9.30 History Seminar 11.00 Pitch for Smith account

October 22, 1999

Oxford frowns on it; Bill Gates made a million at it; Strathclyde positively encourages it. Anne Sebba reports on the UK undergraduates setting up their own companies

In 1973 Bill Gates entered Harvard University as a freshman. Within two years he had set up Microsoft to develop software for the personal computers he was convinced would soon be in every home and dropped out of university. Today Gates's wealth is estimated at more than $100 billion.

The idea of starting up a company while still at university, possibly spurred on by the Gates fairytale, finally appears to be catching on with British undergraduates. They are easy to spot: the ones whose mobile phones go off in the middle of lectures, who rush off after lectures to don a suit and meet a potential client, and who are up all night balancing the accounts, delivering flyers, writing advertising copy or planning graphics.

"It's constant hard work, better shared with a partner and definitely not advisable in your third year," says one student, who believes running a business may have cost him a 2:1.

Of course, there have always been a few enterprising students who have tried to earn extra money on the side. But the difference now is in the number of young entrepreneurs determined to make it before they are 30. Cary Cooper, professor of organisational psychology at the University of Manchester's Institute of Science and Technology, believes the culture is changing. Universities are starting to recognise they have to help students blessed with good ideas. He warns of the dangers if students feel unable to discuss their business life with their lecturers.

"Far from discouraging them, we should help students to plan their studies. Some students will burn out if they try to do too much and that's why parents and universities should help keep the venture small," Cooper says.

"They must complete their education so that they have a broad knowledge base and don't depend on one product. We're entering a knowledge economy where e-commerce will increase. Students with computer or engineering backgrounds are well placed to take advantage of this."

Strathclyde University in Glasgow is one of the very few universities that deliberately help students start businesses. It has set up an entrepreneurship initiative, offering modular elective classes in business to students from all disciplines, introducing them to real situations and including discussion groups with successful entrepreneurs.

"British students need role models," explains Dr Jonathan Levie, a lecturer on the course. "In the United States one in 12 people starts a business, in the United Kingdom it is one in 33. A typical American student probably has a parent or an uncle starting up a company and so they observe at close quarters and see it as a legitimate career. British students do not have these role models so we try to compensate in the classroom."

The Strathclyde initiative, launched in 1966 and the first of its kind in the UK, was the brainchild of "pracademic" Dr Mike Yendell, who runs a company while also teaching enterprise skills. Two students who have benefited are Peter Mann and Jake McKnight, who drew up a business plan while on the enterprise initiative last year and launched Fusion FM, a student radio station with an official Radio Authority temporary licence.

"We could never have done this without university support. We had financial backing from various university bodies and the Alumni Board, to which any student can apply to fund ventures. Although it is run as a company, the university owns Fusion FM, which had charitable status, so profits were ploughed back to help fund other student ventures."

Mann and McKnight, who have now both left the university, are involved in a group seeking a permanent 24-hour licence to establish Fusion FM on a long-term footing. Mann is also setting up a business designing websites for Glasgow-based companies, which is starting to bring in money.

Other universities are less helpful - Oxford, in particular, has a reputation for being anti-enterprise. Even other Oxford students sometimes resent those involved in organising balls or managing club nights, criticising them as making money off their backs.

Kate Jillings, a second-year student currently organising two big events, says: "The whole system makes it difficult to work in term time. With at least two 2,000-word essays a week and Saturday tutorials, there's hardly any time left unless you want a nervous breakdown."

Alex Blyth and Phil Geraghty, friends and business partners after studying at Southampton University together, decided to keep the details of their website design company as quiet as possible while they were undergraduates. "The company was my lifeline to get through university because I needed money to finish or else I'd have had to take a bar job," explains Geraghty. "My younger sister has not gone to university because she reckons it's too expensive."

Geraghty says that his lecturers did not like the idea of him working and warned him to be "cautious". But although he tried to limit his business activities to one day a week it didn't always pan out like that. Phil graduated last summer with a 2:2 in computer science but was told he was 1 per cent off a 2:1 and is in no doubt that his business activities caused the slippage. Nonetheless, he and Alex have remained in Southampton and developed their company, now called Southampton Online (www.Soton-online.co.uk), which is run from an office rather than their bedroom.

"There are 17,000 students in Southampton, most of whom have free internet access. We have developed a website for the whole city selling advertising space for local businesses and giving details of night clubs, pubs and cinema listings. We got off the ground with a Pounds 2,500 loan from Barclays and our aim is to move on to other cities."

Alex describes the early days of the company: "It was great fun but often very complicated. I seemed to spend my life jumping in and out of a suit and sometimes I'd be meeting company directors who had no idea we were students. My dissertation supervisor was very helpful and kept giving me extensions but in general I didn't want to ask the university for help. I thought it was better to keep it low key and low budget. The strain of everything during finals was ghastly."

As undergraduates pay more for higher education, universities will have to recognise that most students will have to work during term time.

"The days of big grants are over and students will have to fund themselves in future. Wouldn't it be in all our interests if they do so through starting business ventures instead of working at the local burger bar? The university can help them manage so they do not get overwhelmed by the business," Cooper advises.

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