Shutting Down Entrepreneurship

Early last week, Harvard University issued a cease and desist order to a local student startup, InstaNomz, informing them that they could no longer operate on campus. InstaNomz, founded by Akshar Bonu ’17 and Fanele S. Mashwama ’17, is a food delivery service catering to local restaurants that typically do not offer delivery.

Harvard gave the founders two options if they wanted to continue: Either operate as an outside vendor or be managed through Harvard Student Agencies, a non-profit organization run by Harvard students. If they became an outside vendor, they would could no longer offer delivery directly to a student’s dorm room and increase their operating expenses. Because this was not an option, the entrepreneurs attempted to negotiate with HSA but could not come to an agreement. With both options exhausted, the InstaNomz business has been suspended indefinitely.

At first glance, the University’s position seems defensible. Having a business delivering food in and out of buildings could create security issues that Harvard does deserve the right to respond to as they see fit. Yet no one knows the actual reason behind the shutdown because the University gave no specific reason for the effectively forced closure.

The HSA performs business operations for students similar in scope to InstaNomz frequently. Some of these HSA services include delivering laundry, water and groceries right up to a student’s dorm room. Upon closer inspection, the dismissal of InstaNomz appears to be a case of the “Kremlin on the Charles” protecting its own state enterprise.

By its own description, HSA is the largest student-run company in the world. The organization serves an important role on campus by providing real jobs to Harvard students instead of a typical work-study program. But at the same time, this group has a monopoly on campus business due to their exclusive ability to operate delivery services within the student dormitories.

So what differentiates the HSA from InstaNomz? Not too much. Both ventures are student-run and serve the purpose of providing jobs and practical business experience for students. Maybe the reason for the special treatment is that HSA is a non-profit. According to the HSA website, the organization was originally created because hosting a for-profit company on campus would threaten Harvard’s real estate tax exemption. This defense does not hold up well however, because the majority of student businesses operating on campus are for-profit and based in either dorms or the startup space on Mt. Auburn Street (which is owned by the University).

If there is little that separates the HSA enough to justify its special treatment, then what could be the reason that allows the HSA to operate where others cannot? The answer may lie in the make up of its corporate board.

The HSA board contains numerous Harvard administrators. Consequently, there is a significant conflict of interest question regarding the board’s fairness in the treatment of InstaNomz. By having the school administrators on the board, HSA can effectively influence university policies to their benefit. The board has two key reasons to prohibit InstaNomz from being on campus. First, the startup has the potential to dominate a space that could be a large revenue stream for the HSA, and, second, if InstaNomz is allowed to continue, it would set a precedent allowing for other Harvard students to create companies to directly compete with the HSA and hurt its business.

Ultimately, do the Harvard administrators on the board have a greater responsibility to Harvard Student Agencies as dictated by that organization charter or to the University itself and its students as required by their job? It is clear the board is choosing HSA over the market and independent efforts of others in the Harvard community by limiting its options and allowing this monopoly to continue. Harvard may try to divert blame from itself for the shutdown by forcing InstaNomz to negotiate with HSA, but HSA’s most-favored-nation status gives it all the incentive to not make a deal, knowing it can simply push aside the startup and enter the space.

Any person familiar with basic economics understands the dangers and problems of monopolies. With no other competition, market inefficiencies arise, resulting in worse outcomes for consumers. Furthermore, this regulation is not just limiting business operations but also preventing one from existing. In its current state, HSA is an inefficient, monopolistic organization that seems ripe for disruption.

If Harvard permits InstaNomz to operate, it is allowing for students to enjoy their favorite foods without the hassle of leaving their room. More importantly, it will set the standard for other Harvard students to create businesses that could compete with the HSA monopoly. Since competition breeds innovation, it will lead to greater efficiency and convenience along with better prices for Harvard students.

Despite the plethora of successful startups that have emerged from Harvard College, the entrepreneurial environment the university declares it has does not exist. The University cannot be allowed to continue to claim to foster entrepreneurial culture, then turn around and fight it.

Although Harvard lacks a formal mission statement, former Dean of the College Harry R. Lewis once stated the goal of the College was, “to create knowledge, to open the minds of students to that knowledge, and to enable students to take best advantage of their educational opportunities.” In this instance, Harvard students and the InstaNomz founders have learned that the University allows for entrepreneurial openness only when it suits the administration, and, to evoke George Orwell’s “Animal Farm,” that some are simply more equal than others.

Manuel M. Cominsky ’14 is a history concentrator in Lowell House.