Reference no: EM131286461

Assignment: Campus Sponsorship Racing into two markets at once

DreamIt really helped us get moving quickly; it was almost like the Indy 500, we were running so fast! Now, though, we still have to deal with the same problem we've had since we got started-how do we quickly scale this company?
Dan Levin, CEO, September, 2010

Post-race review

The summer is just a memory now, and the fall wind is beginning to blow. Dan Levin, Rob Falcone, and Tony Colantonio are sitting in their office, a shared space in the Laurence A. Baiada Center for Entrepreneurship in Technology at Drexel University's campus in Philadelphia, Pennsylvania, pondering the question that has dogged them since they launched their venture: How do we attract both the student groups who need funding and the big, national brands that want to attract and keep college students as their customers? What comes first-the students or the brands?

Start your engines!

Campus Sponsorship started in late 2009 by Dan Levin and Rob Falcone as a purely mission- based idea, with no business model. The idea was to help college student organizations raise money, something that has historically been difficult and time-consuming for the students.

Colleges and universities do provide basic funding to recognized groups out of the activity fees each student pays. There is no standard way of providing funding for student groups across all colleges and universities, and there are no national statistics that describe college student group funding. A recent study provided by Drexel University's Student Life organization, which surveyed almost 30 universities, showed that the income to the university from student activity fees mostly ranged from $500,000 to $2 million per year, although there were outliers on either end of that range. The following table shows the most prominent ranges and the percent of institutions in this study that collects each amount:

Amount collected Percent of Universities
$500,000 to $1 million 44%
$1 million to $1.5 million 11%
$1.5 million to $2 million 33%

Funding patterns among the universities also vary, and all institutions have their own formulas. However, the majority of universities delivered 80% of their student activity fee revenue directly to the student groups for their activities. Administrative expenses consumed the remaining 20%. While the Drexel study did not provide exact percentages within that 80% distribution to student organizations, the following table lists, in ascending order of amount of money received, the types of student groups that received funding in the responding universities:

Type of Student Organization
Recreation (sport clubs)
Student Government
Other Student Groups
Activities Boards

Activities boards are generally in charge of programming events that benefit the entire university, while all other student organizations typically hold events specific to their membership. So these campus groups-club sports teams, fraternities and sororities, booster clubs, language clubs, and the like-always have to raise more money to host their planned activities.

Dan's research showed that nearly 50% of students participate in some kind of organization while in college. According to the National Center for Education Statistics, the total college enrollment in 2007 (the last year for which figures are available) was more than 18 million2. That means that there could have been almost nine million students looking for funding for their campus groups enrolled in just over 4,0003 colleges and universities in the United States. That's a market any brand should want to get in front of!

What Dan and Rob hoped to accomplish was to build a kind of brokerage to bring together these campus groups and companies that have reason to connect with this particular demographic and also have money to spend to do that connecting. Think of it as an app for campus groups; its members interact with the brands in some way-defined by the brand and hosted by Campus Sponsorship-and in return receive small amounts of money for each individual interaction.

Since the amounts are small per interaction, it encourages the campus group to get all its members, and then some, to participate. The more participation, the more money raised.

But how to turn this idea into a valid business concept? Dan and Rob spent about six months batting the idea around-or, in their words, riffing on it-before deciding to try writing up a concept paper. This was a three-page document describing what they were trying to do: bring together students who need money with the national brands who want to sell their product.

This came together in December of 2009, when Rob was readying his winter term schedule for his MBA program at Drexel University. He opted to take a class called New Venture Planning, in which he hoped to learn how to increase the probability of success in a start-up. At the same time, Rob and Dan began investigating ways to jump-start the idea. They elected to enter multiple university business plan competitions, including those of Drexel University, Rice University and Wake Forest University. In the Drexel Pitch Competition, which is an "Idea Challenge" that simply asks students to turn in one page describing the business idea and how it works, followed by an invited three minute presentation, they placed fourth out of 75 entrants. They didn't have very good luck in the other competitions, not being selected for any of them. But that wasn't going to stop them.

They also looked into DreamIt Ventures, a Philadelphia-based business accelerator program that selects start-up companies to spend a summer getting their businesses up and running. Launched in late 2007, with its first "class" in the summer of 2008, it provides a platform for launching a business quickly, all while providing access to additional experts with needed skill sets for each of the companies, as well as space to work in, shared services, multiple learning opportunities, and networking with investors and other entrepreneurs. It also provides cash; office space; legal, accounting and PR help; weekly access to a number of entrepreneurs and skills workshops; and introductions to equity investors. In exchange for all that, DreamIt takes a 6% equity stake in each company it accepts into the program.

DreamIt was founded by three entrepreneurs who also were investing in early-stage companies after successfully exiting their own companies. Steven D. Welch had built valve-maker Mitos Technolociges Inc. and sold it to Parker Hannifin. David Bookspan founded and sold MarketSpan and its legal data service, now CourtLink, to LexisNexis. Michael Levinson sold PTS Learning Systems to Global Knowledge Network.

The DreamIt founders wanted to induce more young people to both stay in the Philadelphia area and to start companies of their own. They convinced law and accounting firms to provide free advice to their accepted companies, and used both their own personal funds and those from economic development organizations at the city and state level to get DreamIt off the ground.

They also brought in Philadelphia-area angel investors and Venture Capitalists to help select the companies for the summer-long program, as well as other company leaders to provide advice during each program. In 2011, DreamIt expanded to New York City.

The Crew

The three original founders of Campus Sponsorship come from diverse backgrounds. Dan Levin, CEO, worked briefly at Drexel University in the Event Services Office. In the spring of 2008, though, he left Drexel and started up Phame Entertainment, a business focused on booking entertainment into college events. He also worked with some other booking companies and producers, producing celebrity charity events and sponsorships. These concerts, whether through Phame or other booking companies, included such major artists as The Roots, John Legend, Lupe Fiasco, and others. Phame and related activities led Dan to consider using music to engage in philanthropy.

Rob Falcone, COO, met Dan when Rob was the leader of the famed DAC Pack, a Drexel University basketball fan club named for the center where the basketball team plays, the Daskalaskis Athletic Center. Dan was then working in the Drexel University Event Services office. When Rob took over the DAC Pack, there were fewer than 50 members; when he finally graduated and stepped down as president, there were more than 1,000. In addition, he forged strategic partnerships with the University and some community groups, which resulted in an annual funding increase of 400%. Rob was an undergraduate in electrical engineering at Drexel at the time; after completing that degree, he stayed at Drexel to study for his MBA.

Tony Colantonio, Vice President of Strategic Partnerships, worked with Dan and Rob on one of the major philanthropy concerts, Rock Your Cause, after having met Dan while at the New Jersey shore a year or so before they launched Campus Sponsorship. The Rock Your Cause concert, a one-time event, was held in the spring of 2009 and was attended by over 3,000 people. The attendees were entertained by rapper Lupe Fiasco and mash-up artist Girl Talk and raised nearly $150,000 for charity. The charities that received the monies were designated by the individual student organizations that took part in the event.

Tony spent three years with Comcast Corporation as Manager of Government and Community Affairs, where he oversaw sponsorship for one of Comcast's regions. Comcast focused on sponsoring smaller community activities, rather than large, national organizations; community groups in the Philadelphia suburbs would approach the company to request support, and Tony would handle the requests. This dovetailed nicely with Tony's interest in volunteerism and sponsorships-he regularly volunteers in several philanthropic and community organizations, including the Leukemia Society and the Lymphoma Society.

Zero to sixty in 12 weeks

Campus Sponsorship was accepted into DreamIt in the summer of 2010, which was the third DreamIt class. DreamIt had over 500 applicants for that third class from all over the world; the process actually began in January of 2010, when the application system on the DreamIt website opened up. The company started its interviews in late February, and concluded them by the end of March, when it made its offers to the 10 selected companies. The kickoff weekend was held in early May. It closed the summer with a Demo Day, an event at which each of the companies presented to a diverse audience that always included lots of private investors and venture capitalists.

For Campus Sponsorship and all applicants, the selection process included two phone interviews, the first of which was a video interview that lasted about 15 minutes for the Campus Sponsorship team. In this first interview, the DreamIt team asked very structured questions during that call, including those regarding the Campus Sponsorship business model, the intended market, as well as the qualifications of the team. This was followed shortly thereafter with a less formal call in which the Campus Sponsorship founders were able to ask their own questions.

The company was accepted into the program, and their odyssey began. The team feels confident that they learned a good deal about running a business during the summer boot camp, and noted that, among other things, they felt the legal support was truly valuable. They also felt that they were able to validate their business concept during the summer, and that validation ultimately led to their first paying customer, who they signed during the second month of the program.

In Rob's words, they "started the summer with nothing, and ended up building a functioning product, getting customers to agree to try us out during our alpha launch, and getting students to participate in that alpha launch to raise money. We definitely proved that we had a new way to both advertise to college kids, and for college kids to raise money."

The focus of the summer was on being quick; DreamIt is, after all, an acceleration program. That means the Campus Sponsorship team had to be quick to get a minimum viable product/website up and running; quick to develop a system to address and manage their risks; and quick to get to that first paid customer. That quickness, though, kept them struggling with a chicken-and-egg type question: how would they get the major brands signed up as sponsors without having a critical mass of student organizations already on board?

Running the race

Campus Sponsorship has to sell into two diverse markets: college students (and the college administrators that may act as gatekeepers to them) and major brands that are seeking to reach their own target markets with effective messaging.

Today's college students, with their access to more information than any previous generation, can be very skeptical, and thus hard to impress. Companies really have to work to prove their worth to this generation, and they cannot do it in a hard-sell fashion. This generation, often called Generation Y or the Millennials, does tend to be brand conscious, but that doesn't necessarily mean that they will go visit a brand's website4. In order for companies to reach this generation, therefore, they have to find a soft-sell, but not passive, way to get their attention. Developing a website and just hoping for visits won't work.

Generation Y is defined as the group of people born since the early 1980s. The good news for Campus Sponsorship is that this generation seems to be very team-oriented, and that they are using technology to create community in virtual space. Community service is also becoming a norm for this generation, and they also want to eventually go to work for companies that do something for their community3. This is also good news for Campus Sponsorship, as the company can act as the bridge between a generation of college students that likes to work together toward common goals and major national brands that want to show that they care about community also, not to mention the fact that they will someday be interviewing this generation for open positions in their companies.

However, Gen Y can be hard to reach. Unlike their parents, who grew up with only three TV channels, and generally one local and perhaps a handful of national news outlets, this generation has witnessed an incredible fragmentation of the media. In addition, ethnic groups no longer see assimilation into the national culture as a goal; multiculturalism is the new norm. These multicultural groups also tend to associate among themselves, with less mixing in schools.

There are therefore more and more diverse and specialized student groups on college campuses.

Of course, building the bridge between student organizations and brands is what Dan and his team need to figure out. They have been looking into ways to build the student base through more efficient means, such as by targeting national fraternities. But is that enough? Again, how do they sign up national student groups before they have the ability to show them a large stable of national brands willing to help fund their organization? And how do they interest investors so that they can get the financing they need in order to keep their business growing?

As the three founders ponder how to not only show the growth potential of their business but also how to actually ramp up quickly, they get a phone call from one of the investors that saw them on Demo Day at DreamIt: Could they come in to meet with the investor the next day? Channeling their summer "quickness," they said yes immediately. Now they are sitting there staring at one another. Dan is the first to speak up. "Now what? We have to tell them how we are going to penetrate two markets at once. It would be nice if we knew how to do that!"

Questions:

1. What is the best way to attract college students to Campus Sponsorship?

2. What are the top three national brands you would suggest that Campus Sponsorship should sign up? Why?

3. What would you tell the national brand managers at the companies you just suggested in order to interest them in participating in this effort?

4. How would you assign resources within Campus Sponsorship to both attracting college student groups and national brands at the same time?

5. What are the key points that Dan and the team should highlight in a presentation to the investor?