On his way to a second-place finish at the DJF East Coast Venture Challenge at Columbia Business School earlier this month, Michael Dwork, a recent Columbia B-school grad, stopped by the judges' table to pass around samples of a biodegradable plate made of stream-pressed leaves. "We're changing what disposable means," Dwork pitched as he dangled his product, dubbed GreenWare, in the air. "We're trying to revolutionize this market by creating an earth-friendly product that meets people's needs."
The judges, all venture capitalists, examined the plates as Dwork took to the auditorium stage and powered through his 10-minute presentation, explaining how his line of eco-friendly plates, cups, and bowls will appeal to "trendsters" and "earth-friendly" consumers. His presentation impressed the judges enough for them to select his team as one of five in the afternoon finals round, a heated four-hour session in which judges grilled finalists on the merits and marketability of their plan. At the end of the day he walked away with second prize and $100,000 in seed funding for his company, 90% Worldwide (see BusinessWeek.com, 5/31/07, "Competitions: Winning Is the Easy Part").
In recent years, business-plan competitions have become a rite of passage for any masters in business administration student with an entrepreneurial bent, and organizers say they've seen a big jump in entries. Most major ones—there are about 85 annually—attract anywhere from 100 to 130 teams. There also are hundreds of offshoots at smaller colleges and universities in the U.S. and abroad. "It has exploded and it continues to grow," said Ann Whitt, the marketing and communications manager for the Moot Corp Competition held by the University of Texas McCombs School of Business, which began in 1984.
However having a great idea usually doesn't guarantee that you will excel at these business-plan competitions. Organizers and participants say that careful planning and some key strategies can make the difference between picking up a winner's check and being an also-ran. "We're looking for entrepreneurs that have the potential to turn the industry upside down," said venture capitalist Timothy Draper, one of 10 judges who participated in the Columbia competition.
So how can you get a leg up on the competition? Recent conversations with contest entrants, judges, and organizers elicited these tips:
LISTEN TO FEEDBACK. All business-plan teams enter competitions on equal footing, but the field gets winnowed by judges as the contest moves along. How can a team stay in the running? One way to start is by listening carefully to judges' feedback on your project, said Jules Walter, an electrical engineering student at Massachusetts Institute of Technology Sloan School of Management, whose sustainable energy company, Bagazo, recently won the top prize in the sustainable development track of the MIT $100K Entrepreneurship Competition. At MIT, teams begin competing in the fall and go through several rounds of the competition before finals in the spring. Along the way, they get numerous chances to interact and converse with judges.
"I think it's very obvious, but not many people realize it. Just listen to the judges," said Walter, whose product will create cooking fuel from agricultural waste. "They tell you exactly what they want. Read their feedback and try to understand their reasoning."
Students at the Rice Business Plan Competition, housed at Rice University's Jones Graduate School of Management, have a chance to get several rounds of feedback from the judges during the three-day contest, said competition director Philana Diaz. Incorporating this feedback can be what makes the difference between getting to the next round or staying on the sidelines, she said. Students who advance to the finals will sometimes spend a few days holed up in their hotel room, retooling their business plans to incorporate judges' suggestions. "Those that advance and do well are the ones that take the feedback from Thursday and incorporate it into the present even if the turnaround time is short," Diaz said.
GET MENTORS. Compile a team with supportive advisers and mentors in your field. This is one of the most important things students can do in a business-plan competition, according to students and judges. These people can lend more eyes and ears, providing valuable feedback. Just ask Nevan Hanumara, an MIT doctoral student in mechanical engineering and a member of the Robopsy team, which took first place at the MIT $100K competition this spring. He spent several hours at Massachusetts General Hospital watching radiologist Dr. Rajiv Gupta perform needle biopsies on lung cancer patients.
Hanumara's team eventually designed a remotely controlled biopsy needle that doctors can operate while a patient is inside a CT machine. The insight the team received from Gupta and another MIT professor was "critical" in the development of the team's business plan, said Hanumara.
"The hospital was willing to try things out and let us come in," Hanumara said. "They weren't, like, ‘Oh God, here are students with gizmos.'"
Dwork, the GreenWare designer, spent several hours talking to restaurateur Danny Meyers, owner of the Union Square Hospitality Group, and Steve Michaelson, president of FreshDirect, while researching his business plan. "There are a lot of people out there you can safely talk to who can tell you if the idea makes sense," Dwork said.
However use advisers carefully. Students should be wary of listing advisers on their business plans unless they have spent a significant amount of time with them discussing the plan, said Joseph Hadzima, a senior lecturer at MIT's Sloan School and one of the founding judges of the MIT $100K. "What stands out is when they list a bunch of advisers, and it's clear that their advisers haven't done much advising," Hadzima said. "If it's a bunch of window-dressing, that comes through easily."
PRACTICE, PRACTICE, PRACTICE.
The old adage "practice makes perfect" is one that business-plan competitors should keep in mind before appearing in front of judges. But there's a fine line between practicing too much and sounding like you're reading from a script during a presentation, said Draper, the Columbia judge. Walk into the competition polished, but also try to be spontaneous during the presentation, he advises. "We can tell if it's a memorized speech," Draper said. "I like them to know their stuff so well that it seems off the cuff, like it's part of their being."
Members of the MIT team that won the Columbia competition said they approached their presentation as if they were telling a story. The three-person team designed an antibacterial coating called SteriCoat that will be used to reduce the risk of infection in patients using catheters. They practiced their pitch on everyone from a spouses to MIT professors, said David Lucchino, one of the team members. "I think presenting to a cross-section of people gave us a real benefit," said Lucchino. "What happens a lot of the time is that you are so close to this that you lose perspective on who you are presenting to."
BE PASSIONATE. Teams that make it to the top at these competitions often walk in knowing that they are committed to their business plan for the long term, even if they don't manage to win the competition.
Take Andrew Smith, a second-year MBA student at the Tuck School of Businessat Dartmouth whose team won the Rice Business Plan Competition last year. He came into business school with seven years experience in the sustainable energy field and knew that he wanted to continue to pursue work in this field while in business school.
He teamed up with Keith White, a second-year MBA student at Tuck with experience in the trucking industry, and the two came up with a business plan for a company, Advanced Transit Dynamics, that uses rear-drag-reduction technology to improve the fuel efficiency of tractor trailers. "It helps if you are passionate about the issue starting up front," Smith said. "I went to these B-school competitions certain that this is what I wanted to do the next three to five years of my life."
It is this type of commitment to a project that many judges keep an eye out for, said Hadzima, of the MIT $100K competition. He often asks students what they plan to do after the competition. He uses this as a test to determine how passionate students are about their business plans. The answers can sometimes be telling, Hadzima said. "You want to get a sense of if the people are really committed to doing it," he said. "To say this is the winning team and then having them go nowhere with it is denying another team the opportunity to take it and run with it."
BE PREPARED. Judges of several major competitions agree that many competitors at business-plan competitions share a weakness: They are often unfamiliar with the market for their product. This can work to a team's disadvantage because judges for many of these competitions tend to be venture capitalists, people who will only throw their support behind a project if they feel it will get a strong market return.
At the Rice Business Plan Competition, 56% of the judges in this year's competition were venture capitalists or private equity and angel investors. Other similar competitions feature panels of judges that are exclusively venture capitalists. "I feel sometimes they discount it because it's obvious, but not being able to define the real market that you have for your product is a disadvantage," said Philana Diaz, director of the Rice competition.
Indeed, some recent winners of competitions said they conducted exhaustive research on potential consumers for their products. The SteriCoat team from MIT reached out to a cross-section of people in the hospital industry, from low-level employees to high-level medical device executives, to ascertain the market need for their product, which seeks to reduce hospital infections.As part of their business plan they listed 25 people in the industry they had consulted with, a move they felt would give validity to their company. "We wanted to find the nurse and doctor who dealt with our particular problem and we were able to do that," Lucchino said.
Dwork of GreenWare conducted similar market research when putting together his business plan, he said. He spoke to dozens of people in the food service and grocery industry to see if consumers would be interested in buying biodegradable plates. He also bounced the idea off his friends and practically anyone else who would listen to him. "It is important to validate it with other people and validate it within the market, actually go out and spend the time to see if there is any need," he said.
But sometimes even teams who have done the most diligent homework and research on their product will occasionally be stumped by a judge's question. If this occurs, don't panic, advises Keith White, a second-year Tuck Student who is a co-founder of the Advanced Transit Dynamics team. "Make the judges aware that you know what the weaknesses are," he says. "Even though you don't have a direct answer, don't gloss over it."
WINNING ISN'T EVERYTHING. There is still an upside to entering business-plan competitions, even if you don't manage to win one. Venture capitalists and other businessmen will often attend business-plan competitions just to observe some of the latest ideas and technology being pushed by students.
At the very least, the contests give students a chance to see if their plan actually has a chance of succeeding in the real world, said John Harthorne, a recent graduate from the MIT Sloan School and a member of the Robopsy team. He wrote five business plans for companies during his time in school. Some of the plans succeeded, while others did not. Writing them while in business school allowed him to test them out in a supportive setting, he said."It creates an environment where you can fail without cost," Harthorne said.
For those who do win business-school competitions, the experience can be a little heady. In addition to the seed money and the prestige, there are sometimes unexpected bonuses. The two winning teams from this year's MIT $100K competition were invited to ring the opening bell at the New York Stock Exchange on May 17, a promising start to their business careers.
Click here for the slide show