Schools once didn't teach entrepreneurship. Then in the 1980s, two University of Texas MBA students wanted an equivalent of law schools' moot court, the business plan competition was born, and they grew fast.
Competitions began as new and innovative. They woke people to new possibilities. Few people conceived of students creating business plans and starting companies from school.
Those days are gone. Students commonly start businesses before college. Almost nobody in universities is blind to the possibility.
So if business plan competitions aren't teaching new business concepts, what are they doing? Who benefits from them? Who loses?
Coming from a teacher
First some background. I teach entrepreneurship at New York University and online independently. Last year, three of my students won awards (collectively receiving more money from the university than I did).
I'm proud of their achievements--the opposite of sour grapes. I feel they show my teaching and curriculum are effective. As long as the competitions exist, I agree they should act in their interests to try to win.
In class I discourage them from thinking about the competitions in favor of focusing on their customers, their customers' problems, and how to solve them. I also focus them on their own skills, beliefs, and experiences to learn and grow as students and people.
I think my dissuading them from the competitions helps win them. So to be more precise, I teach students entrepreneurial problem-solving skills that apply to starting companies, but also to working in other firms and throughout life.
Meanwhile, schools promote competitions left and right. What is the effect of these promotions on education?
To be sure, there are benefits to school business plan competitions. They do support entrepreneurship, which I value. They give opportunities to practice. Some students get chances they wouldn't otherwise.
But at what cost? The money doesn't magically appear, nor does the time students put into them.
Is there more baby or bathwater in these competitions?
There is both baby and bathwater to the competitions. To be clear, because the contests promote the baby part, I'm not trying to present a comprehensive view here. Below is the rarely considered bathwater.
1. They distract from customers: when students focus on contestant judges, they aren't focusing on their long-term customers. In a sense, the judges and sponsors become their customers, paying them for a service.
You can say the judges stand in for actual customers, but do they?
2. They meet sponsors' interests more than students: Follow the money. Sponsors, often venture capitalists, aren't fools giving money away for no reason. They want deal flow, which the competitions create.
Does increased deal flow benefit students overall, besides the winners? It certainly benefits the investors. But when there is conflict, are the investors more interested in student learning and growth or their investors and stakeholders?
3. The money comes from somewhere: NYU is having a big push to become more affordable. Everyone knows how much university costs are rising and the debt students graduate with.
The contest money and resources come from somewhere. When sponsors come in offering money for competitions, schools devote resources to them. Do they ask who isn't getting resources when these competitions do?
4. They put students on the contest schedule instead of the market's: contests lead students to prepare for pitch days, spending time on elevator pitches and things customers don't need but investors do. They stop working on customers' schedules in favor of the school's and contest's.
5. They distract from revenue and profit: what capitalist promotes one-time grants over sustainable profit from satisfied customers?
Sure, a one-time boost helps the start-up process. That's what investment is for. If a business deserves investment, entrepreneurs who can show it should get it. A contest that moves away from that simple concept distorts student views of how markets and investment work outside school.
6. They distort student values: no customer buys a product or service because the founder won an award. We pay for what solves our problems and improve our lives. Awards evaluate students on things besides delivering value to customers.
7. They distort schools' missions: cash-strapped schools offered money from rich sponsors often take it, figuring, why not, it looks free. Do sponsors and venture capitalists know how to educate? Is it in the best interests of students?
What aren't students doing if they are competing? The contests don't happen in a vacuum. They get promoted to the whole school. What do they communicate to the rest of the school?
8. They distort the market: our educational system favors kids who have advantages they didn't earn, especially at elite universities, which contests gravitate to. These contests further favor these students at the expense of students elsewhere who may be better leaders and entrepreneurs but weren't born with the same advantages.
9. They waste resources: advertising, promotion, pitch day, and so on take time and money to produce and distribute. Students spend a day lining up like cattle to pitch.
If these events and promotion aren't wasteful, who benefits from them? If students have investment-worthy businesses, shouldn't they be able to pitch without the contest?
If the contest gives them access they wouldn't otherwise, isn't the contest exacerbating the investors' lack of time, decreasing access for someone else?
10. They label some 'losers': if someone wins, others lose. Why should they be losers when their businesses typically have no comparison with the winners. The losers may have great businesses, but now they lost resources preparing for a competition.
They didn't lose in their target market. They lost in a one-time contest 'market.'
11. They promote seeking investment independent of project need: sponsors are typically investors. Few businesses need or benefit from venture investing. These contests promote it and the models they look for. Are those models in the best interest of the students and their customers?
Not the final word
I don't pretend the reasons above are exhaustive. I'm presenting one side. I certainly see great value in many types of business plan competitions outside of schools, like industry-based ones.
If, say, a clean tech industry association wants to promote entrepreneurial activity in its field, a business plan competition for the public will likely work and not create the above problems.
I expect some will push back on what I wrote. I bet most of the push-back will come from venture capitalists and their community. If so, what does that say about whose interests the contests serve?
Are contest sponsors more responsible to students or their own investors? At one time business plan competitions created student learning and experience they couldn't get elsewhere. Do they anymore? If not, are they more in the service of creating deal flow or student learning?