To the winner a chance of stardom

For business school students wishing to test what they have learned in a practical setting, there are few opportunities to rival the business plan contest. The American Idol formats – multiple rounds, barb-tongued judges, intense rivalry – and the exposure to potential investors provide one of the stiffest challenges to anyone who has spent the bulk of their MBA course in classrooms or writing academic papers.

Since the late 1990s, business plan contests have blossomed and spread beyond business schools. Ambitious towns, regions and companies now host contests with generous rewards to entice new businesses. Even television programmes such as Donald Trump’s The Apprentice owe something to the format. For entrepreneurs who have struggled to get in front of angel investors and venture capitalists, business plan contests have turned out to be an excellent way to pitch and even raise seed capital.

Barry Kahn, 26, has newly graduated from the University of Texas, Austin, with a PhD in economics. In the most recent contest season he won cash and services-in-kind worth $350,000 for his start-up QCue, which develops software to improve ticket brokerage.

“Before these contests started, for me to get in the door and pitch to a venture capitalist was a huge deal,” he says. “I had met with one. Finding investors was not easy. These competitions give you a chance to pitch in front of people. I’ve now got a Rolodex, which no one else in my situation really does. Every investor I have on board came from these contests and every investor waiting to invest until we reach a Series A stage is from these contests.”

Mr Kahn and his team entered four contests, won two and came third in another two. Their biggest win came at Rice University in Houston, where they won $100,000 – provided they locate their start-up in Houston. The money is awarded by the Greater Houston Partnership, a kind of local chamber of commerce.

“Ironically, the money has become trivial because, since we won, money is not as scarce as it was the week before we won. What is important is how the city of Houston took us around, introduced us to local CEOs. It’s unbelievable to think that we could have that kind of access and a city behind us like that. That’s more important for us now than the money.”

The Rice contest is open to schools around the world and this year received 234 applications for 36 spots. Teams must contain at least one graduate student. “These contests are a terrific opportunity to teach students how to start and launch a company, how to create a plan and sell their idea to investors,” says Brad Burke, director of the Rice Alliance for Technology and Entrepreneurship, which runs the contest.

“Seventy six per cent of the judges at this year’s contest said they had seen a plan worthy of their investment.”

Technology

When the Rice contest started in 2001, says Mr Burke, there were a lot more consumer products among the plans, a barbecue spice rub, for example, and a magazine for teenage boys. These days almost all the plans have a large technology component. The other change is that, whereas in 2001 teams were doing the contest as an academic exercise, “teams today are more likely to launch when they graduate”.

Mr Burke says that roughly two-thirds of the competitors between 2001 and 2007 are still in business. Jerry Engle, the executive director of the Lester Center for Entrepreneurship and Innovation at the Haas School of Business at the University of California Berkeley, draws a distinction between the big global contests and ones limited to the university where they are held. The Lester Center runs two global contests, one for technology businesses, another for social ventures. Both attract teams from around the world. But it also runs a third contest just for Berkeley. This Berkeley contest, says Mr Engle, is vital for “fostering the local, entrepreneurial ecosystem” around the university and developing the “town and gown” partnerships. Local business people get to know more about what is happening at the university and vice versa.

Last year’s winner was a plan to provide healthy lunches to schoolchildren. This year’s top three were all energy-related. Mr Engle can also point with pride to two recent Berkeley winners that are now raising millions in funding. Four years ago, Silicon Clocks won with a plan to create new, high-tech timing products. The founder spent a year after graduation working in free office space provided by the Lester Center and has since raised more than $30m in financing. Two years ago, the winner was Aurora Biofuels, a partnership between a Berkeley research scientist and MBA student to commercialise technology that converts algae into biofuels. It recently closed a $20m Series B round.

Message

Such numbers may be in the future for Bryan Smith and Irene Susantio, who graduated from Wharton this spring after winning their school’s business plan contest, open to students across the University of Pennsylvania.

Their company, Solixia, aims to help cancer patients through the use of nanoparticle technology. Mr Smith was a research scientist who signed up for an MBA at Wharton to learn how to commercialise his research.

“Having a competition as a stage gate helped us to pressure test our idea for a company,” he says. “Does it have legs? It forced us to flesh out our plan.”

Ms Susantio, who comes from a more conventional business background, including a stint in operations, at ExxonMobil, says: “More than 200 judges looked at our business plan through the various rounds. It wasn’t always nice feedback, but it was very honest. So by the end we felt we had a plan which was solid.”

Pitching their plan so much also helped them to refine and improve their message, especially their ability to explain a complex technical product.

Emily Cieri, the managing director of Wharton Entrepreneurial Programs, emphasises that just as important as who wins, is the educational experience for all the contestants. A total of 343 students offered 145 plans this year and all had access to workshops about finding ideas and turning them into plans. The contest is probably the most “real” aspect of any business school’s attempts to teach entrepreneurship.

Whoever wins, says Ms Cieri, “students are learning throughout the process”.