After several rounds of haggling, he decided to employ one of the most powerful — but also riskiest — negotiating techniques. He told the Red Five founders to walk away from the talks; that would show the VCs that they couldn't abide the terms. Then, via the founders' network of acquaintances, he found a back door into the VC firm. "We talked with the CEO through a friend and showed him what a ridiculous proposal it was,” he says. "When the more senior management realized that we weren't foolish enough to accept what they offered, they eventually came around."
And Red Five landed a significant investment, by emerging market standards at leaset.
Saverimuttu also helped the company hammer out its market-entry strategy, making recommendations on such things as how to price their product and which sales channels to pursue.
The internship prompted a modification of his post-Wharton plans. He still intends to pursue some sort of entrepreneurial venture, but will do so in the developed world, instead of Africa. "I came out thinking that I don't know if I'm ready to live and work in an emerging market. There are just so many challenges.”
One of the biggest — the shortage of seed funding — he experienced first-hand. The venture capitalists could push for such tough terms because few venture firms operate in South Africa, leaving Red Five with limited alternatives.
On the positive side, the summer demystified entrepreneurship, making it seem far less risky than he'd imagined.
"I've always been a little risk averse, and I think a lot of Wharton students are like that. But I found out that it's not as hard as I thought to go out and try something like this. The guys I was working for were young, in their late 20s. It made the idea of risk-taking less intimidating.”
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Wharton Entrepreneurial Programs