Success and the Serial Entrepreneur
After launching “the fastest-growing start-up ever,” Groupon cofounders headed to the classroom to teach at Chicago Booth.
Photo by Chris Strong
Students who take entrepreneurship courses are eager to hear faculty talk about their real-world experiences. What is it like to launch a venture that’s been called “the fastest-growing start-up ever,” or to reportedly be faced with a multi-billion-dollar bid from Google?
The only two serial entrepreneurs in Chicago who can answer those questions have agreed to share what they know with students at Chicago Booth. Eric Lefkofsky and Brad Keywell, cofounders of online collective buying website Groupon, reportedly turned down a sale offer of nearly $6 billion from Google in early December.
On January 3, the adjunct professors of entrepreneurship took on their newest challenge: teaching 95 Booth students who enrolled in their course, "Building Internet Start-Ups: Risk, Reward, and Failure", for the winter quarter at Gleacher Center.
Lefkofsky and Keywell launched Groupon in 2008 along with Andrew Mason, who left the University of Chicago Harris School of Public Policy to be CEO. The firm offered email subscribers a deal-of-the-day coupon at a local business, then encouraged them to share it with their social networks. Shoppers have jumped at such deals as a $110 spa treatment for $40, or a $60 dinner at a popular restaurant for $30, passing it along to friends. A minimum number of people must sign up for the offer; if that threshold is reached, everyone in the group gets to buy the coupon—hence the name, Groupon.
The firm was so successful in drawing local customers in such markets as Chicago that a national promotion by the Gap last summer drew $11 million in revenue on one day and temporarily shut down Groupon’s server, the New York Times reported. In November, Oprah featured Groupon as one of her “favorite things,” and promoted a joint offer in which Groupon facilitated donations to Kiva, the microfinance organization. The surge in traffic caused by Oprah, coinciding with another popular national deal of the day—$25 for a $50 Nordstrom Rack coupon—temporarily caused Groupon’s site to grind to a halt that day.
In fact, the firm experienced explosive growth on several fronts in 2010. “Groupon had 125 employees on January 1, and it will end the year with more than 3,200 employees worldwide in 35 countries,” Keywell said in December.
Groupon is not the only success story for Lefkofsky and Keywell. Lefkofsky launched InnerWorkings, a business-to-business online printing firm, in 2002 and took it public in 2006; it’s now run by CEO Eric Belcher, ’95. In 2005, Lefkofsky and Keywell started Echo Global Logistics, a business-to-business online logistics and trucking firm that they took public in 2008. In 2007, they started Mediabank, a business-to-business media-buying firm whose platform powers over 40 percent of North America media spending across all media types.
Their success is unparalleled, said Steven Kaplan, Neubauer Family Professor of Entrepreneurship and Finance. “Eric was the keynote speaker at our entrepreneurship conference last November and I did a fireside chat with him,” Kaplan said. “He started talking about what he’d done and my jaw dropped. I realized this guy is probably the most successful entrepreneur on the planet in the last 10 years. He’s started four IPO-able companies in eight years. There’s no one else in the world who’s done that.
“And Brad is a force in his own right. He helped build three of those four companies, and he’s the driver behind putting Chicago on the map when it comes to high technology,” Kaplan said. “We were lucky to get both of them.”
Into the Classroom
Kaplan persuaded Lefkofsky and Keywell to co-teach an entrepreneurship course at Booth. Lefkofsky, who had taught at Kellogg, and Keywell, who had taught at the Ross School of Business at the University of Michigan, readily accepted the offer. “As a place to teach entrepreneurship, Booth is really coming into its own,” Keywell said.
Their course promises to focus “on several concepts that are critical to expedite the pathway to identify viable business opportunities, grow an enterprise, and find a niche worthy of new business creation.” One of the two major deliverables is a mid-term “experience”—an “absolutely nontraditional challenge that will cause students to do things that they otherwise wouldn’t do in a business school setting,” Keywell said. “We’re going to give everyone a similar set of materials, and they’ll have a limited amount of time to create something of value. It should be an accelerated way to experience success or failure—hopefully, both.” Being comfortable with failure is critical. “You’ve got to be comfortable with failing, and figuring out what the lesson is,” he said. “If you’re not comfortable with that, you probably shouldn’t be starting a business on the internet.”
Class participation counts for 50 percent of the final grade. “Asking students to be active participants in the learning process is a necessary part of great education,” Keywell said.
Kaplan said the course is a strong fit for Chicago Booth. “Eric and Brad think very systematically about starting businesses and building businesses. The way they think is consistent with the discipline-based thinking we teach here,” he said. “And students will be required to draw up a business plan. The better plans can incubate in their course, and students can build them in the New Venture Challenge course,” which leads up to the school’s annual business plan competition.
Nurturing future entrepreneurs in Chicago is important to Lefkofsky and Keywell. “We’re outspoken proponents for the city as a hub for technology and entrepreneurship on a global scale,” Keywell said. “Chicago normally doesn’t get that kind of attention. But with the number of successful tech businesses born here, this is the time for Chicago to wake up to its strength.” In March, they started Lightbank, a venture capital fund that invests only in early-stage technology companies built around social media. Lefkofsky, who blogs about Lightbank, wrote, “We’ll actually put someone on your team. We’ll actually meet with you on a regular basis. We’ll actually take responsibility. You can even move your office into our building. We don’t invest in a lot of companies, because every investment we make is not only our money, but [also] our time. Operational support to us means doing actual work, not just dispensing advice.” Among the firms Lightbank has helped fund is Watermelon Express, which sells test preparation applications for such devices as the iPad. Run by Ashish Rangnekar, a second-year student in the Full-Time MBA Program, the firm took first place in the 2010 New Venture Challenge.
Keywell said he and Lefkofsky want to be successful entrepreneurs, teachers, philanthropists, and members of the “thriving” community in Chicago. Spending time with Chicago Booth students helps fulfill that goal. “Those who are given a lot should give a lot,” he said.
Among the students taking the class is Jason Caylor, a first-year student in the Full-Time MBA Program. “I follow the tech community closely and have followed the evolution of Groupon over the past two years,” he said. “Eric and Brad are serial entrepreneurs with some huge exits under their belts. I think anyone would be crazy to pass up the opportunity to take this class.”
Matt Moran, a second-year full-time student, agreed. “With more and more business being conducted online, it seemed like a great opportunity,” he said. “I expect this will be a unique experience.”
By the end of the quarter, students may have a new take not just on entrepreneurship, but also on the entire experience of getting an MBA. “If this is not very different from most other business school classes,” Keywell said, “then we are not doing our job.”
What’s the Deal with Groupon?
How Groupon Works: The website offers its followers a deal-of-the-day coupon for local stores and restaurants. People share the offer with others in their social network; if a minimum number agree to buy it, the coupon is sold to all of them.
On the Entrepreneurial Edge
Groupon cofounders and adjunct professors Brad Keywell and Eric Lefkofsky have taught at other business schools. But they were eager to join the entrepreneurship faculty at Chicago Booth because of Steven Kaplan and Ellen Rudnick, clinical professor of entrepreneurship and executive director of the Polsky Center. “Steve, Ellen, and their team have done an incredible job of making entrepreneurship both relevant and celebrated at Booth, and they’ve been rewarded by being ranked one of the best entrepreneurship programs in the world,” Keywell said. “Our involvement is an acknowledgement of their passion.”
Booth entrepreneurship students have grabbed headlines recently with such start-ups as GrubHub and Bump. But the school’s alumni have a tradition of launching ventures that create entire new industries, including Morningstar and Zebra Technologies.
From Business Plan to Successful Business
Since 1996, the Edward L. Kaplan, ’71, New Venture Challenge—Chicago Booth’s annual business plan competition—has awarded $675,000 in start-up funding to help launch more than 60 companies.
The Polsky Center
A key component of entrepreneurship, private equity, and venture capital activities at Chicago Booth, the Michael P. Polsky Center for Entrepreneurship was established in 1998 with a gift from the Ewing Marion Kauffman Foundation and endowed in 2002 with a gift from Michael Polsky, ’87, founder, president, and CEO of Chicago-based alternative energy company Invenergy LLC.