A Walk and Talk with Prof. Kartik Hosanagar

Wharton Professor Kartik Hosanagar invites students to join him for his walk home from work. Katlyn Grasso W’16, founder of GenHERation, Venture Initiation Program member, Wharton Venture Award winner, walked with him one night, and they talked about her interest in social entrepreneurship.

Talks like this between professors and students are what make the Wharton experience truly exceptional—and turn aspiring entrepreneurs in to founders. Click here for their Walk and Talk.

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ChargeItSpot: The Next Indispensable Retail Service?

Editor’s Note: This post originally appeared on the Wharton Magazine blog.

By Matthew Brodsky, Editor, Wharton Magazine

Doug Baldasare, WG’12, laughs now about the first time he delivered a ChargeItSpot machine, Aug. 12, 2012, to the Whole Foods market in Jenkintown, a suburb of Philadelphia. He pulled up in a rented Ford Fusion, lugged the machine into place, and waited and hoped for the first customer interaction—any interaction. In the first six hours, more than 50 people engaged with the kiosk. Since, Baldasare has forged partnerships with local retailers such as Urban Outfitters, and he’s conducted informal research to prove correlation between charging phones in-store and sales (including shadowing customers in-store and taking notes himself). But Baldasare needed confirmation—if you give consumers a place to charge their mobile devices, securely and for free, will they shop longer and spend more?

A ChargeItSpot device in action at an Urban Outfitter store.
A ChargeItSpot device in action at an Urban Outfitter store.

Read more ChargeItSpot: The Next Indispensable Retail Service?

Lean Startup Advice from Steven Blank

By Munish Dayal WG’15

As an avid follower of Steve Blank’s lean startup methodology, I was thrilled to learn that he was going to do a fireside chat on customer discovery and validation, hosted by Professor Len Lodish, at the Wharton Entrepreneurship Annual Summer Reception at WhartonǀSan Francisco. I’ve read up on Blank’s methodologies in my own time and been exposed to them in Professor Ethan Mollick’s Entrepreneurship class, and I’m trying to incorporate his framework in developing my own venture. I’m currently in my second year of Wharton’s EMBA program and a member of Wharton’s Venture Initiation Program (VIP), Wharton’s incubator program for students pursuing entrepreneurial ventures.

Steve Blank chatting with Wharton Professor Len Lodish.
Steve Blank chatting with Wharton Professor Len Lodish.

Read more Lean Startup Advice from Steven Blank

What Cooperative Robots Can Do For Us: Dick Zhang at TEDxPenn

By Nadine Kavanaugh, Associate Director, Wharton Entrepreneurship

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Last fall, TEDxPenn: Creating the Sound took attendees, me among them, into a fascinating world of sound and technology. Among the speakers was Penn alumnus Dick Zhang, co-founder of Identified Technologies—a member of the Venture Initiation Program, finalist and winner of the Committee Award for Best Use of Technology in the 2014 Wharton Business Plan Competition, and winner of the 2012 Y-Prize. I blogged about my experience at TEDxPenn here; now you can see Dick’s talk yourself: Read more What Cooperative Robots Can Do For Us: Dick Zhang at TEDxPenn

Advice to Graduating Entrepreneurs

By Thanh Pham C’14, founder of fashion startup Jean & Isola

For many of us student entrepreneurs, graduation marks an exciting time—the finish line of academia and the beginning of a full-time career in entrepreneurship. Without the time limitations of academic commitments and physical limitations of university, postgraduate life offers the freedom to fully and freely invest our time.

Wharton graduating student2Read more Advice to Graduating Entrepreneurs

Identified Technologies and DigiPuppets Win $7500 Each

By Nadine Kavanaugh, Associate Director, Wharton Entrepreneurship

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Every year, Wharton Entrepreneurship gives several awards to students who demonstrate clear entrepreneurial prowess. There’s the Wharton Venture Award, which gives several students $10,000 each to work on their ventures for the summer rather than going the more traditional internship route, and the Loveman Award, a cash prize of $1,000 , which goes to the undergraduate specializing in Entrepreneurship with the highest cumulative GPA. But only one award requires the recipients to have first won something else before they even qualify for consideration: The Emil K. Woods Award.

Read more Identified Technologies and DigiPuppets Win $7500 Each

Cash Management for Startups

By Mike Taormina, Wharton MBA alumnus and Co-founder of CommonBond

Editor’s note: This article came out of an exchange on the Venture Initiation Program listserv, where current and former members of the program go to ask the community for help in solving their entrepreneurial problems. We thought Mike’s advice to a fellow VIP alumnus was so terrific that we asked him to turn it into a blog post.

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There is a wealth of advice out there for startups trying to raise money—and for good reason. Without that first round or seed funding, many great ideas would never become anything more than an idea.

We also live in a highly innovative fundraising environment today, and the attention paid to helping entrepreneurs navigate their options and access capital is critical. As a founder, it’s incredibly exciting to be starting a business at a time when doing so—while I wouldn’t say is “easy”—has never been more possible for so many people.

So, let’s assume for a moment that you’ve successfully raised capital for your business (congratulations, by the way). The question then becomes: “What is the best strategy for managing this newfound cash?

Given the diversity of products and the multitude of providers, this could quickly become a time-consuming, complex process. When CommonBond raised its first round of funding in November 2012, we confronted the same question on how to best manage our cash, and it was incumbent upon us to find the optimal answer.

Here’s how we approached it:

First, the considerations.

1.     Capital preservation is critical.

Angels and VCs invest in entrepreneurs to take risks in operating their businesses, not to take risks in making financial investments. Compounding the issue (no pun intended), any upside in today’s yield environment is so meager that it simply doesn’t compensate for any risk-taking, given the amount of cash early-stage companies have to manage. For example, let’s assume your $1mm account has an average balance throughout the year of $500,000. If we further assumed a yield of 0.10% (which would actually be quite high for a low-risk money market fund at today’s yields), we’re talking $500 for the year. That’s it.

If you instead decide to expose your cash to more risk in the hopes of a higher return, one of two outcomes are likely:

If the investment works out, yes, you’ll have more cash, but probably not a meaningful amount; or,

Your investment does not work out, and you lose principal—a cardinal sin that can quickly lose both your investor and your credibility with respect to subsequent fundraising rounds.

Given the relatively small capital base of a startup, there is simply too small an incentive and too great an investor confidence risk to take much investment risk with your cash management.

2.     Liquidity. Uncertainty abounds in startup land. You may need to liquidate an investment to free up cash, so make sure that doing so doesn’t lead to an uneconomical investment. Bank CDs, for example, typically provide a higher yield than T-Bills or money market funds, but only if you lock up the cash for a period of time. The penalty for exiting a CD early (and the negative yield it can create) may be reason enough for a startup to stay clear of CDs as instruments for short-term cash management.

3.     Cost management. Watch out for banks with minimum balance fees or those that charge a relatively high commission for a simple T-bill trade—a cost which can also lead to a negative yield on the transaction.

4.     Counterparty risk. If you invest in a money market account, make sure you’re comfortable with the counterparty risk—the likelihood that your financial institution of choice will run into bad times that results in either a lock-up or loss of your assets with the institution.

What to do next: 

  • Bank account. If you open a checking or savings account, you have the $250,000 FDIC protection, so this is a great place to start from a capital preservation standpoint.
  • Bank CDs. You could then invest in bank CDs. If you go this route, keep in mind consideration #2 above (“Liquidity”). You don’t want to end up locked up in a CD and having to pay a penalty to get out, negating any deposit income (again, for minimal yield upside).
  • Brokerage account. If you have a brokerage account, you could invest in T-bills, money market funds, or sweep accounts. With T-bill purchases, just make sure the fees being charged don’t lead to a negative yielding investment. So long as the yield covers the fees, this is a great way to preserve capital, since FDIC insurance only covers up to $250,000 for checking accounts. With money market funds, make sure the fund’s investment mandate and holdings align with your low-risk, capital preservation strategy.

In the case of CommonBond, we decided on a combined approach: we set up a checking account and a brokerage account, both at the same bank so that wire fees or transfer time were never part of the calculus. The brokerage account invests in short-dated T-Bills and/or in a bank deposit sweep account, and the checking account is funded to ensure the company has sufficient cash for one to two months of operations—an amount that will likely not exceed the FDIC insurance threshold for the typical early stage startup.

Doing some very basic but important cash management will allow you to focus on running your business. And pushing the business forward should, and will, generate infinitely more value than any cash management strategy could ever deliver.

Mike TaorminaBio: Michael Taormina is CFO & Co-Founder of CommonBond, a student lending platform that provides a better student loan experience through lower rates, exceptional customer service, and a commitment to community. CommonBond is also the first company to bring the One-for-One model to education and finance: for every degree fully funded on the company’s platform, CommonBond funds the education of a student in need abroad for a full year. Mike is a former VP at J.P. Morgan Asset Management and a CFA Charterholder.