Startup funding for a new venture often comes from friends and family until one finally gets enough of a business going to attract an angel or venture capital, especially if you are new to business and have no track record or credit history. A relatively new form of funding has appeared in the past few years, however, as funders have joined with universities to attract ideas for new businesses through business plan competitions.
Business plan competition first started in the early 1980's at the University of Texas. Two Texas MBA students wanted to have a business school activity that was as challenging and prestigious as law school Moot Court competitions. In spite of initial hesitations by the Texas business school dean, the program had its first trial run in 1984 with only Texas MBA students participating in their "Moot Corp." By 1989 they had gone national, sending their winning team against teams from Harvard, Wharton, Carnegie Mellon, Michigan, and Purdue. In 1990, the London Business School, Lyon Graduate School of Business from France, and Bond University from Australia joined the competition. Since then, the number of competitions have increased dramatically worldwide, many of them sponsored by leading venture capital firms.
In fact, a number of venture capital firms have taken this a step further and have sponsored their own events. Garage.com leaped into the market in March, 2000 with PLANedu, limiting participation to full-time undergraduate and graduate students currently enrolled in accredited U.S. colleges or universities. Business incubators and local communities have also funded competition in the hope of identifying viable businesses to revitalize their business community. Haverhill, Massachusetts Cyber District sponsors four separate contests: for entrepreneurs, college students/groups, high school students/groups, and middle school student/groups.
The payoff for the winners of these contests can range from a few thousand dollars to contact with major investors who are ready to take the idea to the next level. Even if your plan doesn't win, you get invaluable feedback from real investors on the viability of your business plan. If you are willing to listen carefully, the advice given can provide the catalyst for putting your business on the right track for success.
The payoff for the investors is having an opportunity to view plans from some of the best and the brightest entrepreneurial minds. Fresh ideas from highly educated, motivated and well coached teams can be a fruitful way to discover new investments.
For the business schools, participating in the contests can be a powerful drawing card for potential bright, motivated students. Their payoff is filling their classes with enthusiastic, entrepreneurial students who, if they hit it big, have the potential to contribute enormously to the financial future of the school.
Does this mean you need to go business school to get funding for your venture? Well, that is not a bad idea, but many of the more prestigious contests require only one member of the management team to be a full-time student. The other members of the team can usually be any individuals that make the business a stronger, more viable entrant. Take the case of Mike Cassidy, a two-time winner of the MIT business plan contest. Cassidy actually received his undergraduate degree in aerospace engineering from MIT, but did not participate in their competition when he was there. Later, attending Harvard Business School, he competed in the MIT $50K Entrepreneurship Competition with two partners. They won the top prize plus $125,000 in additional seed capital for their software company, Stylus Innovation. By age 33 he had moved on, leaving the business to others to run.
Where did he go from there? Back to the MIT business plan contest. This time around he checked the MIT website to see what ideas were being developed and what skills were being solicited. He found a match with a student, Gary Culliss, who had designed Direct Hit Technologies. Cassidy joined the team as CEO and rode it to another win, this time bringing in $1.4 million in venture capital, not a bad start for launching a new company.
Most of the business plan contests run from fall to early summer so the best time to latch on to a team is in late August or early September. However, any time of year one can start building a team and learning the ropes. And don't be afraid to try more than once, honing your plan as you learn from the process. It took Gary Culliss two years to hit the jackpot, but he is now sitting on a business projected to bring in $1 million in revenues in its first year of operation. Not a bad tradeoff for a school homework assignment.