Lessons Learned From a Failed Ivy League Entrepreneur

A "Case Story" By Chris Cononico
 

Chapter Ten

Since Jake, George, Mark, and I were living in different places for the summer, working for different companies, we divided tasks among us to prepare for the launch of our new business. George was going to find office space, Mark was going to coordinate our equipment installation, Jake was going to spearhead our mailing campaign, and I was going to finalize details with the merchants. At the same time, we were equally involved in developing our marketing strategy. The four of us agreed to talk on the phone every day, and to reapportion the workload accordingly.

George swore he could find us a plush office in a government-subsidized building somewhere. Before the semester ended, we trailed out to visit a government building located deep in the heart of West Philadelphia. The rent might have been dirt cheap, but it was quite a hike from campus and smack center in the middle of “the projects.” Undoubtedly, we would have had a difficult time getting students to visit us there. Other locations that George was considering were located in Center City, which was also a considerable distance from campus.

To fund our start-up, we each invested $10,000 into the equity of the business and signed a capital lease for approximately $120,000 worth of equipment. We were trying to use as little cash as possible and Mark was able to get us pro-bono legal work from his girlfriend’s father, who drafted our customer and merchant contracts for free. At the same time, Jake’s mother, who was an accountant, made sure we had a suitable accounting system in place to manage our expenses and daily cash flows.

I remember finishing my work at Morgan Stanley every night at around 8 P.M., and then starting my night job, which was working on our business. New drafts of our direct mail campaign were constantly being circulated among us. I would speak with Mark intermittently throughout the day, and he complained that his coworkers were suspicious of him. Eyebrows were raised because even though he wasn’t staffed on anything yet, he kept sending large jobs to the printer.

Unfortunately, Mark’s office was an open room, where you could hear everyone else’s conversations. Despite his attempts to muffle his voice and speak quietly into the phone, someone stopped him once by the water cooler and asked him how QuakerCard was coming along. It must have been a little bit awkward.

Our few months of corporate experience only made us more excited about self-employment. For me, the novelty of wearing a suit everyday faded quickly. It was a drastic contrast to work as intern by day and as entrepreneur by night. As an intern, I was the low man on the totem pole. I was delegated everyone else’s grunt work, and received very little credit for anything I did. As an entrepreneur, I felt empowered. Whether my new company succeeded or not was impacted by my decisions.

When I evaluated my internship, it was only natural to highlight the bad things about corporate America, and contrast them with the benefits of self-employment. In reality, there were a lot of good things about corporate America that I took for granted. For example, I had the safety and security of a coveted internship at a top tier investment bank. I was paid well, and the experience was improving my credentials in the job market. By working as an intern and an entrepreneur, I experienced both the highs of being self-employed, and the safety of corporate America. Ultimately, it would be a very different feeling to choose one path to the exclusion of the other.

Throughout the summer, my partners and I worked diligently towards the launch of our business. Unfortunately, a few weeks prior, QuakerCard hit a major obstacle when George’s plans for office space collapsed. Our equipment provider was flying an engineer to Philadelphia to set up the system, but we had no office. I knew Mark couldn’t leave his job to find a real estate broker because he was already too close to getting fired, so I began calling around to local brokers in Philadelphia.

The first broker I called didn’t have any spaces available near campus, but he recommended I call the Christian Center, which was a church located in the center of Penn’s campus. The Reverend Michael rented office space in the building mostly to university professors, and used the money to fund his ministry. He had a love/hate relationship with the school’s Business Services people, who were pressuring him to sell the building back to the school at what he considered to be below market value.

I spoke with the building manager, and there was a vacancy on the first floor. It was the right size, the right price, and it was the perfect location. I agreed to rent it immediately, site unseen. It all happened within two hours of hearing the bad news from George. It was amazing to me how our office space turned out better than we ever could have planned. Now, when we sent a mailer to students, it would have an on-campus return address at the University of Pennsylvania! Our office couldn't have been more centrally located. In fact, you had to walk by us to get to the PennCard office.

Other components of the business began to come together in a similarly quirky manner. We were able to stop a new competitor, College Cash, from entering our market. By inserting “non-compete” language in the contracts we signed with our participating restaurants, we prevented them from agreeing to work with any competing programs. The merchant non-compete clause basically said that since we were making significant investments in the QuakerCard system, the restaurants agreed to exclusively use our program, and not work with anyone else offering a similar service that targeted students.

After we finalized our contracts with the merchants, the College Cash team tried to implement its business plan, but the restaurants declined because of the QuakerCard. Refusing to give up without a fight, College Cash did something unexpected. They changed the name of their company to “University Restaurant Services,” and tried to adopt our meal plan focus. It was futile because our merchants were true to their agreements, but the use of the name “University Restaurant Services” shocked us.

We were amazed they could use the word “University” in their company name. We immediately called Mark’s girlfriend’s father and discussed the legality. Apparently, as long as the name was relevant to your business and the proper state authority approved it, the use of the word “University” was perfectly legal. We grasped the strategic importance of what College Cash had been trying to accomplish with their name change. They were trying to create a brand for themselves that seemed more appealing and relevant to students and vendors without having to get an endorsement from Penn.

It would never have occurred to us, but by inserting the word “University” in the company name, University Restaurant Services sounded more legitimate to students. In many ways, their branding was brilliant, because they leveled the playing field with the school just by incorporating the word “University.”

My partners and I believed our company was at an enormous disadvantage by not having a school endorsement. To be successful, we had to get students and parents to open our mailers. If it was legal, our using the term “University” in our company name seemed like an easy way to ensure our envelopes were opened. And so, at the final hour, we got permission from the proper state authorities and changed the name of our company to “University Student Services, Inc.” from QuakerCard Inc. However, the name of our product was still going to be called the “QuakerCard.”

Although I managed to get a full-time job offer from Morgan Stanley, it was not easy to juggle my internship and my QuakerCard responsibilities. There were many times when the stress took its toll on me. I recall one time when I was sitting at my desk at Morgan Stanley, buried under a pile of work, I received an urgent phone call from Mark. Apparently, I had to rush to Long Island to deal with some crisis related to the printer. I talked to my boss and got permission to leave for a few hours.

I hopped on the subway to Queens, arranged to have my mother pick me up at the train station, and we drove to Long Island together. Needless to say, we got stuck in bumper-to-bumper traffic. We were behind some road construction and the RAT-TAT-TAT of the jackhammer was right next to me. I was sitting in the passenger’s seat watching the clock change, getting increasingly agitated, because I was going to be very late getting back to work.

At that critical moment when I was boiling, the guy in the car behind us decided to lean on his horn. I have no idea to whom that horn was directed, but since ours was the only car in front of him, I took it personally. Combined with the jackhammer outside my window, it pushed me over the edge and I flung the car door open like a wild man. I approached his window and screamed at the top of my lungs, “SHUT THE F--K UP!” I didn’t even realize what I had done until there was complete silence. Even the construction guys stopped to watch, while the guy I was screaming at tried to drive away in the emergency lane.

When I got back into the car, my mother didn’t say a word to me. She never even brought it up. I think she knew that I was putting myself under a lot of pressure. It didn’t matter though, because I was freaked out enough by what I did for the both of us. 
 

Copyright  2005 by Chris Cononico
All rights reserved. No part of this manuscript may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the author, except by a reviewer who may quote brief passages in a review.