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Notre Dame's College of Business Administration

Gigot Center for Entrepreneurial Studies

ND students entrepreneurial success stories

The news the professor delivered wasn't just bad, it was bewildering. "You have just been disinherited," Jeff Bernel informed his students.

They had no money for school or for anything else, he told them. And they could forget about borrowing funds or selling off their possessions. They were literally broke and "unbankable."

Now the good news: He was giving them each $20.

And now some more bad news: He wanted it back. Worse, he was giving them homework.

Bernel wasn't messing with his students' minds. He was going over the rules for an assignment in Introduction to Entrepreneurship, a class for non-business majors. Bernel was teaching the debut section of the course last spring semester.

The students were to take his $20 -- literally his money, coming from his pocket -- and devise ways to double it each month for the next three months, to a total of at least $160. They had to pay him back the $20 at the end, but they could do whatever they wanted with the profits.

"Twenty percent of your final grade will be based on your effort and the amount of money you have acquired at the end of the course," Bernel further informed them.

It's not every day one finds a professor passing out $20 bills in class (especially not with 43 chairs filled ) or a course where students are graded, at least in part, on how much dough they can make in 14 weeks. But Introduction to Entrepreneurship is a product of Notre Dame's upstart Gigot Center for Entrepreneurial Studies, which was founded, according to its mission statement, "to create a sense of the possible for students."

The "Twenty Dollar Challenge" in Bernel's class is one example of that mind-expansion in progress. There have been others. Like the course for MBA students, where local people dreaming of starting their own businesses were invited in to pitch their ideas -- things like an installing an authentic Mexican foods section in supermarkets, or building houses with shredded tires. It was the business people's job to sell the graduate students on their ideas and get the students' help sharpening their business plans -- which the students did in teams.

James H. Davis, the Gigot Center's academic director and an associate professor of management, says, the ultimate vision of the center is to launch businesses from Notre Dame. Not business careers, businesses. And it has been doing that, too.

Brian White, a 1999MBA, used the center's graduate-level entrepreneurship course to develop a business plan for a new kind of motion detector. He and friends developed the technology while undergraduates in mechanical engineering at Stanford University. Their patented device is said to be so sensitive it can detect an infant's breathing and sound an alarm in its absence (without giving false alarms for a trespassing fly or cat). A prototype is being tested at Stanford Medical Center.

This past year Davis and Bernel helped a pair of Ph.D. candidates in computer science and computer engineering -- John Morelli and Larry Barchett 1997 M.S. -- prepare a feasibility analysis and develop a business plan for an idea that came to them at a tailgater before a Notre Dame football game last year. The idea was for a new kind of computer CPU geared toward graphics and multimedia. Several companies have since contacted the inventors to say they're interested in exploring medical imaging applications for the technology.

Morelli -- who is on his own now, Barchett having left to take a job with IBM -- says, "The Gigot Center folks were instrumental in helping us formulate a real business plan. Not just the document, but how to go about turning this idea into a viable business." He also doesn't discount the credibility the venture has gained just being associated with Notre Dame.

"Without  [the Notre Dame name]," Morelli says, "we're a   handful of grad students with an idea. With it, we're so much more."

The Giogot Center was launched in 1998 with a $2 million gift from Gary E. Gigot, a 1972 Notre Dame graduate and a one-time advertising executive who was director of U.S. marketing for Microsoft in the early 1990s when the software giant rolled out Windows 3.0 and 3.1. Among other business interests, he now serves as a partner in and senior vice president of worldwide products for Seattle-based Visio Corporation, a leading supplier of business diagramming and technical software.

A long-time member of the College of Business Administration's Advisory Council, Gigot has been working with Davis for years on injecting entrepreneurship into Notre Dame's business curriculum. He contacted Davis about five years ago after hearing about entrepreneurship programs at West Coast universities like Stanford and USC. Gigot decided to make seed money available to Notre Dame graduate students so they could commercialize the ideas they were coming up with as class projects.

Davis was already having students in his Strategic Management course plot business strategies for real-world companies like Anaconda Sports (maker of Dick Vitale's "The Rock" basketball), Bethlehem Steel, and many smaller firms. With Gigot's seed   money, they gained the option of pursuing their own ideas for a start-up. A panel of professors then reviewed the proposals and awarded grants of up to $4,000 to cover expenses like technology, travel and patent searches.

"We did that for three or four years," Davis says. "Of those ventures, half of them are businesses now." They include an oil filter with a magnet to draw iron filings, and a mircrobrewery in Three Rivers, Michigan -- The Robert Thomas Brewing Company -- named for founders Thomas Prame, a 1995MBA and Robert Kowalewski, a 1996 MBA.

"The notion [of the seed grants] was that we would give them money, and once they launched the business we would hope they would feel an obligation that if they made a profit to reinvest in someone else's idea in the future," says Davis.

Some money has been reinvested back into the course, but more typically the returns have come in the form of alumni helping mentor students, Davis says. A key long-term goal of the Gigot Center is to establish a much larger venture capital fund, possibly with a professional fund manager. The fund would finance the launch of promising business ideas originating in any segment of the Notre Dame "family" -- students, faculty or alumni.

Davis and Bernel, whose title is program director,  reflect the center's philosophy of blending academic rigor with practical business experience. Davis, who holds four degrees, was a student of Stephen Covey, of Seven Habits of Highly Effective People fame, as an undergraduate at Brigham Young University in the early 1970s. Covey was then a professor of organizational behavior.

A one-time nuclear submarine engineer for the Navy, Bernel bought out his father's company, American Rubber Products Corporation in La Porte, Indiana, in 1980, when the business was in decline. He built it into a major manufacturer of engineered seals and gaskets for the automobile market.

Bernel earned an MBA from Notre Dame's accelerated Executive MBA Program in 1994 and became a part-time, adjunct faculty member in management two years later. He sold American Rubber Products to two of his employees in the mid-1990s and became a millionaire in the process. He still commutes daily from La Porte, sometimes on his Harley-Davidson motorcycle, sometimes in his red Ferrari.

The Gigot Center doesn't confer any degrees or certificates yet, but business students can pursue a concentration in entrepreneurship. Davis and Bernel want to make it possible for any student in any discipline to minor in entrepreneurship and for good reason. When they scanned records for all alumni, they found 10,000 entrepreneurs, but fewer than a tenth were business majors in college. Davis thinks he knows one reason why relatively few entrepreneurs sprout from the business school.

"Four years of business school teaches them how to manage risks," he says. "They walk into our entrepreneurship class knowing how to manage risks. The non-business students approach risk in a completely different way. They look at it and say, 'I'm  willing to take the risk because I don't know know the consequences.'"

That combination of ignorance and open-mindedness is reflected in the ideas pursued by the non-business majors who took the Twenty Dollar Challenge in Bernel's class -- and   who outperformed a class of business majors who tackled the same exercise.

Several students made and sold predictable items like baked goods and T-shirts. Among others, though, one concocted a drink he called "Better than Beer." The solution, which he said he sold to "local bodgas" over spring break, was composed of pineapple juice, vanilla extract and marshmallows. When whipped in a blender, it supposedly looked like beer, complete with foamy head.

Some of the other non-majors concentrated on the service sector. One offered massages -- $5 for a the premium package (shoulders, back, neck and head). A pair of students cleared $323 doing laundry for $5 a load.

Some businesses skirted the bounds of legality, like "Rich's Movie Nights Inc." Senior Rich Stepan rented movies on cassette and showed them in his home. Since charging admission would have been illegal, he provided snacks and refreshments for a "small service fee," initially $3 a head. Eleven screenings netted him $225.60.

The champ of Bernel's class was senior Kelly Hanratty, a computer science major and, yes, a distant relative of former Notre Dame quarterback Terry Hanratty '69. Already familiar with technical aspects of Internet web page design, she invested her $20 in a book explaining how to use Photoshop, a powerful image-editing program. After familiarizing herself with the program, she marketed her ability to design custom web sites. Her principal client turned out to be her father, an outplacement and career counseling consultant in Texas. Even giving Dad a family discount over the market rates for web design, which she researched, she still cleared $2,300.

"On of the things you learn in this course," Bernel says, "is that you can have huge multiples. You're not not limited to whatever Wall Street says you can have as far as return on investment. In this case, it's not so much a question of working hard as working smart."

Most students in both classes had no problem meeting the investment-doubling standard. In Bernel's class the average increase was 1,396 percent ($205 per person), with class profits totaling $8,615. Students voted to donate the entire amount to a South Bend charitable organization, There Are Children Here, which maintains a rural area south of the city for inner-city youth to play sports and enjoy the outdoors.

In Davis's  graduate-level entrepreneurship class, students develop ideas for their own businesses and also research the viability of someone else's. The professor invites 20 area entrepreneurs to class to pitch their ideas for 10 or 15 minutes. ("I have to cut them off after 15 minutes. It's like having 20 used car salesmen.") Groups of students then get to select which idea they want to make the subject of a feasibility analysis.

This isn't  an exercise in examining what the entrepreneurs have said and then comparing it against textbook notions of marketability. The teams search patent records; contact industry experts, managers of venture capital funds, directors of think tanks; identify and analyze potential competitors, even contact potential customers to find out if the product or service sounds like something they'd buy.

"They can call literally all over the world," Davis says, noting that students are allowed to use the phones and fax machine in the Gigot Center office, "And believe me, they do."

These feasibility studies are so detailed and sophisticated that the entrepreneurs can use them when applying for loans or venture capital, which is what attracts them to class in the first place. Plus it doesn't cost them anything.

One proposed business the graduate students researched was Inca Quality Foods, the brainstorm of Luis Espinoza, right. A native of Laredo, Texas, Espinoza had noticed the growing Hispanic population in the South Bend area and knew the local super markets carried few authentic Hispanic food products. His idea was to import  items normally found in Mexico and Puerto Rico and stock them at stores where significant numbers of Hispanic people shop.

Espinoza says the first class to hear him describe the idea gave it thumbs down, but he forged ahead. The following semester's class discovered that it was no longer a question of whether Inca Quality Foods would succeed but how to manage its growth. The business now supplies more than 20 Kroger stores, he says, with plans to double that number in the next year.

Espinoza says the second group of MBA students was especially helpful in showing him how to take full advantage of his computerized accounting system. One group member spent 12 hours working with him and his secretary at the company office.

In the second half of Davis's class, students investigative their own ideas for businesses, and instead of stopping with the feasibility study, they a compile a complete business plan.

One team this past year looked at the funeral industry and discovered that the business is conducted much differently in other parts of the world. In addition to one-stop funeral homes such as those in the United States, stores exist where consumers can shop for items like caskets and headstones and have them delivered to an independent mortuary or the cemetery.

Davis's students determined that potential existed for such a business in the United States and that a good place to try it would be New Orleans, hometown of one member of the group. New Orleans burials are already unconventional in that bodies are stored in vaults aboveground because the city lies below sea level. Dig a hole and it fills with water.

"They found the property, they found the store front, they contacted the owner," Davis says. As of this past summer, the group had not yet launched the business. One member had graduated and taken a job in San Francisco, Davis says, "but they still talk about it."

Along with exposing students to the possibilities of entrepreneurship, the center also seeks to teach about its harsher realities. Davis says the Twenty Dollar Challenge, an idea he picked up at a conference for college entrepreneurship programs, not only stimulates creative thinking, it can scare people.

"It's a little like having to make payroll," he says. Knowing you have to possess a certain amount of money by a certain date is nerve-racking, even if the only consequence is a jolt to one's course grade, not steamed employees holding empty pay envelopes.

"It's hard work. You bust your butt," Bernel says of starting and building a business.

That's one reason he and Davis continually invite entrepreneurs to speak to their classes about their experiences and why the center plans to sponsor annual conferences. The first such conference, February 1999, concluded with a panel discussion titled "Succeeding (and Failing) in Business."

"To have someone come in and talk about it -- to say 'I'm an entrepreneur, here's what I did. Here's how hard I had to work. Here are the sacrifices I made' -- it's a real good bucket of cold water on most people," Bernel. He adds, "What we do through education," he says,"should improve their chances versus someone who just wakes up one morning and says, 'I want to be my own boss.'"

Lauren Stettin, class of 2000, used therapeutic massage as her entrepreneurial project.

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