Sunday, April 13, 2008

The problem with business plan competitions (and why I like Cornell's)

This week was Entrepreneurship Week @ Cornell. For the second year in a row, I've judged the Business Plan Competition.

I love going to Cornell for this event for three reasons.

Firstly, its my alma mater, and the event is full of energy and excitement of Cornellians coming home.

Secondly, the judging event is a combination of grilling the entrepreneurs and providing them with a lot of advice at the same it. If you are "mentorable" and your idea is "fundable" we want to see you get a Series A round of financing, and we'll work hard to try and make it happen.

Lastly, and most importantly, ideas show up that are potentially venture fundable.

So now onto the real reason for this post. I've participated in business plan competitions, not only as a judge, but also as a participant. I've even won a couple.

What I've realized in hindsight is that winning a business plan competition only incrementally improves your odds of having a successful business, versus not winning one. You get a check and the money is sometimes substantial. (We won $25K which allowed us to launch the company). However, for the most part, after the competition you're still stuck with the same problem.

I call it: "That's-great. Now-what-do-I-do."

Winners realize this after winning the competition. I was surprised that venture capitalists or investors weren't lining up to fund the business. There were no angels or foundations at the competition who would really have given us the money we really needed. I also don't know what the judges really meant when they said I was a winner. Is it because:

a) We had an original idea
b) We had done the most homework and did a great job answering your questions
c) We had the best presentation
d) We had a great management team and were the most likely to succeed

Having been on the other side, dynamics of each group differ. Groups of judges may pick the winners for completely different reasons. The most useful information I have realized is to find out:

a) what the judges really think about the fundability of my plan; and
b) what do I need to do (or more importantly, who do I need to call) to build a company.

So to all of you dreaming of the phones ringing off the hook after you win the high profile international business plan competitions, I have one message.

Stop dreaming.

Use the day to identify people at the competition who liked your idea and will be willing to spend time with you. Akamai (a company that did not win the MIT50K, although it was a semi-finalist) became a big company. I don't remember who won that year. Go to several business plan competitions to find judges who find what you are doing intriguing, and are able to pass on contacts that will create a big company.

Especially go to competitions where angels show up. Or where you have a connection.

At Cornell, almost all the judges went to Cornell. There is a shared passion to make things happen long after the check has been cashed, the congratulations have been sent, and the partying has ended.

For those of you who organize business plan competitions, create task forces that include the resources of your school, alums, and judges, so you can help the winners and finalists take the necessary steps to:

a) fix their plans
b) augment their management teams
c) raise research and commercialization grants from Government and Private Foundations
d) get access to angels and
e) eventually get Series A funding

I hope the Big Red Venture Managers at Cornell can create such a culture this year. The entrepreneurs are best served if every competition becomes this way. Then we will accelerate the pace of innovation and make the world a more interesting place. Business plan competitions will become a real way to find the next big ideas. More young people, researchers and innovators will be inspired to dream big.

Cornell's efforts over the next year may yet create a model. Time will tell.

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