Business school students are turning to entrepreneur courses during the recession rather than working toward landing a job with a Wall Street firm or a hedge fund, another sign that the U.S. has entered into a so-called new economy.

With a $787-billion stimulus package and the second part of an enormous financial bailout both set to offer benefits to small businesses and entrepreneurs, the trend could persist for some time.

Following the collapse of Bear Stearns and Lehman Brothers, as well as massive layoffs at several financial firms, students have seen fewer opportunities being offered and even some offers revoked. Even firms such as Goldman Sachs ( GS), Morgan Stanley ( MS), JPMorgan Chase ( JPM) and Citigroup ( C) have reduced headcounts.

The Kauffman Foundation, which touts itself as one of the world's largest foundations devoted to entrepreneurship, has observed that prior to the recession that started just over a year ago, there had been a great expansion in interest on college campuses in entrepreneur courses.

"We haven't yet seen the hard evidence whether that's translated into more kids starting businesses because there's a huge lag effect," said Bob Litan, vice president of research and policy at the Kauffman Foundation and senior fellow at the Brookings Institute. "We find that most successful entrepreneurs are people that start their businesses in their mid-to-late 30's."

Students Making the Shift

There are signs, though, that students are turning their focus to small business and entrepreneurship programs to get a quicker start. Hyuk-Jeen Suh, Ph.D. and a member of Yale School of Management's class of 2009, said that entrepreneurship courses have been so attractive due to the cross-functional skills required to run a business.

"I believe taking entrepreneurship classes is the best way to prepare myself to be a CEO someday, whether it is at a small company or a Fortune 500 company," Suh said. "Despite the risk and challenges of entrepreneurship and starting a business, I also find it an extremely rewarding thing to do, especially if you can succeed."

As one of the co-chairs of the Entrepreneurship Club at Yale, Suh said that the club staff servicing the Yale School of Management community alone has increased from three students to 15 in a year.

"In addition, Yale recently created the Yale Entrepreneurial Institute to help entrepreneurs start businesses, and many professors involved with entrepreneurship and venture capital joined the School of Management in recent years," Suh said, adding that the entrepreneurship courses have always been very popular and are seeing increasing demand.

College professors and lecturers also say that numbers are increasing now as students are moving to entrepreneurship and small business courses while the U.S. economy continues to be battered.

"After the collapse of Lehman," says Constance Bagley, professor in the practice of law and management at Yale's School of Business, "it certainly affects how people think of not only entrepreneurship but also non-traditional financing."

In the course she teaches, which started two years ago, she has seen more than a 50% increase in the number of students.

"At Yale's School of Management , the percentage of students interested in entrepreneurship has increased dramatically in the last few years," Suh said. "I think there is a mix in trends here. I don't think students are migrating to these classes because of the economic situation but more because they find value in learning about running a company and wearing multiple hats."

Jon Fisher, an adjunct professor with the University of San Francisco's School of Business and Management, says that students have shifted toward entrepreneur and small business courses as well-known fraud cases have shaken investor confidence in the markets.

"I'm also seeing a greater trend of students going into small business just so they have an extra grasp on their own destiny," Fisher said.

Students are also eager to pursue spots at venture capital firms if they were to stay on the financial side. Typically, VC jobs have always been very difficult to come by, and Bagley says that if all students can offer is a good financial analyst background, it's not going to happen.

"The days where you thought you can succeed just because you're good at crunching numbers are long past," Bagley said. "You really need to have the ability to deal with these multilayered, multidimensional issues and develop strategies that are going to take into account far more than the after-tax return to shareholders."

Additionally, Kauffman's Litan says that the pros of starting a business in a recession may outweigh the cons. "The con is that there isn't a lot of money around, and the pro is there isn't a lot of competition, and it's easy to find labor," he said.

"If anything, I think this is good time to start a business," Suh said. "If a company can start in such difficult times it can only get better as the economy improves. In fact, starting a company during economic boom times only brings a false sense of confidence in one's business ability, as it did for many people during the Internet bubble, and we all know how that turned out."

Government Measures to Help Entrepreneurs

The shift currently underway on campuses could ramp up now that the Obama administration has developed two spending programs with components that will aid small business owners. The American Recovery and Reinvestment Act will use the Small Business Administration, or SBA, to help small firms.

The stimulus plan is expected to make affordable credit available to small business. It also looks to reduce fees on SBA-backed loans to zero, and it will see the SBA guarantee a larger portion of a loan. Additionally, the bill will attempt to unfreeze the secondary market for SBA-backed loans, which is expected to spur lending.

Also, the bill should help small firms struggling with existing debt by establishing a new Small Business Stabilization Financing Program. The legislation also looks to spur investment in high-growth, small firms.

Rep. Nydia Velazquez (D, N.Y.), the chairwoman of the House Committee on Small Business, said that the passage of this stimulus plan "is a victory for struggling entrepreneurs.

"Taken together, these initiatives are expected to result in nearly $21 billion in new investments and lending for small businesses, spurring the creation of 634,000 jobs," Velazquez said in a statement.

Litan argues that there isn't much in the stimulus package specifically targeting entrepreneurs. "To the extent that the stimulus package helps the economy, generally it'll help entrepreneurs," he said.

Instead, Litan points to the plan devised by Treasury Secretary Timothy Geithner, dubbed the Financial Stability Act, which features a much-expanded Federal Reserve facility to have the Fed buy more small business loans.

"Those are loans backed by the SBA," Litan said. "The SBA is going to guarantee a larger percentage of the loans that they hand out. Those two measures should provide more liquidity to the small business sector. People can argue whether that's enough or not, but that certainly is a major component of the plan."

But Fisher, who was named Ernst & Young's 2007 Entrepreneur of the year in California and recently sold a software company to Oracle ( ORCL), says he's not sure whether the government's plans will be beneficial to students pursuing small business and entrepreneur courses.

"Small businesses will get somewhat of a benefit, but I believe that there are 25 million entrepreneurs in this country that are woefully underserved by the stimulus initiatives," Fisher said. "Billions upon billions of dollars of resources committed to propping up companies like General Motors ( GM) should be concentrated on the millions of profitable small businesses in this country, not just in the high-tech or the biotech space, but in retail and others in between."

There are other signs that President Obama is sensitive to the needs of struggling small businesses. John Doerr, who Bagley calls "one of the best venture capitalists around," was appointed as a member to Obama's Economic Recovery Advisory Board to provide the president and his administration with advice in fixing America's economic downturn.

"If you look at the people that are on the new advisory group to the Obama administration, having prominent high-tech people like John Doerr is a signal that the way the bill is implemented will end up resulting in opportunities flowing to the more entrepreneurial sector," Bagley said.

Bagley adds that Obama has stressed the importance of using technology, even within the broad categories of the stimulus package, and "that the administration has often said that it's not always the biggest companies that have the best solutions. They want smarter solutions and a smarter infrastructure," she said.

What's not clear is how long the shift in students' focus to small business and entrepreneur classes will last, given that recessionary conditions will not persist forever.

"In some ways, it's like during the Internet bubble when you had a tremendous number of students leaving to do start-ups," Bagley said. "You had people wondering if it was worth it to stay and complete their MBA. Once the bubble popped, all of a sudden you see a shift back to the more traditional consulting and investment banking. It's a very cyclical aspect."

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