University of Southern California

Sink or Swim on 50 Bucks
Professor Thomas Knapp’s “E” Challenge Student Turn $200 Investment into $9,000 Worth of Business
September 9, 2009 • by Jeremy Deutchman

When it comes to fostering a sense of entrepreneurial initiative among students, Professor Thomas Knapp believes in the power of leading by example. As a USC undergraduate in the 1980s, Knapp began Club Sportswear, a successful apparel business; by the time he graduated in 1986 with a B.S. in business administration, the company had already racked up $840,000 in sales. More than two decades later, Knapp is back at USC Marshall, this time as an assistant professor of clinical entrepreneurship. And he is drawing on his experience – and a 20-year career of entrepreneurial achievement – in his Applied Entrepreneurial Feasibility Lab, a new course offered for the first time last spring.

Nicknamed the “E” Challenge, the course is classic USC Marshall, enabling students to take knowledge acquired in the classroom and apply it in the real world. In addition to more traditional lecture and discussion, students have an opportunity to hone their skills by forming small companies and seeing how they fare in the marketplace. The course, says Knapp, offers participants vital, hands-on experience – and a critical dose of reality. “Everyone has a million great ideas,” he says, and the “E” Challenge class puts those ideas to the test. Students “have no choice but to go and get dirty,” Knapp says, “because that’s how you get through the pain” and identify what, or whether, someone is willing to pay for a particular concept or product.

The course requires students to invest more than just time and effort in their endeavors. Each “E” Challenge company starts with $50 contributed by individual team members; the companies must sink or swim on the strength of that initial investment. “They can’t use a rich uncle” to subsidize their efforts, says Knapp. “They have to take that start-up capital and actually make it work.”

As the groups considered how to proceed, they took distinct approaches, launching a diverse range of products and services. One company began selling customized sunglasses they called “shades of hope,” with a portion of proceeds benefiting a different charity each month. Another offered t-shirts bearing slogans like, “Practice safe sex…make love with a Trojan” and “Raise your hand if you’re a Trojan. Raise your standards if you’re not.” A third group, going by the name SCity Eats, provided home food delivery from local Los Angeles restaurants like Chipotle and California Pizza Kitchen. Whatever their business model, each company’s goal was the same: generate enough revenue to build a sustainable business.

It is a goal that Knapp’s students have met – and exceeded. “In two weeks,” he says, “they collectively did over $9,000 worth of business off a $200 investment. It was beyond what I thought it would be, and I’m one of those guys with pretty big expectations.” The “E” Challenge course has forced students to learn other crucial, non-financial business lessons as well. “Watching the growth they have made has been phenomenal,” says Knapp. “They’ve had to listen, and to interpret what the customers are saying, not just from their words but from their actions.”

As the semester has progressed, Knapp found that his students were not the only ones doing the learning. Their willingness to help each other succeed has given him a window into the future of entrepreneurism. “I come from a generation focused on winning at all costs,” he says. “But these students are different. I call them the ‘AYSO generation,’ because they all play together. Being cutthroat is not their thing; they enjoy competing, but would much rather have everyone win.” This, he suggests, has enormous potential to impact the way business gets done.

According to Knapp, the spirit of collaboration that permeated the “E” Challenge course has proved infectious. His faculty colleagues have been “one hundred percent supportive. They are as excited about the class as I am, and are right in it with me, rolling up their sleeves and really enjoying it.” In fact, many senior faculty members have volunteered their time to serve as advisors to the student companies. That level of engagement, says Knapp, not only helps students, but can also yield positive benefits for USC Marshall’s program in entrepreneurship. “It’s a great opportunity for us as a department,” Knapp observes. “These are some of our brightest students, and, ideally, every faculty member will touch them in some way through this course.”

When he put the “E” Challenge syllabus together, Knapp knew he would need more than faculty buy-in to establish the class as a lasting presence at USC Marshall. “I wanted to make it a meaningful experience” for everyone involved, he says, but, ultimately, he realized it would also have to be fun. “The students are my customers,” says the veteran entrepreneur, laughing. “I’ve got to make sure they’re happy; that’s my job.”

The “E” Challenge has become a major component of the entrepreneurship class “Starting and Growing the New Venture,” which is offered in both the fall and spring semesters.

About the USC Marshall School of Business
Consistently ranked among the nation's premier schools, USC Marshall is internationally recognized for its emphasis on entrepreneurship and innovation, social responsibility and path-breaking research. Located in the heart of Los Angeles, one of the world's leading business centers and the U.S. gateway to the Pacific Rim, Marshall offers its 5,700-plus undergraduate and graduate students a unique world view and impressive global experiential opportunities. With an alumni community spanning 123 countries, USC Marshall students join a worldwide community of thought leaders who are redefining the way business works.