Tag Archives: Rice business plan competition

A Two-Day Startup Fest at Rice Business Plan Competition

Business Plan Contest, Venture Contests

A portable device to quickly diagnose strokes. An additive that doubles the strength of fiberglass and carbon fibre materials. A new way to use magnesium to heal broken bones. Those are just a few of the dozens of startups I saw earlier this month at the annual Rice Business Plan Competition. This was the tenth year I’ve been a judge. It gets better every year. Two days of plans and pitches. I wouldn’t miss it. The picture here shows the finals, six amazing finalist teams competing for 300 judges in a very full Rice business school auditorium.

RBPC Finals 2017

More than $1.2 billion in funding

As a judge of this event, I read six business plans cover to cover. Then I spent two days watching and asking questions as several dozen startup teams pitch their startups. I do six of them on Friday and 10 on Saturday, which includes six finalists. The pitches take 20 minutes or so, and of course they include questions and answers. The 42 startups chosen from more than 700 applicants must have at least one student, and only the students can do the pitch. They come from all over the United States, plus Canada, U.K., Germany, India, and Hong Kong.

In the 10 years I’ve been doing this, the startups get steadily better. At least 80 percent of the ones I saw this year look like they should be getting angel investment, and all of the six finalists will get funded for sure, and launch. The statistics get steadily more impressive. Here are some numbers published by the organizers:

In 2016 we screened more than 750 applications. More than 180 corporate and private sponsors support the business plan competition. Venture capitalists and other investors from around the country volunteer their time to judge the competition, with the majority of the 275+ judges coming from the investment sector. 161 past competitors have gone on to successfully launch their businesses and are still in business today, with another 15 having successful exits. These companies have raised in excess of $1.2 billion in funding.

Serious investment possibilities

This year’s winner developed a portable device that identifies stroke victims fast. Although their pitch at Rice isn’t public, they link to a previous pitch presentation. This is Forest Devices, from Carnegie Mellon.

Forest Devices earned $635,000 in prize money and investment. Most of this is conditional, tied to angel investment that comes with fairly standard conditions including equity for the investors. Most of the teams end up accepting the terms and taking the investment, although that generally takes a few weeks of legal work before it’s final.

Medical Magnesium, which finished in third place, landed $709,000 in proposed investment with term sheets. It is developing bioabsorbable magnesium implants that turn into bone instead of being removed. It came from the University of Aachen, in Germany.

Palo Alto Software gives a prize for the best written business plan entered. This year that prize went to AIM Tech, from the University of Michigan. It develops low-tech, low-cost medical devices for emerging marketings, including an award-winning low-tech infant ventilator.

 

Q&A: Winning Business Plan for a Competition

Business Plan Contest, Venture Contests, , , ,

How do you do a winning business plan for a business plan competition? I’m glad you asked. I’m a frequent judge of these competitions so it’s in my interest to help you improve your chances by developing a better business plan, pitch presentation, summary, and elevator speech.

So that you know, I’m answering this question with reference to the mainstream high-profile business plan competitions I’ve judged many times, including the University of Texas’ Global Venture Labs Investment Competition, the Rice Business Plan Competition, and the University of Oregon’s New Venture Competition. I’ve done these three at least 10 times each. I’m assuming they are typical – but I could be wrong.

Here’s how the process works, with regard to what you deliver and how decisions are made:

  1. You submit either a business plan or executive summary to a steering committee that selects a few dozen entrants from hundreds of submissions. These committees vary. Many still use the full plan, but trends favor just the summary. This step takes place behind the scenes, before the visible portion of the competition begins. The entries selected are called semi-finalists. They are invited to go to the competition, at the site, which usually involves a Thursday, Friday, and Saturday, most often in April or May.
  2. Semi-finalists are divided into groups of four to six. Semi-final judges, mostly angel investors, venture capitalists, and executives from sponsor companies, read and evaluate the full business plans before the competition starts.
  3. An elevator speech round happens on the Thursday, in the evening. The teams do a 60-second elevator speech for prizes and awards. Winning that competition doesn’t formally help win the main prize, but informally, it affects the judges who see it. About half the judges will attend that first evening.
  4. The semi-final round takes place on Friday. Teams do pitch presentations and answer questions from the judges assigned to their group, who have read their business plans. Judges choose a finalist based not on the quality of business as a potential investment. The plan matters of course, and the pitch matters as well, but the choice is ultimately about the business. Judges try to make decisions based on investment criteria, including growth potential, defensibility, scalability, and experience of the management team.
  5. Finalists go through the same gauntlet on Saturday. Finals judges read the plans, listen to pitches, and ask questions. They choose the winner based on the same criteria they use to choose investments.

In all of these competitions, the judges are told to choose the best plan for outside investors, not the best-written or most attractively formatted business plan. So, a mediocre business plan for a great business will always beat a great business plan for a mediocre business. What you want from your business plan is to present your business well in a way that makes it easy for judges to see what you have. Your business plan alone isn’t enough to determine your fate in these competitions, but it does provide the first impression and the detailed background. In fact, all three of the competitions I mentioned above have special prizes for the best business plan, but those awards pale in comparison to the main prizes.

Therefore, the best way to help your chances with your business plan is to make sure the judges see the critical elements that make a business attractive to investors: potential growth and scalability, proprietary technology or some other kind of barriers to entry, and an experienced management team.

Here are some related tips that might also help:

  1. Make sure you cover the information investors want. Tell a convincing story about the problem you solve and the solution you offer, in a way that will interest the investors and let them believe your market story. Show whatever traction you have, and as much startup experience in the management team as you can. Show how your business will defend itself (proprietary technology, trade secrets, whatever secret sauce you have) from competitors entering the market. Show how you can scale up for high growth. Show that you understand how exits might work in 3-5 years.
  2. Keep it brief. Be concise. Don’t show off your knowledge, push your main points forward. Bullet points are appreciated.
  3. Show your numbers and your key assumptions. Numbers without assumptions and underlying story are useless. Forget present value and IRR games that depend on future assumptions. Show unit economics and build forecasts bottom up, from assumptions, not ever as some small percentage of a big market.
  4. Use illustrations that simplify and explain. Have the detailed numbers to back them up, of course, but use bar charts and line charts and pie charts to help readers get the idea quickly.
  5. Check your numbers against real world benchmarks. Investors will react negatively, not positively, to unrealistic profitability projections.
  6. Maintain alignment between the key points you emphasize in the business plan, the pitch presentation, and the elevator speech. Ideally your business plan is like the screenplay for the pitch presentation and the elevator speech.
  7. Don’t be afraid to revise numbers constantly, and don’t apologize if the numbers you show today are different from what you showed yesterday. Plans are supposed to evolve constantly.

(Image: shutterstock.com)

True Story: A Great Presentation Wins Big

Business Plan Contest, MBA, Venture Contests, ,

Do great presentations launch businesses? Not always, perhaps, but sometimes, yes. And in this case, yes. Or maybe it’s just a great business. 

I was in Austin TX at the event last Saturday when NuMat Technologies, a startup launched at Northwestern, won the University of Texas’ Venture Labs Investment Competition.   I was also at Rice in Houston two weeks earlier when NuMat won the Rice Business Plan Competition. 

Both of these victories matter. The Venture Labs competition pits winners of other competitions against each other. It was the first of the big MBA-level business plan competitions when it began in 1984, and bills itself as the SuperBowl of these contest. The Rice version has the highest payoff, more than $1.5 million total prizes, and close to $1 million for the winners. Both of them require at least one MBA student, from any accredited institution, for eligibility. Both of them include startups from Asia, Latin America, and Europe. 

I haven’t read the NuMat business plan, but I did see the NuMat pitch, which was sensational. The key was explaining the science just enough to be credible, focusing on the business, and keeping it clear and flowing from point to point. I hope NuMaT  will do an online video of that so you can see it.

In the meantime, I’ve embedded a very short YouTube video that explains the science surprisingly well in just about one minute. Clearly, somebody on this team is a good communicator: 

If you don’t see that here, you can click this link to see it on YouTube. The quick summary is that it seems  poised to change the way gases are stored. Think about those very heavy metal compressed gas tanks like the LNG fuel tanks in LNG-powered vehicle. Think what would happen if the same or more gas could be stored in a new substance that wouldn’t let it leak but wouldn’t require compression. This looks like a real game changer. 

Conclusion? Yes: hey NuMat, post your pitch online!

From the Rice Million-Dollar Business Plan Competition

Business Plan Contest, Venture Contests,

Today and tomorrow I’ll be judging the Rice Business Plan Competition again for the fifth time, enjoying the event thoroughly and proud to be a part of it.

This one, now in its 11th year, has prize money totaling $1.3 million. Its also covered in Fortune Magazine and elsewhere, and rivals the University of Texas Venture Labs (formerly Moot Corp), the SuperBowl of business plan contests, in prestige. It’s a real coup for Rice University, Brad Burke, The Rice Alliance for Technology and Entrepreneurship (Brad is managing director), and Brad’s very-well-organized team.

At the kick-off elevator speech competition last night, Brad had some interesting numbers: in 10 years, after a humble beginning, the Rice contest has had 128 competing companies funded, for a total of $450 million.

That number highlights the evolution of these contests. What started at the University of Texas in 1984 as an academic exercise (hence the name “moot corp”) is now a launching pad. There are dozens of these contests every year now. Most of them have ties to MBA programs, and startups need to have at least one member enrolled in an MBA institution. The best of these contests attract very real startups with very real prospects. It used to be that a few were actually launched, and nowadays the majority are launched and funded.

Then, after we heard that number, we saw 42 teams present one-minute elevator speeches. They were timed, 60 seconds each. And there are some very impressive startups in that group. Today will be interesting.

 

10 Reflections On 2 Business Plan Competitions

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

Last week I spent three days in Houston as a judge of the Rice Business Plan Competition. I haven’t been home since I left April 7 to judge the University of Oregon’s New Venture Championship.

Both of these competitions include four components: the business plan, the business pitch, the responses to questions, and the elevator speech. Every team has at least one MBA student, most of them are all MBA students. The winners get a lot of money.

Rice is the richest. Last Saturday night they distributed $1.3 million in investments, services, and cash awards. Some of that, however, involves investment for equity, or conditions like moving to Houston.

Judging these contests is fun. You read business plans, then listen to the entrepreneurs pitch the plan with slides and demos, followed by questions and answers. Later, you give them feedback. The hardest part, at least this year, is that you have to rank the teams and choose winners.

Here are my 10 reflections:

  1. A great ending: The Rice contest was a $1.1 million contest until the absolute last minute, the last presentation in the awards banquet, when the Texas GOOSE (grand order of successful entrepreneurs) doubled its investment in the winner, from $150K to $300K. The GOOSE society is a phenomenon in itself, worth another post here. I couldn’t find a good link to it to share here, but among the names I recognize are Rod Canion, co-founder of Compaq Computers, and Bob Brockman, who gave the award on Saturday. Right there, with the winners on the stage, they took a marker and, writing by hand, doubled the amount on the check.
  2. A good response to feedback: Clearbrook Imaging, a team from the University of Texas, has a product in its early stages that could, if it works and gets into the hands of doctors, make some kinds of heart surgery much safer. Unfortunately they’ve also got a thick, turbid business plan, and a slow-paced presentation. The underlying product/market fit looks so good my group of judges passes them onto the finals before lunch, then coaches them, in the afternoon, on how to turn their pitch around on empathy and stories and plot. The next day they win the Oregon contest.
  3. Mixed feelings: Innovators from The Indian Institute of Technology at Kharagpur has a way to rig some plastic together to filter water in villages without using electric power, for $6 a unit, to reduce the horrifying death toll of water-borne preventable diseases among India’s rural poor. They didn’t make the semifinals. It’s hard to compare plans offering frills in a consumer market to plans that offer real improvements in health and life for people living in poverty.
  4. Disappointing: The financial projections for a lot of the plans had horribly unrealistic profitability and little or no sense of cash flow. I’m surprised at how many strong teams had flawed financials. Good news: except for the flawed financials, the business plans are getting better than ever. These are exciting new companies with strong markets and excellent teams behind them. And flawed financials are not fatal flaws.
  5. Growth and change: business plan competitions started in 1984 with the University of Texas’ Moot Corp, now called Venture Labs. They were originally a lot like that name, moot, hypothetical, academic exercises in mock businesses. These days the vast majority of these plans are real, with real prospects, real value, and real likelihood of launching. Brad Burke, managing director of the Rice Alliance that puts on the competition, says since they started in 2001 they’ve had 116 teams launch businesses, which raised $337 million in venture capital.
  6. Four for four: For my flight at the Oregon contest I reviewed four plans. All four were believable, launchable businesses.
  7. Six for six: For my flight at Rice I reviewed six plans. Two were a bit early, but promising. Four were real.
  8. Disproportionately male: It’s getting better these days, but it’s still true that judges and competitors are maybe 80 percent male. There’s no good reason for that. I hope it changes fast. And for more good news on this front, the winning team, TNG Pharmaceuticals,  was led by CEO Jenny Corbin, and two others of the six finalist teams included strong women. Priyanka Bakaya of MIT and PK Clean, another finalist, won the $10,000 nCourage Courageous Women Entrepreneur Prize. And Priscilla Silva had the main speaking part for Cyclewood Plastics, of the University of Arkansas, another of the six finalists.
  9. Meanwhile, back in the real world: QRCodeCity, one of the plans I reviewed for Rice, had started in January with an iPhone app called “Scan.” When the Rice contest started in had been downloaded more than 250,000 times. Three days later, at the awards banquet, it had been downloaded more than 300,000 times. They didn’t make the finals.
  10. Toughest finals ever: The Rice event included 42 teams chosen from more than 150 applications. They filtered them down to six teams for the finals. It was incredibly hard to choose between those six. Any one of them could have won. One of my favorites fell behind only because they hadn’t signed the technology license agreement. The team that won, TNG Pharmaceuticals from the University of Louisville, which has vaccine to relieve cattle of fly infestations, was fabulous. But so were the five other finalists.

I’m not done with this subject. In two weeks I do it again for the University of Texas’ Venture Labs, formerly Moot Corp, the oldest and maybe still the best known of these contests. Venture Labs gets the winners of several dozen other contests.

5 Ways to Make Your Projected Profits Realistic

Business Financing, Business Plan Contest, Business Plan Marathon, Business Planning, Venture Contests, , , , ,

I’m well into my business plan marathon again this year, in Houston today looking forward to judging the Rice Business Plan Competition, one of my favorites.

Regarding business plans, instead of just complaining (again) about unrealistically high profitability projections, today I have some specific suggestions. And this has nothing whatsoever to do with the six excellent plans I’ve read for my part of the judging today.

But, as my mother used to say: “if the shoe fits, wear it.”

The underlying problem is that projecting high profits doesn’t usually mean you have a great business plan. It almost always means that you’ve underestimated expenses or direct costs. It’s usually a bad thing, rarely a good thing.

So here are those concrete suggestions:

  1. Compare your projected profitability (net profits or pretax profits as percent of sales) to standard industry profiles. The most well-known source in the Annual Statement Studies published by Risk Management Associates (RMA). These will give you standard profitability rates for more than 700 common types of business. I searched the site for information business, narrowed it down to software publishing, and I was offered a download for $120. Oxxford Information Systems competes with RMA with more profiles for more different types of business. And Business Plan Pro bundles the Oxxford Information profiles with a searchable database linked to the ratios table [disclosure: I’m the conceptual author of Business Plan Pro and my company publishes it.] And there are other competitors in that market. Standard profitability isn’t that hard to find.That doesn’t mean that I recommend your projected profits always match some standard industry profile. Not at all. What it does mean, though, is that you should know what profits are reasonable for similar industries, and don’t project huge profitability that’s 5 or 10 times higher, in percent of sales terms, than the standards. That kills credibility.
  2. Compare your projected profitability to results of publicly traded companies in your industry. You don’t need an exact match, but you should know how different your projections are, and you should satisfy yourself on why they’re different. The publicly traded companies tend to be larger and more established than new startups. Sometimes a startup is so new and innovative that it is much more profitable than industry leaders; but that’s rare. If you don’t know where to find financial reports of publicly traded companies, start with Yahoo Finance.
  3. Do a good web search to see if you can find comments on blogs or in interviews where entrepreneurs talk about actual profits in real businesses like yours. Maybe you’ll find somebody who might be a competitor. People give a lot of information away these days, in blogs, and on the web.
  4. Try to find somebody with actual experience in a similar company. Use social media, use your mentors, talk to the nearest business school or chamber of commerce. Get somebody to tell you, from real-world experience, what kind of profits are likely.
  5. If all else fails, remember that across the real world of business, normal profits run about 5, 10, maybe 15 percent of sales. If you’ve done your best and it still shows 30 percent or more, take a good look at your payroll, headcount, and marketing expenses. When it doubt, add marketing expenses to take your projected profits down to a credible level.

Is this you? Does your business plan project profits way above standard levels? That doesn’t make your plan look better. First, make it credible. Only then are the numbers really interesting.

(Image: Elnur/Shutterstock)

True Story: 75 Business Plans in a Month

Business Planning, Venture Contests, , , , ,

Sometime in middle May you might find me emerging, blinking, uncomfortable from the sunlight, after reading and evaluating 75 or so business plans in a single month. And watching and judging and asking questions about almost as many presentations. I can see the headline:

Man reads 75 business plans in a month … and lives to tell about it.

Does that sound like a complaint? I hope not. Actually; there’s a touch of bragging to it. I couldn’t have spent the last 30 years focused on business planning if I didn’t like reading them (although, perhaps, maybe it would be better without so many all at once).

This is business plan season for me. I just finished reading half a dozen plans for Notre Dame’s annual business plan competition (we, Palo Alto Software, give a prize to the best one), and another half dozen plans for the Rice Alliance business plan competition (I’m a judge, and we have a best business plan prize for that one too). I still have to read five plans for the University of Oregon’s New Venture Competition next weekend (I’m a judge), and I’m supposed to produce a first-cut on 43 plans for the Willamette Angel Conference (I’m one of the angel investors) by the end of the workday today.

Oh, and this is the season I teach my Starting a Business class at the University of Oregon, so I’ll have another 20 or so plans to read as part of the class.

Despite all this, I’m very disappointed that I have to miss the University of Texas’ Moot Corp Competition this year, because of a scheduling conflict. That would have been another half dozen or so plans, also this month.

So don’t tell me, please, that nobody reads business plans. I do. So do the other judges. So does a whole team at Palo Alto Software. And so do all the other members of the angel investor group I’m in.

So you’d like tips, hints, suggestions? If you wrote one of those plans then it’s too late for you to change it now; but maybe I can influence your presentation. And also, maybe if I comment on some of the business plans I’m reading while I’m reading them, it might help somebody else with a plan later on.

All for the greater good, I’m sure.

Maybe I’ll make it a category, like “the business plan marathon,” or something like that. So you can click for related entries. Tim’s folly, perhaps.

And just to kick this off, some points worth noting:

  • Profitability too high: I’m not impressed with a plan promising 40%, 50% or more net profit on sales. That doesn’t mean the business is very profitable; it means they’ve underestimated expenses.
  • Dense text: Particularly dense scientific text. I’m a business reader, I’m not going to evaluate your science anyhow. I’ll just look at your degrees and past work to see whether that makes your claims credible. Maybe the patents, too, but patents don’t mean much unless they’re good strong patents with a lot of legal work supporting them.
  • Missing tables and charts: For example, I want a bar chart to show me the highlights — projected sales, gross margin, and net income, for the first three years, or five years if you insist. I want to see the projected income table in detail, so I can track things like marketing expenses and payroll. I want to see cash flow table. I want to see startup costs, and what the proposed investment is going to buy the venture. 
  • Treasure hunts: Don’t make me hunt around to find exit strategy, valuation, defensibility, market focus, or any other key point. Make it all easy to find, please.