Dot-Coms Invade The Dormitory

Ohann Schleier-Smith and Greg Tseng, both juniors at Harvard College, don't look like outlaws. But when they had to buy a $112 textbook called "The Fundamentals of Statistical and Thermal Physics" from Harvard's bookstore for a course last year, a rebellion was born. They did an extensive Web search and found the book online for just $60. Furious at the bookstore's price, they decided to create a Web site to make it easier to find bargain textbooks. Last August, after months of work, they launched FlyingChickens.com, so named because it helps students fly from the Coop, Harvard's cooperative bookstore. In January their site merged with Limespot.com, a similar company, now serving more than 80 colleges. An economics major would say there's nothing illegal about competing with a college bookstore's monopoly. But this crime was different. Until the merger, FlyingChickens.com was headquartered in its founders' Harvard dorm rooms.

The rules are clear, right on page 314 of Harvard's Student Handbook: "Residents in a University dormitory are not permitted to operate a business out of their room." Harvard's ban on dorm-room businesses goes back as far as anyone can remember, and it seemed to make sense. Students are at college to study, not sell. And who'd want to share a room with somebody running a nail salon or a massage-therapy center (two businesses started in dorms at West Texas A&M)? But today dot-com mania has infected campuses like a bad case of mono; business plans now outnumber bongs in most dorms. The result: last month Harvard rewrote its no-business-on-campus policy, creating a more lenient law allowing "modest levels of business activity" in student rooms. Says spokeswoman Sally Baker: "We require students to work for their financial-aid packages, and it seemed illogical for them to not work for themselves."

Rules or not, students at many universities have started businesses in their dorms. Dell Computer was born in founder Michael Dell's University of Texas residence in 1983. Bill Gates laid the groundwork for Microsoft before dropping out of Harvard in 1975. At many institutions the rules that kept them in a collegiate version of Silicon Valley's "stealth mode" remain in place. In an informal poll of 10 universities conducted for NEWSWEEK by the National Association of Student Personnel Administrators, most schools had some policy outlawing "commercial activity" in dorm rooms. But administrators say those regs are a relic of predigital days, when nabbing student entrepreneurs was as easy as spying the stockpile of schlocky door-to-door goods in their closets. As business becomes electronic, it's tougher to police. Students are supposed to spend long hours toiling at computers, and resident advisers can't tell who's writing a psych paper and who's creating a business plan. So at many schools, tech staffers watch out for budding moguls by keeping tabs on Internet traffic.

At Harvard, students didn't take any chances. Last summer the lights in Matt Ebbel and Andrew Chung's room burned late as they studied "Business Plans for Dummies." But when they decided to launch CollegeBeans.com, a portal offering college calendars and marketplaces, they did all they could to separate their business from their dorm. They had mail sent to an off-campus student group's office, so the campus post office wouldn't wonder why they received so much junk mail from CPAs. They used Hotmail accounts instead of their Harvard e-mail. But when Ebbel works on the Web site, it's in his dorm room, and staff meetings convene in the dorm's common room. Ebbel's roommates don't seem to mind the frequent business meetings. Inspired by all the dot-com talk, they're thinking of starting companies, too.

Ed Baker and his three roommates, founders of Datesite.com, an online dating service, use many of the same tactics. They rent a post-office box and do business via cell phone, not the phone in their gorgeous Winthrop Hall dorm, which backs onto the Charles River. But for more than a year they've made a huge bottom-line concession to Harvard's policy. "We have a site that a lot of people use, and we could make money off it," Baker says. "But one of the reasons we didn't put ads on is we were afraid to turn it into a real business because of the Harvard policy." They have no plans to change now that the ban is lifted; their plan is to get lots of registered users and then sell the site to more profit-minded operators. That strategy worked for a group of Harvard grads from last year's class. Their date site, TheSpark.com, sold this year for several million dollars.

Last year the old Harvard policy forced Carl Sjogreen and his partners to be creative when they started Transformis LLC. After releasing a beta version of their software, which helps manage online data, they were besieged with calls from prospective investors, who wanted to come by their office to get acquainted. That presented a problem. Says partner Omri Traub, a doctoral student: "We didn't really want to let on that we were a three-person company running out of a dorm room." So they held most meetings in local restaurants. But when they incorporated, they needed to write up official minutes of company meetings, which they'd been holding in Traub's office in Harvard's computer-science building. Transformis's minutes, however, say that meetings were held in an off-campus apartment. "We were trying to make sure Harvard didn't have any claim on our project," says partner Alex Lloyd, who, like Sjogreen, is an undergraduate.

Many of these stratagems may have been unnecessary. Eli Bolotin, one of TheSpark.com's cofounders, says he received just a stern lecture when a partner was nabbed using his Harvard e-mail for company business. In a memo to Harvard's faculty, Dean Harry Lewis says a key reason for dropping the policy is that after years of lax enforcement, it'd be unfair to clamp down now, and most Internet businesses don't bother dorm dwellers anyway. But even in this new era of leniency, Harvard still prohibits students from using school resources--Internet accounts, e-mail, student directories, even library books--in their pursuit of wealth. Schools like the University of Illinois at Urbana-Champaign now have business-prevention policies that work by measuring how much information a student is uploading to the Internet. Break the 500-megabyte-per-day limit, and the school assumes you're either running a business or sharing copyrighted music or videos. Two-time offenders lose Internet access for the year.

At Harvard, the relaxed policies mean fewer students may have to choose between their schooling and their start-up. Under the old rules, "it's been easier to start a business if you drop out," says Sriram Das, a Harvard senior who's plugged in to the campus entrepreneurial scene. The policies are only a small part of the reason: students like Gates learned long ago that as companies blossom, schoolwork becomes a secondary concern. After selling Transformis to a company called eXcelon Corp. last October, Lloyd, Traub and Sjogreen all took leaves of absence to work for the merged company full-time. But under the new policy, balancing a start-up with study may become to college students what balancing work and family is to thirtysomethings. With that in mind, Das and a partner, senior Peter Weed (he went to the same high school as Bill Gates!), are founding Ivyventures.com, a business incubator and investment fund for students. With their help, future Harvard entrepreneurs may get to move into real offices a bit sooner.