

Why Losing A Biz Plan Competition Is Better Than Winning - edw519
http://www.techcrunch.com/2009/11/28/winners-curse-why-losing-a-b-school-biz-plan-competition-may-be-good-for-your-startup/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+(TechCrunch)&utm_content=My+Yahoo

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pg
In general, prizes awarded by judges in contests are not a very good
predictor.

Judges are usually busy people. They're not going to work that hard to figure
out who's the best. They'll tend to be fooled by superficial polish.

I was a judge at TechCrunch 50 this fall. A few weeks later we had YC
interviews. I don't think I was any more slack than the other TC50 judges, but
there was no comparison between how hard I worked to pick the best startups in
the two cases. Not only was I going to have to put money into the YC startups,
whoever we picked was going to become part of the YC community from then on.

In fact, after having interviewed so many startups under conditions where
getting the right answer really mattered, I found I had to consciously
suppress my tendency to ask probing questions. Even so I think I seemed unduly
harsh compared to the other judges.

~~~
robg
Aren't they two entirely different formats? In one, you're asking probing
questions but it's a small group setting and with your longtime partners. In
the other you're in front of an audience and judging with folks you may or may
not know. You've also screened the applicants for YC for ideas you'll want to
probe deeply whereas the contest seems more about general business models and
fit to markets. You'll invest your money just based on one meeting whereas the
contests seem more like a chance to simply get a second meeting. It's the
difference between rational dissections in YC versus blink assessments in the
competitions. I don't see very many parallels, actually.

 _In general, prizes awarded by judges in contests are not a very good
predictor._

Do you know of specific data here or is this your general impression? Some
contest winners and close losers have seemed very impressive to me. And that's
not just at TC50 but also from the DFJ and MIT competitions too.

~~~
pg
They're definitely different formats. That's why I toned down my questions for
TC50. But it's interesting that both took about the same amount of time. That
means we could have dug a lot deeper at TC50 if that had been the point of the
event.

~~~
robg
You mean the actual "interview", right? As a judge were you also expected to
review and filter applications?

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replicatorblog
I did four B-Plan competitions (had success in all four) in the spring of 2008
and the experience was useful. I would HIGHLY recommend and HN'ers in the
Boston area sign up for this years event, which is going on now.

The good things:

1\. Great networking: The MIT 100K competition has a lot of support in the
Boston area. It is a great way to open a door to almost any company that has
any affiliation with MIT.

2\. Business issues: I know the prevailing ethos here is build something
people want and the rest will take care of itself, but these competitions do
force you to think about how you will sell you product, the importance of
barriers to entry etc. As PG said he is even rethinking the mentoring aspect
of YC to more richly incorporate this kind of info.

3\. Money - These competitions are serious cash cows. 35 team at MIT get $1k,
7 get $10K, and at least 2 get $100K. In addition there are special prizes for
mobile and other areas. If you have a half decent idea it is a way to get YC
caliber money with no dilution. All you need to do is find a student at MIT to
participate, which is trivially easy.

The downsides of these competitions (in addition to what the author said):

1\. Wrong teams: Often the teams are comprised entirely of MBA's. Even though
many were former hackers, they were at school to become managers not makers.
I'm not anti-MBA, but the big problem is the fact that by the time you win a
competition the MBA is a month from graduating and is on the hook for $200K in
debt which dampens the entrepreneurial enthusiasm.

In any case I think the process is well worth it.

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dirkstoop
Other possible interpretations of the data:

\- People who have the patience to court a jury with a business plan,
perfecting their pitch, etc. at such an early stage – while they could be
working on their product – don't make the best entrepeneurs.

\- The judges are teachers who've been entrenched in the academic world for
too long to pass valuable judgement on a startup's viability; Their judgement
is either counterindicative of success overall, or they may simply weigh
factors that are only important for a more mature business too heavily for the
judgement to have anything to do with startup success.

\- Most startups fail, including those that come forth from these
competitions, there's no measurable correlation.

Take your pick ;)

Any judgement of a startup's possible success that's based upon business plans
rather than founders' personalities misses its goal because it does not
account for the amount of change to the plans that is required for success,
but which will only happen if the founders have sufficiently flexible minds.

A final point then: Does hearing a respected jury tell you your plans are the
bee's knees make you more hesistant to change them or throw them overboard
when things aren't taking off?

~~~
dstorrs
Good points. But I wanted to respond to the last:

> A final point then: Does hearing a respected jury tell you >your plans are
> the bee's knees make you more hesistant to >change them or throw them
> overboard when things aren't >taking off?

Maybe, maybe not. But having that same jury tell you your plans are bad __and
why they are bad __is extremely useful. So I wouldn't write off these
competitions entirely.

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jmintz
Dave and I (along with a classmate Dom) won the Chicago Booth (MBA) business
plan competition for Bump before entering YC. It was good because we were in
school and got credit for spending time thinking about and working on Bump
(rather than taking a class that was wholly distracting this one was only
partially distracting), met some alumni that have become valuable advisors,
and greatly improved our presentation skills (which helped a lot when we were
raising money). It was bad because we knew had to work on two things in
parallel 1) the real business and 2) the "business plan" business (if we had
said what we really wanted to say we would not have won that competition,
which at the end of the day is what it was). Overall it was net positive for
us I think because priority #1 was the real business and we made instead of
planned (we started on Bump 7 months before the competition and launched
before it started). In fact, the top 2 companies were the only two that had
product in market at the finals. When my Booth ex-colleagues ask me for advice
in the business plan competition I tell them to build a product and get in in
customers hands, otherwise you are spending too much time guessing what
customers will think.

There are plenty of companies that came out of business plan competitions that
have done really well. One of my favorites is SunEdison that won the HBS
business plan competition. A few years after winning they were just bought for
$200M. Not bad...

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richardburton
I've participated in 3 pitching competitions at Edinburgh University. I won
one of them and lost at the other two. The value I gained from them came in 3
categories:

1.) Networking 2.) Awareness among local startup scene 3.) MacBook Air ;P

Seriously though, the contacts I've made at these events have been infinitely
more valuable than the cash and assortment of juicy Apple products that I've
won.

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zaidf
The biz plan competition at our school is very clear on this: it is _just_
about the business plan. They do not care about execution. In fact, they
recommend that the prize money be distributed equally between the team members
as opposed to being used for the company. I am having a hard time digesting
this, nonetheless I appreciate their clarity.

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henryl
Also, Jon Burgstone came in second place for the HBS business plan competition
with his idea for SupplierMarket and then started and sold the company for
over a billion dollars within a year. Now, he and his former co-founder offer
a special (and larger) cash prize to other 2nd place participants of the same
contest.

~~~
manbearpig
Good point. Business plan competitions are good indicators of who can succeed
in cashing out during dot-com bubbles. Essentially, you presenting a business
to group of clueless individuals. If they buy your pitch, you are more likely
to be able to either con a clueless internet-bubble company's board into
buying your company or fool collectively clueless merchant investors into
buying into your IPO.

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marciovm123
I was co-lead organizer of the MIT Clean Energy Prize last year, a national
biz plan competition with a $200k cash grand prize (and partner to the MIT
100K). We never thought ourselves capable of designing a competition where the
winner was in any way assured of “making it”- the free market is the only
force capable of determining that. But that wasn’t the point; the post is
correct that the perceived ancillary benefits of forming a strong team, making
deadlines, and meeting/facing potential customers and investors turn out to be
what make the whole thing worth it (and not necessarily for the success of the
business being pitched but for the skills built by the students). As pg
implies, the judging is not "for real" since it's with OPM, but compare that
to the usual indicators given at universities (grades) and it doesn't look so
bad.

The vast majority of the teams realize this too, and the ones who don’t are
not the ones who go far. Winning the grand prize is basically a bonus for the
the team who gets it...

Is a b.p. competition for everyone? Probably not. I’d definitely prefer being
a part of YC before winning the 100k (dreaming up a web app); YC community >>
80k. But they are not mutually exclusive and the b.p. application is only 2
pages and 10 slides.

And a big success who actually won such a competition? How about EnerNOC, a
$600M public co that won the Dartmouth competition in 2002. They do load
balancing for electric utilities (big customers go low-power during peak
demand). Probably doing more good for the world then all the apps in the app
store.

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scootklein
I'm a student at NC State right now and we have one of these coming up in the
spring. I will say that both the companies and the judges are somewhat in the
dark for ideas that are even remotely complex with niche markets; however, it
doesn't take away from the fact that there is cash involved that we're after
and we're gonna give it a decent shot. I'm a graduating senior and I'm staying
as far away from jobs as possible. Money from our business plan competition
could keep me afloat for another 6-months or so while I bootstrap my idea.

I like that the author pointed out that no home-run companies have won
business plan competitions, but it's not to say it won't happen. My
observation is that it's going to need to be in a sexy category. The three
winners from our competition last year were tuberculosis testing, biodiesel
from trap grease, and college admissions...surprise surprise. The teams were
good, I have to admit, but I would bet that an equally good team with a sub-
trillion-dollar market wouldn't have had a chance. Akamai could have had an
awesome business plan with great market research, it probably just didn't
excite the judges.

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bjelkeman-again
I have participated in several business plan competitions, not so much to win
the competition, but to have a reason to finish writing the darn thing under
pressure. My biggest success didn't win any prices (but we participated with
it) and the business plan/idea which did win a price I shelved immideatly
after, as it wasn't that interesting to me and it was too niche to make a
really big impact, from my point of view.

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SapphireSun
I have to ask, I know ideas aren't worth anything until you execute, but
doesn't throwing your idea in front of a large audience of other entrepreneurs
and industry leaders potentially lead to a lot of extra competition? This
sounds really cool to me, but I'm a bit hesitant. I like getting feedback, but
usually from people I can trust (which I know is a biased sample).

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charlesju
The whole idea of a business plan contest is screwy. Ideas are a dime a dozen,
it's all about execution. If I were to start another startup tomorrow, I'd
just scrape TC for the newest and hottest set of startups for an idea, tweak
with my own twist and attack head first.

~~~
chris100
The business plan contains more than the idea, it should contain the planned
execution. For instance, how will you promote your product? Partnerships?
Media campaigns?

Of course, the business plan is just a stack of paper. You may have brilliant
execution on paper, but who knows if _you_ will be able to pull it off.

 _Insert mandatory quote about military planning being necessary but not
surviving the first contact with the enemy_

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japherwocky
How's that old quote go? Something about winning by not playing?

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fnid
In 20 years, there is going to be a wave of concern that we aren't praising
our kids enough.

