Millennials start-up owners find debt a necessary risk

CEDAR RAPIDS - Leaving a comfortable job to start a small business is considered risky enough. Yet some millennials in the Corridor are taking even more risks to ensure their start-up not only grows, but thrives.

According to a Wells Fargo study released in June, millennials - those born between 1981 and 1997 - are bigger risk takers in business start-ups than their older counterparts. The online survey tallied the responses of about 1,000 U.S. small business owners was conducted from March 24 to April 16 by the research firm GfK.

While findings state start-up owners of all ages begin their business to be their own boss, millennials reported at a greater rate that feeling a need to perform their specific kind of work was a main motivating factor.

Scott Swenson, regional director of the Kirkwood Community College Small Business Development Center, said more entrepreneurial ventures have developed in the area lately.

'The Corridor is a hot bed in the state right now,” Swenson said. 'We're on par or slightly ahead of the Des Moines area right now.”

Nowadays, entrepreneurs are more prepared at a young age, Swenson said, due to business programs offered as early as high school.

Financing the business

The Wells Fargo survey states that about two-thirds of millennial business owners believe some business debt 'is necessary for growth.”

This was the case for Vanessa Terrell, the 27-year-old owner of the Pointe School of Dance and InStep Dancewear in Marion. Terrell took out two loans - one to purchase InStep Dancewear and the second to purchase the 30-year-old dance studio and its brick-and-mortar establishment.

'The business was so well-established and rock solid that it made sense for me to carry some of that risk,” Terrell said.

When she was 23, Terrell took over operations of InStep Dancewear, a dance wear retail store located inside the studio, following the retirement of its owner.

'It was a really great way to get my hands wet with administrative work before taking over the studio,” Terrell recalled.

InStep Dancewear has grown since Terrell took ownership four years ago, moving from a 100-square-foot space to 400 square feet and expanding her business to include outfitting high school activities, such as show choir.

While operating InStep, Terrell was teaching several classes at what was then Donna's Dance Place, but jumped at the chance when Donna's was put up for sale. She purchased the studio in June, rebranding it as the Pointe School of Dance that now sees more than 200 students each week.

Loans and pencil skirts

Some millennials, such as Gabe Erickson, 29, president and CEO of Flow Media, avoided taking out loans for their start-up.

Flow Media, created seven months ago, is the umbrella for a marketing agency and for Corridor Characters, an online publication that profiles individuals from the area. Erickson shares ownership with five others, each between the ages of 29 and 39.

Flow Media operates on bootstrapping: It relies on the seven employees' equipment - using their own cameras, for example - to create content. None of Erickson's personal finances are put back into the business, except for a $10 share purchase of the company.

Not only did Erickson avoid taking out loans, but he said he also is not taking on any investments any time soon.

'When I accept money for the company, it puts values on our shares. I don't want value on the company just yet,” Erickson said.

Twenty-four-year-old Levi Bostian has also managed to avoid debt by bootstrapping his business, renting a space at the Vault Co-Working Collaboration Space to run his business and relying on his own equipment.

Bostian moved to Cedar Rapids in December 2014 to continue developing his own mobile app. Since the initial idea, Bostian said the app, tentatively called Me 2, 'has pivoted a million different ways” throughout its development. Now the app - set to launch later this year - is intended to give 17-to-22-year-old cancer patients a chance to connect with one another.

The concept, he explained, is to provide them an online support system and a chance to say 'me, too, I understand what you're going through.”

However, because he had no other means of support, Bostian created Curiosity IO in August of last year to pay the bills and to give him the means to continue work on his own app ideas. The company - what Bostian describes as 'a playground” for other mobile-app developers - is a platform for Bostian to create other developers' ideas.

However, to make his business work, Bostian invested his own personal finances. He lived in his aunt's basement when he first to Cedar Rapids, living month to month and spending what he needed to support himself from his own savings account.

The owner of Written Apparel Emily Carlson, 31, is financing part of her business through her part-time job.

'For the last two years, I've been living check to check,” Carlson said of her business, a fashion label specializing in pencil skirts for women created by Carlson. 'Any extra money I have goes back into the business.

Carlson also turned to crowdfunding to give a needed boost to the business, but Written Apparel is expected to make a profit by the year's end, Carlson said. But she is not averse to taking on debt.

Carlson said she might not have had the opportunity to design her own skirts if she'd stayed in her position in retail. It was the lack of fashion labels based in Iowa that convinced her to stay around.

Carlson recently has been working to design her own line, which will be launched in September.

Generational differences

Bostian said starting a business at a young age may be the best idea for some - with no family to worry about support and a lot of energy, it allows possibilities that may not exist for an older business owner.

'As far as taking risks, if you force yourself to go there, you're going to make sure you don't drown,” Bostian said. 'If you worked for someone else, you might wish for something else.”

Erickson, who has a young son in Minnesota, the risk of being unable to support a child was enough to hold him back from leaving his full-time job and pursuing his venture for a while. But gaining his first client 'gave him the peace to step out.”

'This is the poorest I've ever been in my life, but I'm the happiest I've ever been in my life,” Erickson said.

From networking with other dance studio owners around the country, Terrell said she believes business owners of her own age tend to be more trusting of tools that are Cloud based or app based.

'The difference is our response to social media and the internet market,” Terrell said. 'My generation finds that more important, and can adapt quickly to trends and new websites.”

Terrell said she relies on a Cloud-based system to keep track of day-to-day operations and the studio's students to check into class online when she's away.

Despite the challenges, Bostian said the important thing to remember about business is it takes effort to see a payoff.

'Ideas are worthless,” Bostian said. 'It's what you do with those ideas that matter.”