A great idea only goes so far. So to transform their concepts into thriving businesses, a few entrepreneurs are seeking help from an unlikely source: business-plan competitions sponsored by colleges and universities. During the contests, teams of entrepreneurs -- which must include at least one student -- pitch their ideas to a panel of venture capitalists, professors, and local business leaders. They get feedback and advice, and prizes ranging from time in a business incubator to $1 million in cash, often donated by alumni or a sponsor.
Often a reality check is part of the deal, too."If you say, 'My market is X,' judges say, 'Prove it to me. Show it to me,"' says Joern Kallmeyer, now CEO of Wilson TurboPower and once a contestant in Massachusetts Institute of Technology's business plan competition. "You learn where your weak spots are."
The contests have become a big deal on campus. There are now about 70 of them, up from a handful in the 1980s. Some schools even make equity investments in promising companies. Few institutions track their winners, but MIT says 65 of the 83 companies spawned from its contest over the past 15 years are still in business, with a total of 1,600 employees.
For entrepreneurs who aren't heading back to school, the experiences of these five offer a crash course. All started with novel ideas and followed up their big thinking with hard work, perseverance, and a willingness to accept criticism -- lessons every business owner can master.
INVASIVE PLANT CONTROL Steve Manning's company began, literally, with a walk in the park. Like most entrepreneurial ventures, it didn't stay that effortless for long.
While in college, Manning, now 35, interned at a national park, where he noticed that kudzu and other nuisance plants were choking out native species. The only way to control the invaders seemed to be with harsh chemicals that often killed desirable plants as well.
In 1997, as an MBA student at the University of Oregon, Manning began work on a company that would use an eco-friendly approach to eliminating invasive plants, taking special care to preserve native species. Manning thought he could use insects that would eat invaders but ignore native plants. In other cases, employees could hand-pull unwanted plants, then selectively treat the earth to discourage new seedlings. Either would leave the surrounding vegetation in better shape than the fire or chemicals commonly used.
But Manning had to hire botanists to work out the details. Thanks to a win at a business-plan competition, Manning was able to seed his company with $250,000 and set it on a path to growth.
Before entering the competition, Manning's professors helped him develop a funding pitch which portrayed him as a pioneer in a new industry -- low-impact plant control. It explained why IPC, though 10% to 25% pricier than competitors, was still preferable.
IPC placed second in the university's New Venture Championship, winning about $4,000. Manning was able to raise an additional $250,000 from investors he met through the contest. He teamed with Lee Patrick, a botanist, to launch IPC after graduation.
Thanks in part to a 1998 executive order requiring federal agencies to control invasive plants on their properties, IPC's 30 customers now include public universities and Shenandoah National Park. Manning attends land-management conferences to pitch his services and relies on managers at National Parks and Historic Sites to refer new clients. Revenues reached $360,000 last year and are on track to reach $800,000 this year. That may not be as quick-growing as kudzu, but for Manning, it's fast enough.
WILSON TURBOPOWER Joern Kallmeyer, 32, was convinced he had found a great idea and a great technology. But his concept was complicated and expensive to develop. His funding pitches were going nowhere until he participated in MIT's $50K Entrepreneurship Competition. There he got advice and made some connections that helped him raise $1.5 million.
Kallmeyer, an electrical engineer by training, was a student at MIT's Sloan School of Management when he met professor David Wilson, who had devised a new technology for heat transfer using ceramics. Turbines generate heat that, with the help of a heat exchanger, can be recycled to fuel engines. Most exchangers are made of metal, which radiates a lot of heat. A ceramic exchanger theoretically could hold more heat and withstand higher temperatures, but no one had figured out how to seal it to keep the heat from escaping. Wilson thought he had the answer, at least in theory, but hadn't done the engineering to make it work. In 2001, Kallmeyer and another engineer, Rich McCray, began working on a specialized case to hold a ceramic heat exchanger.
The next year, Kallmeyer, Wilson, and McCray made it to the semifinals of MIT's $50K Entrepreneurship Competition. But they confused a lot of judges along the way. When Kallmeyer referred to an original equipment manufacturer, or OEM, business model, for instance, he meant that his heat exchanger could be integrated into other companies' products. The judges thought he was planning to license his idea to other manufacturers. "This [feedback] was so important because the judges act as a sounding board for how investors might react," says Kallmeyer.
Later that year, Wilson TurboPower won the UC-Berkeley Haas Social Venture Competition. They pulled in $25,000 and caught the eye of MIT alum Robert Waldschmidt, who persuaded four investors to put $585,000 into the company. The six-employee company, based in Woburn, Mass., has now raised $1.75 million. Kallmeyer's next task is to keep negotiating contracts with cooling-technology and fuel-cell companies -- and to find out if Waldschmidt's enthusiasm, and his own, are justified.
BUYSAFE In the summer of 2000, Steve Woda, an MBA student at the Wharton School, sent $400 to an online-auction site in exchange for a PDA. But he never got his PDA -- or his money back.
In retrospect, Woda realized that while he could have protected his $400 by putting it in escrow, there was nothing he could have done to ensure that he would receive the PDA at the agreed-upon price. Escrow doesn't guarantee products or delivery. Woda, a 35-year-old former surety bond underwriter, thought a surety bond might be able to guarantee online transactions. Under a surety bond, if the bonded party doesn't fulfill their side of a deal, the company issuing the bond steps in to compensate the customer. In Woda's case, the bond issuer would have been obliged to get him a PDA.
Back in school that fall, Woda studied marketing and venture capital. He decided that serious online sellers -- 90% of whom are small retailers -- would be his best market. Surety bonds would give them credibility beyond the notoriously unreliable buyers' reviews. Woda would ask sellers to pay a 1% fee and put the buySafe logo on their listing. He'd get paid only when the item sold.
Woda's next step was Wharton's Venture competition, where he was a semifinalist and received some important feedback. "People liked the concept but thought we needed a financial partner," Woda says. For legal reasons, Woda had to link with an insurance company.
After graduation, Woda spent a year trying to get buySafe off the ground. His savings depleted, he took a job as vice-president of assurance capital at the Washington offices of Roanoke (Va.)-based Rutherfoord Cos., a regional insurance brokerage. Woda quickly sold CEO Thomas Rutherfoord on his idea, and through him, got a chance to pitch buySafe to Hartford Financial Services Group. Hartford and Rutherfoord partnered with Woda in 2003.
BuySafe now has 19 employees, and its logo has appeared on about 500,000 eBay listings. Woda is currently targeting eBay's 400,000 sellers, but he plans to move into other auction sites and online marketplaces soon. "We need thousands of those sellers, but we don't need millions," says Woda. With his perseverance, he may just get millions.
RIPPLE EFFECTS When Alice Ray created Second Step in 1985, she knew she was on to something. Her violence prevention curriculum used role-playing and discussion to help at-risk middle and high school students manage their anger. But the venture stalled, mostly because it demanded too much of teachers. When Ray launched Ripple Effects with co-founder Sarah Berg in 1998, she was equally as enthusiastic. This time, she wanted to use software to teach the same lessons. Ray and Berg transformed the curricula into a seven-week interactive program, including video interviews with real kids. But the company struggled. The breakthrough came in 2000 when judges at a business plan competition helped Ray find a new selling point for Ripple Effects.
It was Ray's son, working at the company while an MBA student, who suggested entering the UC-Berkeley Haas Social Venture Competition. Like most contests, it's open to teams with at least one member enrolled in any B-school. Judges told Ray she needed to find a way to make her software pay off, literally, for schools. Ray realized that schools with high rates of absenteeism lose about $35 per student per day in government funding. A school with 300 students and 30% absenteeism -- not uncommon in troubled areas -- would get back the $7,500 cost of Ripple Effects in one week if it could cut absences in half. That's a reasonable goal: A study funded by the Small Business Administration's small business innovation research grants showed that one Oakland (Calif.) school cut absenteeism by 56% after using Ripple Effects for seven weeks. Grade-point averages rose from 1.46 to 2.11 by the end of the quarter.
Ray began another marketing push, this time emphasizing cost-effectiveness. She reconnected with school administrators who had embraced her earlier approach, hit the conference circuit, and networked at education events.
Ripple Effects is now in 300 school districts and has annual revenues of $800,000. The six-person company signed an agreement with Discovery Communications-owned United Learning this year, aiming to put the software in 400 more schools. Ray hopes for a further boost next year, when The Journal of Primary Prevention plans to publish the study about the Oakland school's use of Ripple Effects. That study confirms what Ray has long believed -- that the ripple effects of helping struggling kids far outweigh the costs.
ALTADONICS Sometimes a good idea is merely a springboard to a better one. At first, William and Bobby Price's goal was simply to help people find lost dentures. But the advice they received at business plan competitions convinced them to start a more ambitious company.
Dr. William Price, a Winston-Salem (N.C.) dentist, came up with the idea for Altadonics in 1999, after an elderly socialite lost her dentures five times. Her forgetfulness cost her about $11,000 in dental bills and numerous trips to his office. Worse, the new dentures didn't fit as well as the originals, as original dentures are always the most comfortable. Dr. Price, 60, and his son Bobby, 33, thought a computer chip embedded in dentures -- a sort of dental GPS -- would help.
In 1999, with Bobby's wife, Margaret, an MBA student at Wake Forest University, the Prices entered Wake Forest's Babcock Elevator Competition -- a two-minute elevator ride during which teams pitch ideas to judges. Altadonics took first prize, winning a face-to-face with venture capitalists. They thought the GPS idea was troublesome: The chip probably wouldn't be accurate enough to pinpoint the dentures' location, it might distort the shape of the dentures, and it could be damaged by moisture in the mouth.
But at that meeting, the Prices also said they wanted to find a new way to make and store denture molds. As the molds lose their shape after a few days, the Prices figured that dentists would welcome a more stable mold, allowing replacement dentures to be manufactured from original molds.
The venture capitalists told them the second idea -- better molds, and a storage system for them -- was stronger. "They put the wind in our sails and helped us flesh out our ideas," says Bobby.
Later that year, the Prices entered a retooled business plan in the Triad Entrepreneurial Initiative in Research Triangle Park, N.C. They won $20,000 and a yearlong tenancy in a business incubator. During that time, they found a platinum-based silicon substance that holds its shape unusually well. The Prices developed a kit dentists can use to make molds by pouring the silicon over the traditional pink paste. "It's like a magic show," says Bobby.
Altadonics hopes to sell the kits to dentists for about $225. A second set of dentures made from the mold could cost far less than the $1,000 patients might pay for a new set, and spare them multiple trips to the dentist. Altadonics, now with 10 employees, has converted a 3,600-square-foot former bank vault into a warehouse to store molds from dentists nationwide.
The kit was tested in 35 offices at the beginning of 2004. Bobby Price says that dentists like it, but that it takes time to train hygienists to properly use the product. Altadonics is cutting deals with distributors to bring the kits into about 300 offices. With luck, that will give the company something else to sink its teeth into: its first sales.
By Jennifer Merritt