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Bold Ventures

 by LISA DUCHENE

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Illustration: © Neil Brennan/THEISPOT.COM

The College of Agricultural Sciences works to nurture an entrepreneurial mindset among students, faculty members, and the community.

Edward Druffner points to two loud, rumbling machines called briquetters that transform ground-up scrap wood into dense wood bricks. “This is the heart of the operation,” he says.

When used in household woodstoves throughout the Northeast and Mid-Atlantic, the finished wood bricks burn cleaner and more efficiently than traditional firewood, and without the mess or bugs. Druffner can’t make them fast enough. 

U.S. Recycled Wood Products

U.S. Recycled Wood Products takes advantage of high-quality, kiln-dried wood waste gathered from furniture- and cabinet-making operations throughout the region. These materials form the basis of their wood brick fuel products.
 

 A co-owner of U.S. Recycled Wood Products located outside Lancaster, Pa., Druffner is a 1999 graduate of the College of Agricultural Sciences with a dual degree in wood products processing and manufacturing, and wood marketing. In the nearly four years since he and his business partner, Edward Zook, incorporated their company, they have invested $350,000 of their own money, borrowed $610,000, and run the gauntlet of highs and lows.

For example, they ordered the briquetters from a German manufacturer at a cost of more than $300,000, but then lost $25,000 between when they committed to the price in Euros and paid for it in dollars due to a change in the exchange rate. Neither partner has yet taken home a paycheck to his young family. Fortunately, the bricks are selling well, boosted by the rising price of oil, a hopeful sign the rewards—income, job creation, and environmental benefits—will all come.

Ed Zook and Ed Druffner

(L–R) Ed Zook and Ed Druffner with pallets of their alternative firewood products in their Lancaster County manufacturing facility.    

Entrepreneurs like Druffner are vital to the U.S. economy, creating jobs, innovation, value, and growth. There is nothing easy about an entrepreneur’s path, which demands tenacity, creativity, tremendous faith, and resilience. One-third of start-ups close by their second year and half are shuttered within five years.

As an undergraduate, Druffner had no formal training within the College of Agricultural Sciences to learn how to start his own business. But that’s changing as the college works to encourage would-be entrepreneurs.

“Entrepreneurship is becoming mainstream,” says Barry Zoumas, the Alan R. Warehime Professor of Agribusiness who served on a University-wide entrepreneurship work group and who also serves on the college’s entrepreneurship committees. “Job opportunities at big companies aren’t there like they used to be. Students have to become more entrepreneurial.”

Through its Entrepreneurship Strategic Initiative, leaders of the college are working to spark and cultivate the mindset needed to create new business ventures among not only students but faculty members and the Pennsylvanians served by Penn State Extension as well. That means offering inspiration along with the practical tools and skills needed to save them valuable time and improve their chances of success. 

“There were pockets of entrepreneurial thinking within the college, but there was no concerted effort to have it as part of our mission and culture,” explains Judd Michael, professor of sustainable enterprises within the School of Forest Resources and co-chair of the initiative. “Today, through the Entrepreneurship Strategic Initiative, the college is reaching out—often with help from alumni—to students, faculty members, and the community to inspire their inner entrepreneurs.”

Alumni Lend a Helping Hand

Alumni have been among the fiercest drivers of the initiative to increase entrepreneurial thinking at Penn State.

“We have these people who’ve been very successful coming back to us and saying, ‘Why aren’t you teaching this? If I’d had more help while I was a student here, I would have been even more successful, and I could have done it quicker,’” says Michael.

Earl Harbaugh tops that list. In August 2008, Harbaugh, a 1961 agriculture grad and founder and president of four Illinois companies, and his wife, Kay, gave $250,000 to create the Harbaugh Endowment for Entrepreneurship in the College of Agricultural Sciences. So far, the proceeds of that endowment have funded four two-day Harbaugh Entrepreneurship Forums, one held each semester since fall 2009, when entrepreneurs candidly tell their stories of how they made their businesses work, visit classes, and lunch with faculty members and students.

Harbaugh donated, he says, because the entrepreneurial mindset of creativity, innovation, risk, and reward is missing from Pennsylvania’s cultural fabric—an observation confirmed by a 2009 Kauffman Foundation study that ranked Pennsylvania among the lowest states for entrepreneurial activity.  The foundation is the world’s largest devoted to entrepreneurship. Potential entrepreneurs need an environment and training that will nurture them, says Harbaugh. 

Focusing on Undergraduates

To better provide the skills graduates need to create their own enterprises, the college hired Mark Gagnon to teach an additional section of Entrepreneurial Leadership 310, a College of Engineering course that is a key component of the University’s entrepreneurship minor. Before, there were more Ag Sciences students who wanted to take that class and complete the minor than available seats. Such classes are becoming more prevalent at Penn State, mirroring the trend nation- wide: across all U.S. college campuses, 250 courses were offered in 1985, while more than 5,000 are offered today, according to the Kauffman Foundation.

There’s a tremendous amount of potential for entrepreneurship to be a vehicle to enact positive change and help address some of the very pressing problems we’re experiencing around the world.” Mark Gagnon

Mark GagnonGagnon earned his Ph.D. in forest resources with a minor in strategy and organizational behavior at Penn State in 2004 and then helped create two companies before returning to the college as a visiting assistant professor to help lead the initiative.

He pushes students to think outside the box toward an entrepreneurial mindset. “Entrepreneurship is creating something out of nothing,” says Gagnon. “And being a part of that process is a blast.”

Gagnon’s lessons center on a combination of creative thinking and practical know-how. In one exercise, students study their classmates’ wallets and talk about what they like and don’t like. Then each student creates a design improvement by using basic art supplies to construct a new wallet. For example, one student once included a “clapper device” to help find misplaced wallets. In another lesson, students work in pairs to negotiate a car deal and then work in teams to negotiate a house deal.

Whether or not they take his elective class, Gagnon feels that all Ag Sciences students should be exposed to the concept of entrepreneurship early on. Even those destined for large companies need to think creatively to work on product and new business development, he says. Introducing all Ag Sciences students to the possibility of creating their own businesses begins this fall, when Gagnon and Michael will guest lecture on the topic during the college’s AG 150 First-Year Seminar class, which exposes students to key agricultural and natural resources issues and future career opportunities.

“If we can get them even for an hour or two while they are freshmen or sophomores, then that will increase our odds of lighting a fire under them as they go through their career here at Penn State,” says Michael.

Reaching Out to the Community

Although the college’s primary focus is its students, it also has a long history of helping the community through Penn State Extension. One of the ways extension does this is by providing workshops in financial management and recordkeeping to help traditional farmers manage their operations. But about a decade ago, it became clear that commodity agriculture operations needed help reinventing themselves.

“A farm business, like any business, has to continually look at itself and say, ‘What’s going to help me move forward?’” says Jeffrey Hyde, associate professor of agricultural economics, one of six state program leaders within extension, and co-chair of the Entrepreneurship Strategic Initiative.

Extension’s recognition of that need led to a 20-member group working on ways to support agricultural businesses and a new suite of entrepreneur-focused workshops in the last few years.

“We all kind of had our ears to the same ground, if you will,” explains Hyde. “We said, ‘Look, entrepreneurship at a university sometimes means different things, but we all view it as a very important creator of jobs and wealth for Pennsylvania communities.’”

The strategic initiative makes Penn State Extension’s work around entrepreneurship easier, explains Hyde, because it will make available teaching and research resources on entrepreneurship that extension can disseminate to farmers and food manufacturers in Pennsylvania communities, one relationship at a time. For example, one way that happens is by placing student interns from the college into agricultural businesses. Interns gain experience and help the company by providing labor and important information and research findings.

Extension also offers workshops in strategic business planning called “Your Future in Focus” (also soon to be available in textbook form) and “Food for Profit” for food producers. Another series of workshops called “Annie’s Project” is geared toward helping female farmers become more proactive in managing risks, and a one-day session called “Exploring the Small Farm Dream” helps people decide whether or not operating a small farm is for them.

“Our goal is to get people at the idea stage and say, ‘Let’s think about this a little bit,’” says Hyde, “because in a lot of cases, they talk themselves out of it.” But failing constructively and knowing when not to pursue something is also a critical part of the entrepreneurial mindset, he notes.

Learning to accept failure and move on, along with trusting your own gut and learning to take risks, turn out to be common themes among the successful entrepreneurs who were interviewed for a research project that is part of the strategic initiative. Funded by two U.S. Department of Agriculture grants totaling about $450,000, Hyde, Michael, and Gagnon are studying and publishing on key success factors of agricultural and natural resources entrepreneurs.

Capitalizing on Commercialization Opportunities

One of those key success factors is knowing when you’ve got a marketable product. Often, scientists themselves can become successful entrepreneurs if, through the course of their research, they discover such a product. Helping faculty members turn those opportunities into successful commercial ventures is on the strategic initiative’s not-too-distant horizon. Gary Thompson, new associate dean for research and graduate education, is working on this with the leaders of the strategic initiative.

“We have scientists who are doing bench science and creating intellectual property,” explains Michael, “and most of the time they don’t know what to do with it. We hope to help faculty members understand the commercialization potential of their intellectual property.”
    Jack Vanden Heuvel

Jack Vanden Heuvel

When Jack Vanden Heuvel, professor of molecular toxicology in the college’s Department of  Veterinary and Biomedical Sciences, realized he had a business opportunity on his hands, he spent years gathering information to determine whether to start a company to pursue it. 

Vanden Heuvel studies the workings of proteins, called nuclear receptors, found inside cells that detect the presence of steroid and thyroid hormones. About one-third of all prescription drugs work by targeting one of the 48 human nuclear receptors, says Vanden Heuvel.

About eight years ago, Vanden Heuvel published some papers on simple tests he had developed in his lab that determine whether a new compound or chemical interacts with a group of nuclear receptors involved in diabetes and triglyceride levels called PPAR. Suddenly, pharmaceutical companies were calling to inquire about the test, and he was soon urged to start a company—something he had never considered within the realm of possibility.

Next, he spent more than two years in what he calls a “preincubation” period, in which he talked to people and gathered information about everything from legal issues to renting lab space to obtaining financing. The result is Indigo Biosciences, a company Vanden Heuvel started in January 2005 with Blake Peters, another Penn State scientist who has since moved to the University of Kansas but still serves on the board.
    Indigo Biosciences

A technician works in one of the labs at Indigo Biosciences on products and services focused on nuclear receptors. The company continues to explore high-quality, confidential screening services for drug discovery and active ingredient determination.

Now, Indigo sells testing services and kits for many of the 48 nuclear receptors, and it counts as customers some of the world’s biggest pharmaceutical, chemical, and biotechnology companies. The company grossed $500,000 in 2010 and expects to double that in 2011.

Vanden Heuvel says the college’s Entrepreneurship Strategic Initiative is likely to help scientists who find themselves in his position. “One of the hardest things for me was to find all the information I needed to feel comfortable [in starting the company],” says Vanden Heuvel. Some kind of assistance with that information could potentially save valuable time.

Scaling Up

Now what Vanden Heuvel and Druffner from U.S. Recycled Wood Products have in common is an issue of scaling up. Each has taken a significant investment of time and money and found an opportunity to create even greater value. All it will take is more work and more money.

Druffner is learning the intricacies of raising a next round of investment dollars that will give U.S. Recycled Wood Products the capital to expand its production and meet the market’s demand for its alternative wood bricks. “We have the best problem in the world,” he says. “We can’t keep up with sales. The problem is we can’t get the money to keep up with sales. We’re striving to grow as we’re struggling to survive.”

If he can turn that corner, Druffner hopes to have a new facility up and running by July 2012, which will be able to produce 12,000 tons of bricks annually for a few years, before he anticipates needing to expand the facility again to produce 18,000 tons a year.

He is clearly passionate about the sustainability of his product, which he sees as redefining the oldest, cheapest renewable heating fuel for the twenty-first century—not to mention making it out of waste wood that otherwise would end up in a landfill. Druffner is also passionate about the real, tangible, get-your-hands-dirty nature of manufacturing a wood product, noting there’s a hands-on quality to agricultural entrepreneurship that sets it apart from starting companies and selling them off for the sole purpose of making money.

Perhaps it is the difference between flipping a house and building one—a green one.

While the college is promoting entrepreneurship of all types, “U.S. Recycled Wood Products represents the kind of company [we] hope to encourage, not only because it’s a start-up,” says Michael, “but also because it has a green angle. Our college is training students to think ‘outside the barn’ and go beyond traditional agricultural commodities and into biomass and clean energy,” he says.

Meanwhile, Gagnon also is researching the intersection of sustainability and entrepreneurship. “There’s a tremendous amount of potential for entrepreneurship to be a vehicle to enact positive change and help address some of the very pressing problems we’re experiencing around the world,” he says.

Specific to agriculture, Gagnon notes, is how to feed an ever-increasing global population, which is expected to reach about 10.1 billion by 2100. Innovation is necessary, particularly in the agriculture and natural resources fields. “The folks in these fields are stewards of all good things from the earth. We need more of that. We need more good things from the earth and we need to manage them well.”

All photos by Steve Williams