The Difficulty of Harvesting Seed (Capital)

Student entrepreneurs face specific hurdles particular to their dual status (as company founders and full-time students) when it comes to raising seed capital for their startups. Here are some reflections from several Wharton graduate students and recent alumni:


• Being a student can signal to an investor that you have a lot of energy and that you are good at juggling multiple responsibilities and handling limited direction.

• You have the ability to be more frugal and can make money last longer: i.e., you don’t have to pay yourself a salary while you are a student.

• You are in a position to leverage professors in areas of expertise that are core to your business.

• The reputation of the School carries some weight.

• Your access to investors is great as a student. “Through treks, my positions in clubs, ISP projects, etc., I was able to talk to top level investors at about 40 great firms over my time at Wharton.”


• School can be a hamper because investors would like to see a full-time commitment from the entrepreneurs in which they invest.

• From the investor’s perspective, graduate business school can be seen as a risk aversion technique for young professionals, which may not match the mental image of the “entrepreneur.”

• Venture capitalists and angel investors have (highly rational) doubt about your devotion to the idea. Many student entrepreneurs are willing to try concepts while they attend school, as they didn’t plan to take a salary anyway. So many students foolishly admit (or imply) that they are testing the concept, and if they raise money before they graduate, they will go for it. That’s not acceptable in investors’ minds. You must display your commitment to pursue the venture regardless of funding and they’ll often wait until graduation time to seriously consider the investment.

• Being a student is a clear distraction as you cannot spend all of your time and mind-share on the startup.

• There is a perceived decrease in urgency in your fundraising timeline —as compared to other entrepreneurs—as you are still a student.

So the question becomes, what are the ways students can increase investor confidence in them despite their student status?

Both Samir Malik, founder of 1DocWay and dual degree MBA and master’s of biotechnology (Class of 2013), and Steve Lau, co-founder of and Wharton MBA (Class of 2013), agree that as a student you have to be willing to discuss dropping out. There are compelling reasons to stay at school and complete your degree, but these need to be balanced with your growing business’s needs.

Lau reports that over the summer he and his co-founder Jon Dussel (MBA Class of 2013) spoke with eight angel and seed investors. He felt that overall being a student in the position of fundraising was more of a negative than a positive, and others have agreed that on balance, it is a slightly more difficult sell to investors.

According to Venture Initiation Program alumnus Mike Kijewski, WG’12, “I would say it made raising capital only slightly harder. Had I just graduated, and been able to spend 100 percent of my time on the company, more investors would have been likely to invest. But the traction we were able to get with customers while I was in school helped our investors feel a lot more comfortable about investing in a company run by a current MBA student.”

Editor’s note: This post first appeared on Wharton’s Entrepreneurship Blog on Aug. 2, 2012.

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