Five challenges student entrepreneurs face
Why would you choose to give up a stable income by jumping into the risky waters of entrepreneurship, constrained to a diet of instant noodles?
I meet many students from top universities across Asia, and questions like the one above are common. While entrepreneurship appears to be covered daily by news outlets, the truth is those who pursue the startup life are still few and far between, much less those who stay in it. Student entrepreneurs represent an even smaller percentage.
Over the past couple of years, governments throughout Asia have started allocating resources to youth entrepreneurship, from setting up on-campus incubation centers to hosting hackathons and issuing grants to student-run startups. Universities have embedded entrepreneurship courses into their academic offerings, and there is an increase in innovation-related classes that can be taken by non-business majors.
Hong Kong University of Science and Technology’s Entrepreneurship Center and Hong Kong Polytechnic University’s Institute of Entrepreneurship provide courses, co-working spaces, and even opportunities for funding. More than eight entrepreneurship programs in Hong Kong now target the youth, including startup support schemes from the University of Hong Kong, Hong Kong Baptist University, and Hang Seng Bank.
However, student entrepreneurs face a myriad of obstacles when it comes to running a startup, despite the apparent successes of student-founded startups like Facebook and Snapchat. Based on our encounters from an investor’s perspective, below are five observations as to why.
1. Studying in and of itself is a job
Running a startup is a full-time job. Yes, some entrepreneurs can juggle multiple roles at once, but in most cases, a successful entrepreneur is one who is focused solely on their business.
Compared to adults who have left school and have control over their timetables, students have rigorous academic schedules to navigate. Hence, famous entrepreneurs are college dropouts–a situation they took on to accommodate the hours needed to invest in their venture.
2. Imminent opportunity costs
We’ve all heard career centers reiterating the importance of a padded resume, and how designing a career trajectory is vital to landing an ideal title five or ten years down the road. Hiring managers weed out resumes without the necessary buzz words, and those without relevant internships fall short.
In this competitive landscape, diving into entrepreneurialism has high stakes; rolling the dice on whether your startup will succeed presents the risk of spending a few years on the project and having nothing to show for it on your resume. For academically outstanding students, taking on a prestigious entry-level job with alluring compensation would be a tough alternative to give up.
3. Entrepreneurship has become institutionalized
Many students we’ve met came up with their startup idea from a homework assignment or a funded hackathon, where the motivation behind it was purely to win some prize money. While it isn’t fair to dismiss this reason for starting a company, it is apparent that founders who are passionate about their startups from the onset are more committed.
Student founders who are not as committed will likely drop their projects once the funds from their government or campus grants burn out. There is no survival instinct and financial statements frequently allude to overspending on human capital with no plans for future fundraising.
With so many campus incubators receiving government funding, their KPIs encourage instigating as many student projects as possible, with no punishment for lack of follow-through. The result is students taking advantage of such opportunities, viewing entrepreneurship as a ‘vacation from school’ of sorts, and quitting when it stops being fun.
4. Lack of experience
Asian cultures dictate that young people are taken less seriously. VCs are also less inclined to support a first-time founder, much less one who is straight out of or in school. While it’s true that experience comes with age and going through a few jobs brings about more maturity, it doesn’t necessarily mean student founders have less potential just because of their age.
Supporting a student founder means the investor is taking on more risk, which is an issue in Asia’s relatively risk-averse investment landscape. Young people have difficulty booking facetime with VCs, and their lack of credit and job history creates challenges in taking out loans. Student startups are often unable to raise more funding once they run out.
5. Students often lack confidence
When the general public underestimates your abilities, you need to work twice as hard to convince them otherwise. Founders must be skilled salesmen, which is a skill most students lack. With Asian education generally discouraging proactiveness in elementary and middle school, speaking on stage or selling an idea or product don’t come naturally.
Students tend to be less confident; be it from shyness or the acknowledgment that they are inexperienced, it’s common for them to be nervous when pitching or undersell during the question and answer segment. That kind of presentation isn’t going to land funding.
Despite having to swim against the current, the proliferation of young entrepreneurs in the next decade is inevitable. With the prevalence of startup exits promising potential financial upsides, an increase of coding courses in schools, and more options for self-learning online, students are more aware that pursuing entrepreneurship is not only an option, but a rational path to consider.
Venture funds are also sighting profitable opportunities in this space, with the appearance of student-run firms focused on funding niche student startups. First Round Capital’s Dorm Room Fund and General Catalyst’s Rough Draft Ventures have been running for more than six years with strong investment track records. Rookie Fund, which spun out of 500 Startups, has been expanding its footprint since 2015, with five investments to date.
Lack of experience is a double-edged sword; having learned less also means one has been influenced less, which might make room for creativity and mustering innovative solutions with no precedent. As entrepreneurship becomes a recognized skill set, students are rewarded with the freedom to get their foot in the door without as much tradeoff as they traditionally would have had to pay.
The wave of next-generation breakthroughs can spring from our youth, so let’s believe in them.
About the Author
Stephanie Tang is Managing Director of Rookie Fund, Asia’s first student-run venture capital firm funding student startups out of Taiwan, Xiamen, and Hong Kong. She is a Forbes 30 Under 30 honoree under finance and venture capital, and previously managed HTC Vive’s Virtual Reality Venture Capital Alliance after starting her career in edtech.