How to Win Big and Get Ahead Fast

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Entrepreneurs outside academia -- also hungry for funding -- have been insinuating themselves into business-plan competitions as well. For example, KidSmart's talking smoke detector was not conceived of by Black and his teammates or even by an engineer at the University of Georgia. Instead, it was invented by a Minnesota trademark attorney who found his M.B.A. partners through Charles Hofer's program.

Stephen Spinelli, director of entrepreneurship at Babson College in Wellesley, Mass., estimates that at least 50% of his school's roughly 100 teams have an outside member. "I think partnering is healthy, and we even encourage it," he says. An outside member has more of an incentive to push the team to launch the business after (or while) they work toward their degrees. And for schools, having winners now and actual businesses later can raise the prestige level -- and student applications -- of any program. "Some students have told me they go to UGA because they know it's a machine," says Swangard.

Not Always a Good Thing: As the competitions grow, so does the criticism. Some say the contests overemphasize the value of a written plan. "My gut tells me a lot of entrepreneurs never went through this process at all," says the Kauffman Foundation's Rob Chernow. "In a start-up, whatever you put on paper will change the next day." He adds that Kauffman is reevaluating its funding for the competitions.

Another knock against the competitions is that, with a handful of exceptions like Nebraska's, they favor ideas suitable for venture capital -- even though most businesses do not require institutional money. In the last four Inc. 500 surveys, for example, more than 95% of respondents said they didn't receive venture capital. Yet VCs have been a cornerstone of the judging community and naturally, the plans they reward are those that could theoretically be venture-backed (as of late, biotech is hot). "I'm concerned that they have become more of an investment competition than a business-plan competition," says the University of St. Thomas's Ebben.

"You have a nice Midwest lifestyle business, but it wouldn't play on the coasts," the judge said.

His concern is echoed by Neil Peters-Michaud, CEO of Cascade Asset Management, a company that grew out of a business plan entered in competitions in 1999. Peters-Michaud's plan for a computer recycling company received mixed reviews on the circuit. In the leafy confines of Oregon, his green idea was a runner-up, but at the tech-savvy San Diego State contest, Peters-Michaud recalls being told, "You have a nice Midwest lifestyle business, but it wouldn't play on the coasts." Today, the thriving company has upward of $2 million in sales.

Of course, you can argue that the fact that Peters-Michaud has a solid business is not proof of the judges' blindness but rather, proof that competitions have pedagogical value. "The honest, detailed feedback was invaluable," Peters-Michaud says.

Researchers are just beginning to collect data on the afterlife of competition winners. We may yet discover that the most exciting start-ups today are, in fact, making their debut in college auditoriums. Proponents of business-plan competitions often point to a company called Suppliermarket.com in making that case. Second-year M.B.A.'s Jon Burgstone and Asif Satchu first shared their plan for a software company at Harvard's competition in May 1999. A month later, they secured $8 million in VC financing; by October the company was up and running -- its strategy essentially unchanged from HBS. Soon, Lou Dobbs was interviewing the team on Moneyline. The following year, the fairy tale concluded with Ariba acquiring the business in an all stock deal worth more than a billion dollars.

The KidSmarts of the world can only dream that similar riches are in store for them. But the folks steamrolled by Georgia's teams can also take heart -- Suppliermarket.com's billion-dollar idea didn't win. It came in second.

Tariffs Drop, a Business Is Born

Burkha-clad Afghan women stitching sexy silk shirts? The unlikely idea led Sarah Takesh to win $25,000 at the National Social Ventures Competition, co-sponsored by UC-Berkeley and Columbia, with finals held in New York. She also placed second at the contest run by venture capitalists Carrot Capital, which means she is eligible for $500,000 more.

Takesh's company, Tarsian & Blinkley, is a fashion house staffed by Afghan women. The 30-year-old Berkeley M.B.A. pays embroiderers roughly $3 a day and tailors $6.25. In Afghanistan, the standard liveable wage is $2 per day. Boutiques in New York City, San Francisco, and Paris will distribute her first line, due out this month. The blouses, dresses, skirts, and jewelry, designed by Takesh, will be priced at retail between $60 and $380. Her plan has the business reaching breakeven in year two. Sales will grow to $1.5 million in year three, she asserts, with margins of 70%.

Takesh's talent with scissors, however, didn't wow the judges as much as her eye for international trade. In January, she explained, the United States declared most Afghan imports free of tariffs. And in December 2002, Congress designated $3.3 billion in Afghan aid, from which Takesh hopes to benefit. "We could tell her attitude was, 'I'm going to make this happen no matter what," says Catherine Clark, of Columbia Business School, who judged at the 95-team competition.

Takesh, whose family is Iranian, says, "I want to see beauty grow in the middle of a wasteland. Feminine beauty in particular -- right in the very heart of the place that nearly obliterated it." Jess McCuan

Literally, the Best Elevator Pitch

"By the eighth floor, the second VC guy started asking questions," George Weinmann says, "but I still had five points I wanted to make and only 24 floors to go."

Welcome to Wake Forest's Babcock Elevator Competition, where students and VCs are stuffed into an elevator shooting to the top floor of the Wachovia Building, the tallest skyscraper in Winston-Salem, N.C. Contestants have two minutes, or 32 floors, to make their pitch.

"It's designed to be stressful," says competition co-founder Daniel Egger. It is: A student with a stopwatch jumps in the elevator too, starting the clock the moment the doors close. In that time, Egger suggests that students explain their product clearly and cover market size. "When we ask, 'Why you?' students are stumped. They think having a great idea would win, but we're looking for the most fundable plan," he says.

Weinmann, a University of Michigan M.B.A., won this year with a plan to market a new kind of generator for office buildings. Boeing engineers, with whom he used to work, developed the technology. His company, ADI Thermal Power, is looking for $3 million in funding and predicts year seven revenue of about $50 million, with gross margins of 50%. Matthew Fogel

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