Gary M. Cadenhead listens restlessly. One moment he's nodding his head in agreement, the next he's scrunching his face up, as his University of Texas at Austin M.B.A. students spin ideas for business plans that exist at this point only in their heads. He peppers them with questions, pressing for more details, a sharper focus.

When Adriana Palomino, 28, tells classmates about Concierge Services, a business that would employ students to do chores for busy executives, Cadenhead, six-foot-two and silver-haired, furrows his brow. "Where are you going to find college students willing to work for low wages and no benefits?" he asks. When Larry Patrick, a 29-year-old former Auburn University basketball player, begins to describe Real-Time Recruiting, which would help college coaches identify talented high school athletes, Cadenhead interjects, "How are you gonna pay for those scouts?"

Cadenhead turns to Will Clark, 27, who's all business in a blue suit and a red tie. Clark holds aloft what looks like an orange Nerf Ball. "This is a contraceptive sponge that might prevent the transmission of AIDS," Clark says. "Is that the UT version, or does that just happen to be orange?" Cadenhead responds with a mischievous smile, alluding to the University of Texas's school colors of orange and white. Laughter erupts among the 37 students who fill Room 3.107 in the glass-and-limestone building that houses the university's graduate school of business.

On this warm, sunny day in mid-October, Cadenhead's students are beginning a journey that they hope will lead to their participation in the International Moot Corp. Competition, the best known of the country's four major intercollegiate business-plan tournaments, which is held every May at the University of Texas and awards a grand prize of $15,000. Perhaps one of their ideas will jell into the next Ampersand Art Supply Inc. (See " Student Uprising," August 1996.) The Austin-based company manufactures art supplies and sells them at 400 outlets in the United States, as well as overseas. The idea for Ampersand Art Supply blossomed in Cadenhead's class five years ago. Four of his students developed the concept, swept business-plan competitions at the University of Texas and at San Diego State, and then founded the company.

At American universities more business-school professors than ever have an Ampersand Art Supply equivalent to tout as their success story. Whereas a decade ago only about 10 schools had internal business-plan competitions, the estimate today is 35. They range from the exalted $50K Entrepreneurship Competition at the Massachusetts Institute of Technology (see " EntrÉe to Riches: Winning at MIT") to less famous contests at such institutions as DePaul University and the University of Arizona.

As the competitions proliferate, so does the number of campus champions with stories about parlaying their academic projects into real, flourishing companies. One example is 1-800 Contacts, a mail-order contact-lens-replacement company and the winner of the intramural 1995 Brigham Young University tournament in Provo, Utah. The company, based in Draper, Utah, had revenues of $3.7 million in 1996. Another is Attorneys @ Work, an Atlanta-based Internet recruiting and placement service anointed at the University of Georgia competition in 1996. That company projects revenues of $1.5 million for 1998. SensAble Technologies Inc., in Cambridge, Mass., victor at the MIT competition in 1995, showed revenues of $2.5 million in 1997. The company, which recently raised $7 million in venture capital, makes the Phantom, a device that allows computer users to "feel" images generated by computers. "The competitors are getting stronger," says Charles Hofer, Regents Professor of Entrepreneurship at the University of Georgia. "More and more real companies are going to come out of these contests."

The tournaments are catching fire even at traditional schools that long had sneered at the idea as a gimmick without much educational value. In 1997 Harvard Business School, once particularly known as a training ground for big corporations, inaugurated its own contest with 38 business-plan submissions. Now Harvard is officially bullish not only on entrepreneurial studies (since 1993, it has more than doubled the number of entrepreneurship courses it offers) but also on business-plan tournaments. "The process of creating a business from scratch draws on every element of an M.B.A. education," says Professor William Sahlman, an advisor on the student-run Harvard competition.

Not everyone is as complimentary. John Freeman, Helzel Professor of Entrepreneurship at the Haas School of Business at the University of California at Berkeley, says of business-plan competitions: "It's an easy thing to do, sort of like holding a sock hop. It's fun, but two days later you forget about it." Not coincidentally, Berkeley students have rarely participated in International Moot Corp.

Even without Berkeley or Freeman's blessings, the International Moot Corp. is growing--and thriving. In 1993 only 13 teams took part; this year 25 teams from universities as far away as Australia will meet in Austin for the largest showdown ever.

Now the pride and joy of the University of Texas, the competition has humble origins. In 1983 two M.B.A. students borrowed the idea from the moot-court face-offs that are common at law schools. Their proposal for it landed with a thud. After heated debate Moot Corp. received only a token sum in university support. "There was resistance among some on the faculty who felt entrepreneurship was not very dignified, rigorous, or traditional," recalls Dean Robert May, who then headed the accounting department.

For its first five years Moot Corp. was a low-key affair restricted to University of Texas students. It emerged into the limelight in 1989, when teams from five other schools such as the Wharton School at the University of Pennsylvania and the University of Michigan Business School entered. "We invited schools to the University of Texas in the hopes that somehow their prestige would rub off on us," says Professor Cadenhead, who has an M.B.A. from Harvard and a Ph.D. in accounting from Stanford. By 1992 Cadenhead was the director of what had become known as the International Moot Corp. Competition.

On the long road toward International Moot Corp., the students in Cadenhead's class on entrepreneurship will break into teams, learning how to evaluate, write, and present business plans. To reach the international level, Cadenhead's students must win either the university's intramural contest or one of the big intercollegiate tournaments sponsored by San Diego State University, the University of Oregon, and the University of Nebraska .

Scoring well in a big competition may thrill the winners, but it's no guarantee of success in launching a company. Two years ago Eric Hills, then one of Cadenhead's students, bagged second place at San Diego and an honorable mention in the international competition at Austin. He had high hopes that his accolades would attract financing for Partnerware Technologies , the Austin-based computer-software start-up that his plan envisioned. He was sorely disappointed. "Some folks automatically assumed the company I was creating was more of an academic exercise than a real business," he says. "Some investors were predisposed to look at this as a school project before they read the business plan."

By contrast, hitting it big in a competition can sometimes catapult a company into existence. Before Hayes Batson, 27, an M.B.A. student at the University of Chicago, entered the business-plan tournament at that school last year, his Web-based interactive -software company, Epotec Inc., existed only on paper. He finished second, snaring a $5,000 prize. "Coming in second helped provide us with the credibility we needed to raise $1 million in a private offering," says Batson, who now splits his time between Chicago and the Epotec headquarters, in Wilmington, Del. He will not even have graduated from business school when Epotec begins delivering its product, in July.

Ampersand Art Supply, a big winner in showcase business-plan competitions in Texas and California, gained credibility in a similar way. "I didn't just get an education on putting together a good business plan at the University of Texas," says Elaine Salazar, one of Cadenhead's former students and now CEO and president of Ampersand. "I had access to people and resources that helped me launch my business." One who helped: a judge in a Texas business-plan competition who heard Salazar's presentation and dug into his own pocket to invest $300,000 in Ampersand.

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Published on: Mar 1, 1998