College business-plan contests offer competitors the chance to win sizable chunks of cash.
Ivory tower exercises? Not anymore. College business-plan contestants are all about seducing judges and launching companies.
It's enough to make a seasoned entrepreneur weep: Four M.B.A.'s write a business plan for a company that will make a newfangled smoke detector. Then, on the same day they show it to a venture capitalist in Austin, Texas, they get a check for $100,000. How did the team behind KidSmart Inc. ace the funding game -- in this economy no less? By winning an intercollegiate business-plan competition.
Every fall, hundreds of M.B.A. students, in teams of three or four, begin working with professors to hone ideas for start-ups. By spring, they are groomed in the skills of presentation, armed with 20-page business plans, and ready to take on teams from other schools. Some teams attend just one or two competitions. But others hopscotch from campus to campus, from North Carolina to Hong Kong, for a chance to pitch their ideas to a panel of judges -- seasoned entrepreneurs, bankers, lawyers, and venture capitalists -- who have been recruited by the colleges. All the competitors get valuable feedback. "The judges don't pull any punches," says Jay Ebben, a professor at the University of St. Thomas in St. Paul, Minn., who has been both a competitor and a team adviser. The lucky winners get money -- often quite a lot of it.
In the best of all post-graduate-school scenarios, the winners leverage their ideas into real businesses and shift their lives from student ace to entrepreneurial success. But how difficult is the path to the winner's circle on the B-school biz-plan competition circuit? And does winning one of these competitions have any relationship to achievement in the real world? First things first: What it takes to win is not so different in these contests as it is in business -- a well-timed idea, clever strategy, massive amounts of drive, a great mentor, and, naturally, knowing what the money guys like.
The Road to Moot Corp: Power in the world of business-plan competitions is largely polar -- with the University of Texas in Austin at one end and the University of Georgia in Athens at the other.
UT's prominence stems from its ownership of Moot Corp, the Rose Bowl of business-plan competitions. One of the earliest established, the contest started in 1983 as purely an intellectual endeavor for UT students; launching a company wasn't part of the fun. But as Moot Corp expanded in size and scope, going national in 1989 and international in 1990, students grew more serious about devising truly viable ventures. In 1992, Gary Cadenhead, a senior lecturer in management, took the program's reins, and soon upped the purse to $100,000. With money like that involved, more students sought to compete, UT's prestige rose, and other colleges ramped up or started their own competitions. (An editor from Inc. was a judge at Moot Corp this year.)
A tall man with a deep voice, Cadenhead has created a reputation for himself as elder statesman of the business-plan competition movement. Charles Hofer has pursued a different strategy. Ultracompetitive, intense, respected, arrogant, and in the mix every year, Hofer is the Bobby Bowden of the college biz-plan bowl. The UGA professor coaches his teams to win, and they ooze confidence. "They just plain strut sitting down," says Randy Swangard, who runs the University of Oregon's competition.
KidSmart -- one of Hofer's progeny -- chose as the basis of its plan an idea for a fire alarm that replaces the usual ear-splitting warning with a digital recording of a parent's voice to wake children and direct them during an emergency. Judges were initially skeptical of the plan because it was essentially a one-product company in a market dominated by large players. And at Oregon's Venture Challenge, judge Tim Boyle, CEO of Columbia Sportswear, raised questions about KidSmart's sourcing in Asia.
The team took second place at Oregon, winning $10,000, and by the time they made it to Austin for the big bowl, the KidSmarters had incorporated Boyle's feedback into their presentation. Dressed to win in matching button-down shirts bearing their corporate logo, they affably passed out business cards. And they played a dramatic video from Dateline NBC, which showed that their smoke detector was more likely to wake children than a standard model. The moment was classic Hofer. He drills his teams to make their points dramatic. "There's got to be a story," he says.
KidSmart's story clicked. The plan won the $100,000 grand prize, and just in the nick of time. At a previous competition, a VC had seen KidSmart's plan and offered $750,000 of first-round funding. But the team felt they were better off waiting for strategic funding from an angel who knew the industry. "We labored over the decision and came very close," says KidSmart team member Bruce Black, "but a smart entrepreneur always has a contingency plan, and Moot Corp gave us another option." The partners plan to use the money for additional product development.
"Just being able to compete has helped us tremendously," one competitor says. "It gave us exposure."
Getting in the Game: The growth in interest in business-plan competitions was nicely captured in a moment at the very end of Moot Corp this year when Gary Cadenhead took a minute to introduce some 30 professors from other universities who came to Austin -- courtesy of the Ewing Marion Kauffman Foundation -- to observe Moot Corp. These professors, Cadenhead explained, would return to their campuses and start contests or improve the ones they already run. Some were from large institutions; others were from community colleges. All seemed smitten with the idea of running a mini Moot Corp of their own.
With ever more competitions in the mix, colleges have begun to specialize, offering different wrinkles, rules, and approaches. Oregon is friendly to environmental projects. Nebraska rewards ideas for smaller businesses. Conversely, Rice University's competition focuses on high-capital plans. (Georgia's Hofer exploits the differences between contests by sending different UGA teams to compete in the venues that suit them best.)
To be sure, the professors who went to Moot Corp genuinely seemed at home in the competition's charmingly nerdy atmosphere. But economics are also driving the creation of more contests. A competition can benefit a university's technology transfer program, for example. Professors or Ph.D. candidates in fields such as engineering, agriculture, and the life sciences can pass ideas to M.B.A. students who write business plans. If the plans win contests, the ideas get a little bit of financing plus the marketing advantage of being hailed a winner. "In today's world there is a tremendous amount of pressure on university systems to commercialize technology," says Oregon's Swangard.
