Entrepreneurship
Published online: 23 July 2009, doi:10.1038/bioe.2009.7
Playing to win
Business plan competitions can earn you more than a plaque for the wall and a pat on the back—they can provide start-up money, experience and the attention your idea needs to get off the ground.
Business plan competitions (BPCs) help give aspiring entrepreneurs an experience as close as possible to that of the 'real world' of a start-up. These competitions force you to abandon lunchtime conversations about starting a company in favor of actually mapping one out. They will make you fully develop an idea and draft a business plan to go with your oral presentation. And the lessons learned from BPCs can be invaluable when pitching to real investors.
We know all of this because in May 2008, we won the two largest and well-known BPCs in the United States: the Life Sciences track at the Rice University Business Plan Competition in Houston and the grand prize at the 'Super Bowl' of graduate BPCs—the Moot Corp Competition in Austin, Texas. In the following article, we describe some of the major BPCs, the steps in finding advisers and how to put together a business plan, and then we discuss some of the networking and educational benefits that arise from participating in these events.
Getting in the game
BPCs are something that few people outside of graduate business education (MBA) programs are familiar with, but there are many good ones (Box 1; Table 1). Although rules vary by competition, they are always for ventures created, managed and owned by students, and they are open only to graduate students, although that includes graduate students of all disciplines, not just MBA candidates. In other words, if you're a PhD candidate in electrical engineering with an idea for a venture company and your university sponsors a BPC, you're likely welcome, and you're certainly encouraged to apply to any of the qualifying competitions for Moot Corp (Table 1). In fact, the best teams often include not just business students, but entrepreneurs from a variety of disciplines, including engineering, law and medicine.
Moot Corp and its qualifying competitions maintain their own websites, so it's easy to research the contests. The Carnegie Mellon Tepper School of Business offers the McGinnis Venture Competition (a qualifying competition for Moot Corp), for instance, and it's designed for graduate students of all disciplines and draws teams from around the globe. Because of the school's strong technology background, many of Silicon Valley's venture capitalists rate this competition as one not to miss. (One caveat: your business plan must be prepared under faculty supervision. In our experience, the entrepreneurial faculty at business schools welcomes inquiries from students of other disciplines. We suggest you start by contacting the entrepreneurship department at your institution's graduate business program for guidance.)
Here's another reason you should enter a BPC, even if you're a scientist and don't feel you have the business background. Joel Adams of Adams Capital Management (he was the first to fund Michael Dell of Dell Computers) once told us, "When I'm valuing a company, I usually subtract $100,000 for every MBA on the team and add $100,000 for every engineer." So if you are not enrolled in an MBA program, don't let that stop you from entering.
Once you've found and entered your choice contest, though, the real work begins. Most competitions require a comprehensive business plan and an oral presentation. The first goal should be to find a faculty mentor and develop a business plan. If your university's graduate business program offers a course in developing a new venture, be sure to enroll. Most often, these types of courses are open to students of all disciplines. You'll begin by developing an outline for the business plan with a real value proposition (how you're going to make money), and this is no easy task (Box 2).
The basis for our presentation was NeuralStemCells, a firm focused on a new kind of neural stem cell and a new method to extract them from humans. Over a six-month period, we worked to put together a presentation that proved to investors that the company could make money (Box 3). We also filed for patent protection and formally incorporated ourselves. Our coach, Tom Emerson, the David T. and Lindsay J. Morgenthaler Professor of Entrepreneurship at the Carnegie Mellon Tepper School of Business, told us that we needed to "show investors why the world needed our product." We also needed to develop a winning PowerPoint presentation, down to the smallest details, such as what font and color to use and what words to choose. Tom Hajduk, professor and director of business communications at Carnegie Mellon, methodically walked us through these steps and reminded us again and again that we weren't working on a science presentation—our goal was to define the problem and then sell our solution. So picture an English professor, a biomedical engineering student and a neurosurgeon huddled over a computer, choosing font type and sizes and color schemes for hours. That was us.
Rather than rely on gimmicks or needless flash, Tom taught us how to present information clearly. When we had our presentation done, we spent the rest of the semester practicing and refining our pitch to our classmates. When they began asking if they could store their own neural stem cells for the future, we knew we had the presentation right. Once you've gotten your business plan and presentation complete, you may then choose to submit your plan for competitive review to the competition of your choice. Competition officials typically receive hundreds of submissions and invite the best plans to their competition.
If chosen to compete, an oral presentation is required, and at the conclusion of each there is a 15- or 20-minute question and answer session, so your team is critical. Your team must be credible and capable of delivering a 'winning' presentation. Different philosophies exist, but we focused on illuminating the current problem (there is no readily available source of autologous neural stem cells) and our new solution. The rest of the presentation simply delineated the mechanics of the business and credible financials and projections.
Competing
At BPCs there's usually no shortage of talent. It's not unusual to meet attorneys, engineers, physicians and even already successful entrepreneurs participating in the competition. It's also not unusual to meet real heavy hitters in the worlds of finance, medicine and engineering who are acting as judges. There was a preliminary round at Moot where our judges included a leading venture capitalist with Austin Ventures, a nationally recognized physician and the director of the Lance Armstrong Foundation. The questions were tough, and these people knew their respective fields.
In general, a competition includes several rounds and has multiple divisions with entrants from the life sciences, technology and sustainable-technology tracks. The winners ultimately compete in a final round, and the judges determine a winner. The judging panels include entrepreneurs, venture capitalists and experts in various technologies.
If you're a scientist, remember that pitching an idea at a BPC has little in common with reporting research. Although scientists regularly prepare for publication with the peer-review process in mind, hoping that they can convince similarly minded individuals of the merit of their work, and prepare posters and podium presentations for conferences, writing business plans for and pitching them at BPCs requires a fundamentally different approach. At BPCs, you are selling not only the technology or product you have developed, but also yourself and the team. The latter is often much more important. You hear a great deal about 'intangibles' and 'that special something' at these competitions, and what that basically means is whether you can convince the judges that you—the inventor, marketer, manufacturer—can do what you say you will. Perhaps more fundamentally, the judges want to see if you have successfully communicated that you are suited for the task. Our pitch was based on medical and engineering principles, and we were helped by the fact that our team was composed of a neurosurgeon, an engineering PhD student and an engineering professor. In the end, if the work is your own and you communicate its importance and value, no amount of coursework or formal business study can substitute. This bodes particularly well for medical, science and engineering students interested in entrepreneurship.
The benefits of competing (whether you win or not)
Even before you compete, BPCs can benefit you by providing an opportunity to prepare a business plan (for credit) in a regularly scheduled course or as an independent study under faculty supervision. Oftentimes, established and successful entrepreneurs teach full time or part time as adjunct faculty at graduate business programs and travel with students to compete in BPCs. Having successfully created their own businesses and learned 'life's hard lessons', these entrepreneurs often wish to share their knowledge with the next generation. Even if you don't win, the advice and experience from these mentors can be invaluable.
For us, our ability to communicate with any audience improved dramatically. Because of the high caliber of coaches and judges involved in BPCs, ideas are tested and business plans and presentations are strengthened by the experience. Competing in a BPC gives you an idea of what a venture capitalist, for instance, is really looking for in your business.
If you do perform well and win, you'll see monetary benefits. An entrepreneur once said that "cash is more important than your mother," and he was right in terms of starting and, more importantly, maintaining a business. Millions of dollars in the way of grants, loans and in-kind prizes are available to students through BPCs each year. This year, $700,000 will be awarded to contestants at the Rice University Business Plan Competition, making it the richest BPC in the United States. In 2008, we collected nearly $250,000 for NeuralStemCells from BPCs. The money enabled us to start a private lab and hire staff.
And winning can put your company on the fast track in investors' minds. In our case, wins at Rice and Moot Corp provided the opportunity for a feature in Fortune Small Business magazine and gave us the chance to open the NASDAQ stock market. This type of recognition often entices professional investors and government-sponsored regional start-up incubators to invest in your company. According to officials at the Rice University Business Plan Competition, participating companies have gone on to raise more than $90 million in capital since the competition's inception in 2001. But keep in mind that not winning doesn't mean the end: while a student at Yale, Fred Smith, CEO of FedEx, received a 'C' for his business plan. He later turned that business plan into FedEx.
Conclusion
Enrolling in BPCs ended up being one of the smartest things we ever did. But it's worth wondering if we could have learned the business on the fly rather than picking it up in school and through practicing for the BPCs. We think of it this way: our group consists of a neurosurgeon, a biomedical engineering student and a biomedical engineering professor—collectively, we had not thought much about running a business. Business school gave us the opportunity to do that. Within NeuralStemCells, the three of us bring unique strengths and value to the company, and part of our value is derived from our newly learned skills in managing the day-to-day activities of the company, including those regarding accounting, finance and taxation. Without a formal business education and the realistic experience gained through the BPCs, we would have made more mistakes.
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