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Interesting Points, But Winning a Business Plan Competition is Still Better Than Losing One

Business Plan Contest, Venture Contests, , , , , , , , , ,

This morning I can’t resist writing about Vivek Wadhwa’s Winner’s Curse post on TechCrunch last weekend. Odd combination: it’s interesting, thoughtful, well-written, about a subject near and dear to my heart, and, at least in the title, wrong.

In the full title of his fascinating post, he says losing a business school business plan competition is better than winning. imageThat title assertion is my only real objection. He makes several great points explaining how business plan contests can be good for people, and how the winner isn’t necessarily the best business, and how these contests should not be confused with reality. No argument from me on any of those points. However, even if it’s not much difference, even if it means very little, winning is still better than losing.

Maybe it’s just a blog post title thing: surprise gets better traffic. Contrarian gets better traffic.

I’ve frequently been a judge at business school business plan contests (Moot Corp, Rice University, University of Oregon, University of Notre Dame, and others) and some non-school contests too (Forbes, for example). I think they’re great fun, great experience, a real educational opportunity, and pretty much right in line with his summary on that post:

This is not to say that the contests are bad. Instead, they educate students in entrepreneurship and motivate them to come up with interesting ideas. But for all of you out there who think a biz plan victory is a ticket to the big time, think again. And for all the engineering students who think any outcome but victory is a waste of time, you also need to think again.

He goes on to say that losing is better because winning generates praise too early in the business life cycle:

I submit that losing in a business plan contest is actually more beneficial than winning. There is a growing body of research that children who are praised too early and too easily end up under-performing peers who are not praised but are told, in constructive terms, they can do better.

I don’t buy that argument. I’ve been judging these contests for 12 years now, and I see a steady progression towards more and more real businesses, out there in the real world, rather than imaginary or hypothetical business. And in that case, as soon as the awards ceremony is over, the winners are right back out there in the real world, fighting the real battles on the front lines, with no time to bask in any glow. It’s reality for all, winners as well as runners-up and also-rans and losers.

So agreed, winning doesn’t mean much; but it’s not bad.

I’ve seen some really good winners in these contests. Look for example at Klymit, or Qcue, just to name a couple. These are companies which won business plan contests and continued growing. Wadhwa says “not a single home-run has emerged from this now-omnipresent practice.” But hey, that’s placing the bar pretty high. We’re talking about a few dozen such contests per year. Is there nothing between home run and failure?

By the way, this is the second really good post by Vivek Wadhwa about entrepreneurship on TechCrunch in barely a week or so. I posted here on the first one. Good stuff. His work is a nice addition to TechCrunch.

(Image credit: Aleksandr Kurganov/Shutterstock)

Do Business Plan Contest Winners Make It in the Real World?

Angel investment, Business Plan Marathon, Venture Contests, , , , , , , , , , ,

Craig from trackster.com asked me last week in a comment he added to my Willamette Angel Conference post:

I was wondering with all these business plan competitions that you judge, how many winners or even non winners have you seen turn into successful companies? Are there any examples that you could give?

Yes, a lot of these companies make it. It’s more like half than the one in 10 portion you’d think from the classic assumptions.

I’ve seen lots of these companies launch and become successful, in a much higher proportion than the classic assumption of one or two of every 10.

For example, take a look at this page from the Rice Business Alliance, which has run one of the best of these contests since 2002. The graph here shows the success rate for all of the 166 ventures entered in the Rice contest from the beginning. The trend is very clear. The Rice Alliance says that since 2001 (quoting their website):

  • 66 of our past Rice Business Plan Competition teams are successful business start-ups
  • 192 business teams from national and international schools have participated
  • More than $90 million in capital raised by Rice Business Plan Competition participant companies

Although they make the raw data quite as accessible as the Rice Alliance does, the University of Texas’ Moot Corp, the oldest and most respected of these contests, has to have a similar success rate. I say that because I’m involved with both and the plans and the people are excellent in both. And Moot Corp does post a very long page full of specific successes, with a lot of details. I saw all of the companies they have there from the 2007 and 2008 contests, and I’m not at all surprised that they’ve made it.

I particularly liked cQue, which recently landed a contract with the San Francisco Giants to revolutionize ticketing technology; and Evapt, an automated billing system for software as a service; and several dozen others. They are up and running, they are raising money, they are making it.

To be fair, these two competitions tend to be the best of the best. The entrants are carefully selected. Most of them have won local or regional contests. They are grad students and people in the real world. I’m also involved in some less ambitious business plan contests, like ones for undergrads, that don’t produce a lot of real companies.

And this year I’ve added angel investment, which is a different thing entirely. Like the major academic contests, it is about business plans, ventures, presentations, questions and answers, investors’ points of view, exit strategies, and so on. Unlike the academic contests, there are no MBA requirements, and no faculty advisors.

And specifically, the angel group I’m in, the one I posted on last Thursday morning: there were five finalists that presented to the group. All five of them are very real companies already, even thought they want and in some cases need angel investment of $125K. All five will be there a year from now. The one with the lowest need and least ambitious forecast, a software company called CenterSpace, won the investment. But the four others that didn’t win, led by my personal favorite, Zapproved, have good future prospects. That was also Zaps Technologies, Wicked Quick, and Floragenex. All of these are going to survive and grow.