Act II Generation

The economic downturn hasn't dissuaded young entrepreneurs and recent graduates from conquering the new economy -- it has only made them more prepared.

David Morris is a member of the ''Act II Generation.'' A graduate of the University of Pennsylvania's class of 2000, Morris entered the workforce just as the economy was going into a tailspin. Suddenly, Internet businesses had the whiff of desperation about them. The boundless opportunities and dotcom riches that had been promised to graduates of preceding classes seemed far more elusive.

The previous year, Morris says, campus recruiting events revolved around new-economy companies; very few students gravitated toward the large accounting, finance, and marketing companies that showed up looking to hire. Last fall, the tables shifted.

"When the market took a downward turn, 90% of the people interested in new-economy opportunities returned to the safety of the old economy," Morris says. But he wasn't willing to throw in the towel and go back to banking or consulting (B2B or B2C, as students jokingly refer to such old-economy moves). He still has faith that the entrepreneurial spirit that fired the past decade's economic growth is alive -- if not totally well. And he's not alone.

There are still cadres of young people who are convinced that the promise of the new economy is still a good one. Their ranks may be thinning, but the entrepreneurial spirit that fired the Jerry Yangs and Marc Andreessens of the world has not been extinguished.

Morris conceived and founded the idea for the now Boston-based Seedling Group Inc., a recruitment and networking service, in his third year of college. He and his team of Penn grads believed enough in the potential of this segment of the economy to turn down numerous opportunities in favor of moving to Boston and growing Seedling. This dedicated team works to establish long-term connections between young talent and budding companies, and between young entrepreneurs and investors. And it fosters a lifelong relationship between "seedlingers" and Seedling team agents, starting with the seedlingers' last year in college and continuing throughout their careers.

Morris's relationship with emerging talent gives him a critical perspective on the effects of the market downturn. "The crash has created a nice screening process," he says. "Now we can identify who is really committed and who is capable of striking out to create something successful."

James Gutierrez also attributes the weeding-out process to the frigid economy, which has left behind only the most devoted candidates. A 1999 graduate of Yale University and founder of an Internet recruiting company, called MagicBeanStalk Inc., Gutierrez takes the company's cornerstone event, Upstart 101, to more than 25 top colleges nationwide each year. Since the market downturn, the young recruiting company has diversified its offerings to include Consulting 101, Teaching 101, and BioTech 101, among others. However, Upstart remains its most powerful and successful event.

"The students attending our events this year have a genuine interest in the new economy," Gutierrez says. "They are more knowledgeable about the economic landscape, and they believe technology is going to change the world. Those passions don't disappear when the NASDAQ drops 500 points."

Greg Tseng is the kind of recruit the Seedling Group and MagicBeanStalk are most eager to attract. The 21-year-old Harvard senior is a math, physics, and chemistry major who started his price-comparison Web site at age 19, orchestrated a merger with Web portal Limespot, and now works as chief operating officer of the company. Tseng has appeared in the New York Times and the Boston Globe, and has contributed to The Harvard Entrepreneurs Club Guide to Starting Your Own Business (John Wiley & Sons, 1999).

"Frankly, I'm happy about the dotcom collapse and the ensuing changes," Tseng says. "Candidates, like investors, are now looking for companies with real value propositions and solid business models. That's an incredible improvement over the last two years. The Internet and startups attracted so much hype that a lot of silly ideas were funded and a lot companies without revenue models were overvalued. The true power of the Internet was completely lost in all the noise."

Though the market is flooded with recruiting services, Tseng says he gravitated toward MagicBeanStalk and Seedling Group since both were founded by rookies who strove to network with investors and connect with lucrative opportunities. As an entrepreneur, Tseng also sees real value in the personalization of a company like the Seedling Group. He says Gutierrez and Morris have a definite advantage over corporate recruiting firms: They can truly relate to their customers. So far, that strategy is working well for the companies, both of which have solid business plans, strategic growth plans, and currently operate in the black.

Although the giddy optimism of the late 1990s has long vanished, these twenty-somethings have not let go of the idea that they can make their mark on the next economy. This time around, however, they're armed with more knowledge and experience than their predecessors ever had.

Tseng, for one, stands firm against the growing cynicism about the Internet. "Naïveté has its advantages," he says. "You don't recognize any limits to your power, and you don't stop yourself short of succeeding. Shawn Fanning was a 19-year-old college kid who did the impossible when he founded Napster. He came out of nowhere and left the entire recording industry shaking in its boots. He is proof that the Net revolution is not over. There is always room for innovation."

Fast Company sat down with Gutierrez, Morris, and Tseng to hear their thoughts on the talent war, business school, and the most important lessons they learned over the last two years.

Moving forward, what will it take for companies to win the talent war?

Gutierrez: In the future, companies will see a new breed of more-knowledgeable college graduates armed with a full year of case studies, a larger number of employment opportunities, an increased market understanding, and an even greater sense of economic worth. The blurred line between new- and old-economy companies is reshaping the employment outlook for young people. For an exciting, fast-paced, less-corporate environment, startups are no longer the only game in town. More established companies are now offering opportunities in their online divisions and are putting together attractive compensation packages, since stock options are no longer enough to attract and retain employees. While greater flexibility with hours is becoming important, it is crucial for companies hoping to attract top caliber talent to create an entrepreneurial culture that rewards people for their ideas and gives them the ability to implement those ideas. It isn't easy to do at large companies, but it will be well worth the effort to focus on culture.

Tseng: Because technology is changing so fast, the truth is that no one is really an expert for long. The people that companies want are those who have raw ability in terms of learning and performing. Trilogy has a great approach: Its employees work on attracting top talent and then, instead of indoctrinating new hires, Trilogy gives them critical responsibilities and simply guides their way with learning opportunities and management. Unlike 20 years ago, young people can and have made a huge impact in the world of business. There are huge advantages to allowing young talent to reach its full potential within your company.

Is business school still important?

Morris: It's not likely that I'll get my MBA, because I learn better by practical application than theory, but I never rule out anything. Education is wonderful, and MBAs are great for those who want them.

Tseng: Business school is a great place to learn management skills and meet people, but there is no correlation between having an MBA and being an entrepreneur. It is virtually impossible, however, for someone to be like Bill Gates -- to go from being a simply 19-year-old kid with an idea and then build his company into one of the largest in the world, while continuing to act as its CEO. It is crucial to pick up the skills an MBA can teach you along the way in order to drive your company to the next level. I'll likely get my MBA eventually.

What lessons were learned over the last two years?

Morris: First, the money is not in the bank until the wire hits. Second, be consistent with your mission, while being flexible about what outlets you use to express it. There are many ways to get things done, and you have to be willing to put your ideas to the test. Third, it is important to find a balance of dreaming and doing within your team. Dreaming is a luxury, and is fun to do, but the ability to make things happen is vital. Doing is the tough part, and it is the least sexy, but you need those plateaus of doing to see tangible results.

Tseng: You can't change people's behavior overnight. Some businesses out there had a good thing going, but I truly think the market wasn't ready for them. There was too much hype coming out of the media before, and there is too much cynicism now.

Contact James Gutierrez (james@magicbeanstalk.com), David Morris (dmorris@seedinggroup.com), and Greg Tseng (gtseng@fas.harvard.edu) via email.

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