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Building a Business > Entrepreneurship

Published online: 24 May 2004, doi:10.1038/bioent805

Business model competitions catch investors' eyes

Kendall Powell *

*Kendall Powell is a freelance science writer based in Broomfield, CO, USA.

Entrepreneur contests spark innovation and provide a practice run for start-ups.

Sitting on a London bus, Donna Winderbank-Scott and two other medical students from Imperial College London dreamt up a device that may one day help millions of asthma patients. The motivation? A pound 1,000 (US$1,800) prize awarded to the best one-page business idea submitted to Imperial's Ideas Challenge.

In competition: Donna Winderbank-Scott (left) and friends developed an improved inhaler for asthma.

DONNA WINDERBANK-SCOTT

With colleagues Vanh Dang and Rachel Hames, Winderbank-Scott went on to win Imperial's New Business Challenge ( pound 25,000) and the Idea 2 Product international business-plan competition at the University of Texas at Austin (US$10,000), which also earned them a coveted spot in MOOT CORP, the 'World Cup' of business-plan competitions, also at the University of Texas.

Winderbank-Scott explains the brainstorm that generated the winning proposal: "What might have a big target population? Asthma. What are the problems in asthma treatment? Inhalers are difficult to use correctly. So we decided to try to make a better inhaler." Their product, which they named Inhalit, snaps on to any inhaler, improves drug delivery, monitors the severity of the disease, and alerts the patient if they need medical attention. The women expect to sell their idea to a company for royalties later this year.

Seems too simple? Well, there were "many, many meetings in various cafés" and "hundreds of e-mails" that Winderbank-Scott says went into transforming their idea into a full-blown business plan. "We had to learn everything from scratch: financing, marketing and advertising." Scientists who have participated in similar contests agree the most valuable part of the experience was gaining business savvy.

Business schools across the globe have been sponsoring competitions for their MBA students for some 15 years. The contests give the entrepreneur teams a practice trial by fire to pitch proposals to venture capitalists (VCs). They also encourage and steer the best innovations towards start-up companies.

During the past few years, competitions have begun to tap a new source of ideas — patents in university technology-transfer offices, often gathering dust. At the same time, more PhD students and researchers have begun participating, to develop their business ideas and pick up key contacts in the venture-funding world.

Getting Grilled

Several dozen universities around the world also hold international competitions, some of whose winners go on to take part in MOOT CORP — inspired by the 'moot courts' held at law schools. Top prizes range from $2,000 (enough to get incorporated) to $500,000.

Each team has 10–20 minutes to pitch, describing their product or technology, the market share, competitors in the area and how the product will be marketed. The presentation might conclude with financial projections and an exit strategy, or how the venture-capital firm will regain its investment.

In competition: the Watermark team from Bond University, Australia, present a new water treatment.

DONNA WINDERBANK-SCOTT

Presentations are judged by a group of VCs, lawyers and accountants that would rival any thesis committee. They vote with their mock wallets. But young entrepreneurs say that the grilling session provides the most valuable feedback.

"The questions they raise are the fundamental ones you are going to have to answer later," says Sandra Waugh Ruggles, co-founder of Catalyst Biosciences in South San Francisco. She started her company with fellow PhDs from the University of California, San Francisco, after participating in several competitions.

A few competitions also give prizes for phone or 'elevator pitches' — condensed versions meant to catch the ear of a venture capitalist in two minutes. Sanford Ehrlich, who oversees the Venture Challenge at San Diego State University, says the Golden Phone Award was instituted on the advice of an investor who said he would not meet entrepreneurs who were unable to express ideas quickly on the phone.

Competitions offer practice for that real-life encounter, convincing a venture capitalist to invest precious dollars in your idea. Teams can submit a business plan based on original ideas for an on-paper-only company, or they can polish up the plan of a start-up company. Tom Kelly, founder and chief technical officer of Imago Scientific Instruments in Madison, Wisconsin, has advised two winning teams on the business plan for his atomic imaging start-up company.

Kelly, a materials scientist, says his company benefited from the experience. The teams took a fresh look at the company's plan and found ways to increase their estimation of market share. But the real test was whether the judges at MOOT CORP would believe it.

"One VC knew our industry very well and said if our product got accepted as a tool, we had the potential to reach a billion-dollar market," Kelly recalls. "Prior to that, we hadn't heard the 'b-word'." The team came in second, and Kelly says the visibility helped boost fund-raising efforts. "We met with several major VC groups as a result of that exposure."

The situation turned out to be win–win all around. Imago, which makes an atomic probe imaging instrument, raised $12 million in two rounds of venture financing. The benefits of meeting VCs or successful entrepreneurs face-to-face cannot be overstated.

From Lab Rat to Chief Exec

While the competitions themselves are helpful, courses leading up to or spinning off from them also prove valuable, and are growing in popularity. Ruggles credits a competition lecture series and a course offered through the UCSF Center for Bioentrepreneurship for exposing her to the basics of business and finance. The UCSF course, called Idea to IPO, meets the needs of an increasing number of students who aim to enter the biotechnology industry.

Charles Craik, a chemical biologist who co-teaches the course with a Bay area venture capitalist, considers that preparing students for the business world is an important aspect of graduate education. The course grew in four years from 15 to 53 participants.

Workshops offered by many competitions may be even more valuable than the 15-minute final presentation. Singapore Management University (SMU) hosts the six finalist teams in the Lee Kuan Yew Global Business Plan Competition for three days of 'hothouse' sessions with business experts before the final showdown. And the Venture Bowl, hosted by the US National Institute for Entrepreneurship, awards the winning team with a week-long business 'boot camp' in New York City customized to launch their idea. Uniquely among the competitions, Venture Bowl also sets winners up with a potential contract for up to $500,000 with the sponsoring VC firm, Carrot Capital.

Home-Grown Economics

Several countries are betting on university technology start-ups to stimulate growth and give a global edge. Grace Cheng, who coordinates the SMU competition, says it was created by the government to encourage young Singaporeans to start up the companies that form a cornerstone of the country's economy.

In competition: the ZORK team from Adelaide University have invented a better bottle-top.

DONNA WINDERBANK-SCOTT

In Portugal, the commerce department and the biotechnology association, APBio, realized that many highly trained Portuguese scientists had too few options for industry jobs at home. So they started the Concurso de Ideias Bioempreendedor competition to encourage young bioentrepreneurs to start their own companies. Luis Amado, executive director of APBio and chief operating officer at Biotecnol in Oeiras, explains that the contest gives people tools "to solve this problem by themselves". The contest has helped at least four start-ups to put down roots in Portugal.

Contestants value the advantage that contests bring to developing a solid business proposal and learning the ropes in a no-cost dry run. And the potential to give voice to truly innovative ideas during contests looms large. Winderbank-Scott notes, "If you wanted to, you could come up with absolutely anything. It's really just thinking about a problem and coming up with a solution." Just like working on a thesis.

Web links

MOOT CORP at the University of Texas, Austin

http://www.mootcorp.org/index.asp