Putting theory into practice

UNIVERSITY PARK, Pa. – Uday Turaga had the kernel of an idea for a contract research business for the biotechnology, chemical and pharmaceutical industries. But it took the lure of $250,000 in seed money to nourish that vision into a company.

Last fall, while snacking on lemon cake and orange juice, Turaga and three other Penn State students hammered out a business plan for their company, Aryam, for the U2B Fox Challenge. Penn State alumnus Ken Fox, Class of 1993, created the university-wide challenge to encourage students to formulate, then launch, a business.

This past week, Aryam and three other student companies made the Fox Challenge Final Four.

Also in the running for the $250,000 prize are Adiella, an offshore outsourcing service, providing Web and software development; Pleasant Cove, a senior day-care and home-assistance franchise; and Vasor Technologies, a customizable online product support service.

Next up for the contestants are 10-minute formal presentations of their proposed businesses before a panel of three judges including Fox; Bob Capretto, a Penn State alumnus and Pittsburgh venture capitalist; and Gary Weber, Penn State assistant vice president of research and director of technology transfer. The winner or winners will be announced in early May with the $250,000 split among them.

While the contest may have spurred development of business ideas, several of the entrepreneurs said they plan to go ahead with their ideas, win or lose. By completing the contest requirements, they have laid the foundations for businesses they think could be winners.

“One of the major things I’ve learned is the whole process of starting up a business,” said Husam Brohi, founder of Adiella and a business logistics major at Smeal College. “This taught me some really great networking skills and gave me some solid contacts that I’ll be able to use any time. Having a business goal impressed them and made them more willing to help me.” That “process” Brohi talked about started last September when Fox announced the challenge.

An economics graduate, Fox is the co-founder and managing director of Internet Capital Group. Inc., an Internet company funding and assisting start-up companies in the business-to-business marketplace. VerticalNet Inc. is among those incubated by Fox’s company.

As of April 12, the company had a market capitalization – basically, the value of the company’s stock – of $518.2 million.

The stock’s 52-week high was 74.125 and its low 1.2188.The contest’s first phase drew 195 three-to-five-page company executive summaries from teams.

While teams could include graduate students and non-Penn State individuals, they had to have at least one full-time undergraduate student.

Those initial entrants were narrowed down to six semifinalists who, for the second phase, had to develop comprehensive business plans with projections for expenses and revenues.

The Adiella team put together a 90-page document with market forecasting, scenario analysis, descriptions of core competencies and risk and contingency planning. Using a Web-based, project manager application, the company will provide interaction communication between clients and offshore programmers primarily located in Pakistan.

Brohi estimated that each member of the team put in 40 to 50 hours of researching and writing. That didn’t include several trips to New York and New Jersey to talk with other companies in the same market.

Vasor Technologies partners, who are targeting small software-development firms as their market, typically meet together several times a week as well as one day each weekend. The Vasor product will allow clients to offer customized software support using a convenient and easy online interface, said Justin Plock, chief technology officer and, like his partners, a sophomore in Information Sciences and Technology. With the site, Vasor clients will reduce their support costs while being able to provide optimal help.

Going global Even in the planning stage, these student businesses have international connections, reflecting the trend to a global marketplace.

Adiella is building on American companies’ outsourcing of software development to South Asia, namely India and Pakistan. Often, projects go awry because of communication problems, Brohi said. Adiella’s interactive, Internet tool will remove the language barrier.

Also taking advantage of South Asia technology and expertise is Aryam, which plans to develop knowledge networks for the chemical, biotechnology and pharmaceutical industries.

Aryam partners anticipate helping small companies with their research-and-development needs by linking them with researchers at universities, laboratories or facilities, said Turaga, a doctoral student in fuel sciences.Eventually, the company also will do its own contract research.

Revenues will come from fees for setting up the research partnerships as well as for the research.

The fledgling company already has seven alliances with technology suppliers and creators as well as with research, university and contract labs, Turaga said. Those alliances form the “knowledge network” that Aryam plans to market.

Turaga and his partners anticipate Aryam will be self-sufficient in one year and have revenues of about $5 million in five years. Employees will number around 100, Turaga said.

A growing trend: elder care For its business, the Pleasant Cove team has chosen a domestic market: America’s senior citizens.

Heather Bergman, a Penn State Altoona business major, came up with the idea of an adult day-care franchise with her father, Mark Bergman. They modeled it after an existing business in Kansas City that provides a day-care center and in-home care to seniors who can’t live independently but who don’t need care 24-hours a day, Bergman said.

The Kansas City center offers elderly clients activities and meals and is staffed by the same personnel doing the in-home care.

While there are companies that do health-care management, they don’t include all the applications needed to run an efficient organization, Bergman said. Pleasant Cove will simplify those operations and do it more cost effectively, she said.

The company will operate its own facilities, with the first as a model for interested franchisees to see. Bergman expects that to be located in Kansas City and could be open as early as fall 2001.