
No One Wins In Business Plan Competitions - icey
http://steveblank.com/2010/05/17/no-one-wins-in-business-plan-competitions/
======
replicatorblog
I had been working at a startup for 3 years when I entered a few business plan
competitions to stretch my skills. I entered MIT100K, Princeton, One run by
the state of RI, and one by OATV, O'Reilly's venture arm. What I "Won":

\- Met Tim O'Reilly/Went to FOO Camp: Part of winning the OATV competition was
going to SF, Foo Camp - an amazing networking/educational event.

\- $25K in cash and services. Not a huge amount, but enough to be meaningful.

\- Connections: The judges of these things tend to be successful business
people. They opened doors for me and passed on great info.

\- Experience: Pitched 10+ top tier VC firms, and learned how to create
demand. Getting VC's competitive juices flowing was a great experience. You
also get to talk to a lot of folks with training wheels, your ignorance
doesn't seem out of place.

\- Knowledge: Thinking about markets: YC really seems to push product, but it
is important to think through market opportunities. These semi-academic
exercises force you to research the markets to a granular and overcome common
criticism.

\- Knowledge: Most people who are starting companies haven't had a ton of
exposure to legal issues. These competitions tend to be heavily sponsored by
local law firms who are happy to share info.

\- Experience: Pick your team carefully. It is a lesson PG espouses, but is
really impactful when you learn it first hand with founder fallout. Luckily I
learned this before quitting my job.

Is this as valuable as doing YC? I don't imagine so, but if you are in school
anyway doing one of these competitions is a ton better than some useless
elective.

------
marciovm123
I was involved with planning a large, nationwide business plan competition
(mitcep.org). Steve raises some very good points, and I've forwarded his post
to the current leadership with the hopes that we can incorporate some of his
advice to improve next year's competition.

However, I think Steve misses the point of what these competitions are doing.
They are taking students who've never before considered themselves
entrepreneurs (and who've gotten to where they are by getting A's in classes
or being consultants) and encouraging them to become a part of the startup
world, by forming a team, attacking a market need, and pitching to investors.
Everyone involved (including the judges) knows that the static business plan
is merely a demonstration of the team's ability to pitch, not a rigid
guideline for what the team would do for the next few years. At the end of the
competition, the winner is not the team that gets the cash (although I'm sure
it doesn't hurt their egos) but every student who participated and pushed
themselves to learn about startups and themselves.

~~~
edw519
I wonder if you're missing Steve's point. You say:

 _Everyone involved (including the judges) knows that the static business plan
is merely a demonstration of the team's ability to pitch, not a rigid
guideline for what the team would do for the next few years._

"Ability to pitch" is not a prequisite to building a business, it's an
impediment. Learning to pitch the wrong thing well isn't helpful. And
discovering the right thing to pitch requires an entirely different approach,
often 180 degrees from traditional business plan activities.

Engaging prospects to tune or even radically change the business is a required
step. Omitting that step doesn't create a subset, it leaves unnecessary
errors.

It's funny how much less you need to be good at pitching when you know you
have it nailed through proper process. Better to teach that process than to
teach how to pitch the wrong thing.

What's the point of teaching "how" to do the wrong "what"?

~~~
marciovm123
By that logic, what good was it for me to learn how to solve arbitrary math
problems in 7th grade, if the real "what" that I'd need math for later was yet
to be found? Developing skills in the context of an educational environment
might not be as efficient as in "the real world", but it's still extremely
useful.

The ability to pitch might not matter in a field like abstract mathematics
where the product is everything and the "customers" are knowledgeable and
rational, but that's rarely true elsewhere in life.

edit: Even more generally... if you saw two wolf pups play-fighting in the
wild, would you tell them they're wasting their time since they're never going
to eat each other?

~~~
anamax
> Even more generally... if you saw two wolf pups play-fighting in the wild,
> would you tell them they're wasting their time since they're never going to
> eat each other?

Wolves do fight one another. They also fight their prey, which they do eat.
Practice fighting seems quite relevant to real wolves.

What do you learn by pitching? One answer is "sales".

------
raganwald
Business plan competitions measure business planning. I once worked for a
company that had won an award as "One of the 50 best managed private companies
in Canada" several years running.

The procedure for judging this award consisted of accountants coming in and
measuring the degree to which our decisions were driven by documented,
repeatable processes. At no time did they measure how well our products were
selling, the quality of the talent we were able to attract, or our turnover.

My point being that there are means and ends, and when you put a lot of work
into measuring the means, you get a lot of emphasis on means. I will NOT
suggest that your ends automatically suffer, just that the correlation between
repeatable and universal ways of measuring means and the ends you achieve are
loose at best.

------
jdrock
80legs participated in a business plan competition at Rice University while I
was still getting an MBA there. We were one of the finalists, but not the top
winner.

That was a year ago. I have since done some basic searching to see what the
other finalists have done since then. As far as I can tell, only one (the
winner) has done anything significant so far, and that's just raising money.
Granted, it's just a web search, but it seems the rest have just done things
like win other competitions, get grant money, etc.

We are the only ones actively engaged in business. And we only entered the
competition for fun. (We used our winnings for free lunches.)

~~~
strebler
That closely echoes what I've seen locally; one business plan competition has
had the the majority of winners (for the past 5 years that I've tracked it)
not even bother to start a company, they just go get consulting jobs.

The contest doesn't even bother to list the old winners on their website, they
know what's going on.

Business plan contests really don't seem to work.

~~~
mos1
I played tennis quite well in high school and college. I never tried to go
pro. Does that mean the tennis teams failed?

I swam competitively in college. I didn't try for the olympics. Does that mean
the swim team failed?

There are a lot of valuable lessons one can pull from a business plan
competition even if you don't become a founder, or even if you never intend to
become a founder.

------
yosho
My team just placed runner up in an ivy Bplan competition...and I absolutely
agree 100% with what the article said.

We didn't enter the competition to demonstrate how great our idea was, we did
it mostly for the monetary prize money, as well as a chance to practice our
pitch and meet some investors along the way. At the end of the day, it is a
great networking opportunity and a chance to practice presentation skills.

~~~
DTrejo
My team also recently placed runner-up in an Ivy B-plan competition.

We realized that the idea won't work well in practice and that the team
dynamics are far from ideal. I got a taste for what a business plan looks
like, and how it is not very helpful when it comes to actually building a
business.

~~~
vlad
_We realized that the idea won't work well in practice and that the team
dynamics are far from ideal._

You got feedback about why your idea was bad, learned how to put it into
words, and practiced working in a group to do so.

------
edw519
Wow! In one sentence, Steve Blank elucidates the feelings I have always had
about the chasm between academia and the "real world":

 _The Business Model competition measures how well students learn how to Pivot
by getting outside the building (not by writing a plan inside one.)_

I have always appreciated theory and thought much more was needed in the
corporate world. Too many people waste time reinventing approaches they would
have easily known if they had just a little more education.

At the same time, I have often thought academics were in some kind of fantasy
world. You gotta get "outside" and understand what's really happening.

Magic can happen when theory meets practice.

Great post! Thank you, Steve.

~~~
davidcuddeback
> I have often thought academics were in some kind of fantasy world.

I ran into the rift between academia and the real world a few weeks ago, and
it changed my perception of both, specifically in regards to software
engineering.

I feel like academia studies software engineering practices with the goal of
wanting to increase the quality of the product. They come to conclusions about
how great all the best practices are and teach their students that they should
be using all of them.

However, when I started trying to build a product with those methods, I
realized that academia has the luxury of ignoring time. In industry, time is
the enemy. You have to beat the competition, release before the market
opportunity disappears, and in the case of startups you have to find a product
that people will pay money for before you run out of money. If you build a
product that nobody wants, who cares what your test coverage is? When time is
against you, all the best practices in the world probably slow you down too
much, so you have to be more judicious in your application of them.

I don't want to knock academia too much. I think it's still very valuable, but
I have to agree with edw519 that the real magic happens when theory meets
practice.

~~~
_delirium
I think software engineering is probably an area where academia's at the most
disadvantage in studying it, because it's _so_ applied and context-specific. A
truly successful software-engineering researcher would have to be at least
part anthropologist/sociologist, and spend a lot of time on field work. Sort
of similar to academic study of the business/management field.

Areas where you can decouple at least some parts of the theory, and apply them
later, have more luck, I think. For example, Knuth does perfectly fine
inventing algorithms in academia, because it's a pretty academia-friendly sort
of pursuit, and many of them later do make it into the real world, so it's not
totally ivory-tower.

~~~
davidcuddeback
Even the things that academia studies that _can't_ be entirely decoupled, such
as TDD, I think can still be applied in practice. You just have to take your
context into consideration when deciding if it's appropriate. What is your
deadline? How skilled is your team? etc.

------
giffc
They don't call it the ivory tower for nothing.

To academics, ideas are everything. For a startup, an idea is merely a jumping
off point.

This is why you so often see breakdowns in attempts to spin something out of a
university. A professor thinks they deserve a huge chunk of equity for
contributing to ideas, but has no time to truly contribute to execution. The
entrepreneur team and savvy investors know otherwise. Enter huge hissy fit
cap-table fight, stage right.

~~~
idiopathic
As an acaedmic and an entrepreneur, I find it disappointing when people keep
on saying that "ideas do not matter, only execution does". In my experience,
it takes a long time and a lot of effort to do the research that generates a
good idea, but it takes very little time and effort to steal that idea.

Yes, I know execution matters a great deal, and I have done a lot of work
executing on my ideas. But my point is that people who say ideas are the easy
part often mean that it is very easy for them to take someone else's idea and
that they have no need to do the difficult part of coming up with an idea in
the first place. This is why the patent system was created, and the patent
system was a key contributors to the West's rise to prominence. (I say this as
an Arab who grew up watching the effects of piracy, and the crippling effects
on a society of not respecting intellect.)

In the longer term, I do believe that ideas matter, and that dismissing the
work of academics is dangerous to the competitiveness of Anglo-Saxon
societies.

~~~
anamax
> I do believe that ideas matter

No one believes that they don't. The question is how much they matter.

> that dismissing the work of academics is dangerous

Why is it more dangerous to dismiss the work of academics than it is to
dismiss the work of other people?

Note that the "ideas aren're worth much" folks aren't restricting that to
ideas from academics. Are academics as egalitarian wrt ideas from non-
academics?

------
JoeAltmaier
People may enter these contests to get noticed. I need funding, and a contest
is one (lame) way to try to attract attention. Steve Blank's idea about
"business model" contests is too little too late - contestants have already
executed, are getting their attention another way, and probably are way too
busy to bother with contests.

------
inmygarage
The winner of the MIT $100K this year was a PhD student who has created a new
type of cement. If organizations like the $100K didn't exist, what would be
the options for this team? Sure they could try and find some advisors through
academic connections, but the absence of a third-party organization that you
know isn't going to screw you out of your IP is a huge advantage.

Business Plan Contests are not for every team or every startup. However, at a
place like MIT startups are competing vigorously for exposure with companies
like Google and Microsoft who are throwing around cash (and free pizza) to
hire students. Creating a bit of fanfare and excitement around startups seems
to me to be a win/win.

------
barmstrong
I don't believe in writing business plans either - but the business plan
competitions I've been to had nothing to do with the old 20 page paper
document with lots of excel graphs that we normally think of.

They were just presentations pitching to potential investors. So in that sense
the words mean totally separate things.

------
zeynel1
"Business Plan Competitions are Great for Schools and Bad For Students"

New York Public Library sponsors a business plan competition.
[http://legacy.www.nypl.org/research/sibl/smallbiz/nystartup/...](http://legacy.www.nypl.org/research/sibl/smallbiz/nystartup/index.html)
Glad to read that he eloquently articulated what I thought about this
endeavor: Good for the library bureaucracy and useless for the entrepreneur.

