Where Big Ideas Win Big Bucks

Business plan competitions are raising their profiles with bigger cash prizes, and some even throw in office space and site hosting  

 

When Clifford King attended the Global Security Challenge reception at London Business School on Nov. 8, he was one of five finalists in the business technology contest. King says realizing his team was the one left standing after the suspense-filled critique stage "was like [being on] a reality TV show." His team had just won what's billed as the world's richest business plan competition prize (BusinessWeek.com, 5/30/07)—a $500,000 grant to help expand NoblePeak Vision, a night-vision camera company he co-founded.

Hosted by London Business School and largely sponsored by the Defense Dept., the Global Security Challenge calls for new security-focused tech startups, a field that has been expanding rapidly in the wake of the September 11 terror attacks. In a lucky break for King, the second annual event increased its prize from $10,000 to $500,000 because of heightened interest and increased sponsorship from the U.S government. Yet it still has the same "few strings attached" to the winnings as it did for the smaller amount, according to organizer Simon Schneider.

Even though most competitions haven't boosted their prizes so dramatically, many are adding larger grand prizes. For instance, MIT has announced its $100K Entrepreneurship Competition, which used to award two $30,000 prizes, will now give six cash prizes, including a new clean energy prize worth more than $200,000. Because of the increasing figures, organizer Jeff Sabados says he will also drop the "$100K" from the moniker, a number that refers to the total value of prizes presented during the 2007 contest.

Smaller prizes across the nation have been growing, too. The University of Southern California's business plan competition prize has doubled. The university-wide contest now awards two $25,000 grants for two business plan tracks, traditional and technology commercialization.

Rising Entrepreneurship Prizes

In some cases there's even more prize money involved if the business idea is viable and has a socially conscious twist. For example, New York University's Stern School of Business competition gives twice as much money to the social entrepreneurship track winner as it gives the traditional track winner. Since its start four years ago, interest in the $100,000 Social Entrepreneurship cash prize has grown steadily—the percentage of applicants has doubled since 2006 to 30% of submitted plans, says Mara Rose, director of the Stewart Satter Program in Social Entrepreneurship at Stern.

Rosemary Gliedt, who manages Washington University's Skandalaris Center for Entrepreneurial Studies, says she has also observed this trend of increased awards for social plan winners. For example, the school's Social Entrepreneurship & Innovation Competition gives out $50,000 more in total prizes than the Olin Cup, the university's flagship business plan competition. Part of the reason for growth within this track, according to Stern's Rose: "A social capital market is harder to tap into, and there are not as many potential sources of funding—there's sort of an idea that this can be a challenging sell."

Not every competition feeling the pressure to up the ante has the cash resources to do so. Their solution? Mixing cash with company-sponsored, in-kind prizes sponsored. At the 2008 Rice Business School competition, besides $20,000 in cash and a $100,000 investment, winners will get $110,000 in additional in-kind services (including office space, airplane tickets, and Web site hosting), a $25,000 increase from the 2007 contest.

All About the Exposure

However, it's the hefty $200,000 value for the entire set of prizes that garners extra attention from applicants and future investors. Competition director Philana Diaz says winners must be based in Austin to take advantage of office space and, to be eligible for Web services, they can't already have a Web site. Terms of the large $100,000 investment are drawn up with the Grand Order of Successful Entrepreneurs (GOOSE) Society of Texas, a six-member group that invests in the competition and is not regulated by the school.

Rice is also working on increasing its cash awards. "In an entrepreneurial startup, cash is king," acknowledges Diaz. "Our goal is to get more cash prizes." But for now, Nicholas Seet, chief executive of 2005 winner Auditude, a tech company that develops automated media tracking, says the exposure from participating in Rice's competition led his company to more investment opportunities and helped get the company on its feet. Investors "liked the idea so much they added a cool million more," he says.

And while some may be bumping up prizes, others are looking for ways to start competitions from scratch and encourage growth in entrepreneurial infrastructure. At the annual three-day Global Startup Workshop, which grew out of the MIT competition 10 years ago, attendees can learn how to set up a business plan competition. This year, Hanfei Shen, a lead organizer of the workshop, figures 63 of the 250 participants came to the 2007 conference, held in Norway, to establish a competition within their own organizations. Participants included representatives from groups in Ghana, Nigeria, Ethiopia, Argentina, and Costa Rica. So far, 16 business plan competitions have emerged from the workshop.

Cash Is Still Essential

Past competition winners, such as Ingenia Technology co-founder Mark McGlade, believe upping the prize can have a more lasting effect by creating a higher profile for both the startup company and the competition. "The higher the prize money, the higher the media attention and the higher the venture capital," says McGlade, who won $10,000 in the inaugural Global Security Challenge competition.

But for other fledgling companies, startup capital—not publicity—is most essential. Noah Dinkin, who won NYU's $50,000 social entrepreneurship prize more than a year ago, says the cash and six months of free office space gave him a way to keep developing his business. Scheduled to launch in early 2008, Dinkin's Verge Records will be a record label promoting artists from poverty-stricken urban areas such as the shantytowns of Rio de Janeiro. "I've yet to meet an entrepreneur who doesn't need the money when they're starting a business—cash is very important," says Dinkin.

And what if your contest victory isn't a cash cow? B. Michael Roberts, a senior lecturer at Harvard Business School, which awards $10,000 to winners of its business plan competition, says the contest is more about enriching the student's experience than providing funding. "For our students it's a great capstone experience."