Funding 101 Part 4: Business Plan Competitions
We absolutely love Elizabeth's comprehensive series on funding! Click here to view Part 3: Incubators & Acccelerators.
Not sure incubators and accelerators are the best way to fund your company?
I'm happy to report that you can gain some of the same experience and exposure through business plan competitions.
Prize money is growing exponentially for the hundreds of business plan competitions held every year. And the number of competitions is growing, too. The public and private sectors have now joined in what was once mostly the domain of universities, making for a dizzying array of options.
But let's take a step back and explain what they are and who is eligible. Business plan competitions go by lots of names— entrepreneurship contests, venture cups, start-up challenges or even shoot-outs. By whatever name, all are contests for entrepreneurial hopefuls where you pitch your business idea to a panel of judges to win a prize. Some contests are open to all entrepreneurial ideas, while others specialize or break the competitions into several categories such as life sciences, clean energy, or technology. Increasingly, women-led and social ventures are becoming more common categories.
Most competitions advertise a deadline to submit your idea or plan and a second deadline to present it before a panel of judges. Usually there are various phases of evaluation, effectively culling the herd to a select few finalists.
Even if you don’t make it to the finals, the exposure and feedback provided along the way, as well as the real-world practice, can make the effort worth it.
Many competitions have more than one prize in a variety of categories.
Some university-sponsored contests require that at least one team member either holds a degree from that institution or is actively pursuing one, but others require only that the team members are students. Further criteria may include the stage to which the company has developed (typically, seed/very early, and a requirement to be seeking equity investment). Finally, the competitions themselves can be broken down into different categories such as business ideas, plans, pitches and models.
To win a competition, expect to go through several rounds of judging. There is a range of cash prizes. A quick search turns up active contests offering prizes from $1,500-$250,000.
Be sure to find out what, besides cash, is part of the prize. Feedback, coaching sessions, and mentoring, all are considered in-kind "prizes".
Besides the money, business plan competitions also give you real-world experience for the pitching and honing of your idea and of course the process of preparing the business plan itself, all of which are vital to the potential success of the business. Obviously, preparing for the competition will help refine key components of your plan, such as financial projections, target market, product/service features, marketing and promotional plan and exit strategy.
Exposure to investors and venture capitalists is another benefit of these competitions. The Rice Business Plan, one of the world's largest and best known, touts these stats from 2010: "Venture capitalists and other investors from around the country volunteer their time to judge the competition, with the majority of the 200+ judges coming from the investment sector. More than 95 past competitors have gone on to successfully launch their business and are still in business today, raising in excess of $223 million in funding."
Feedback from many entrepreneurs concurs that visibility, exposure and access to resources and investors is a chief driver for entrepreneurs. Usually, the judges are either entrepreneurs and/or investors, who may be willing to invest in contestant companies, regardless of whether they win or place in the competition. Candace Klein, founder of SoMoLend.com and business plan competition veteran, raised $500,000 solely from investors who started as her competition judges.
However, like accelerators and incubators, not all competitions are created equal. In addition to the cash and non-cash prizes, inquire about the success of past winners.
As Cari Somer, Founder of UrbanInterns.com, notes "an entrepreneur's time is the most valuable resource, make sure the investment is worth it."
A number of resources can help you sort through the plethora of competitions. BizPlanCompetitions.com claims to be the largest directory. It currently lists more than 300 events with cash prizes totaling just under $40 million. I found searching by region to be the most efficient method.
Another significant development is the growth of the Ewing Kauffman Foundation's iStart.org; an online platform designed to help organizers manage and launch competitions. It also serves as a comprehensive resource for entrepreneurs. According to iStart.org Director Katie Petersen, the Kauffman Foundation was interested in finding a way to follow and support all the entrants, not just the winners. "[In business plan competitions], participants who aren't awarded a prize in many cases are left high and dry after the competition, with their business idea left to die on their hard drives," she said. iStart.org views the competition as the beginning of a much longer term engagement with each entrepreneur and encourages them to share their business plan or idea through the iStart.org network. Mentoring, investment and legal assistance are just a few of the topics pursued post-competition.
There are some specialized resources and competitions as well. The William James Foundation aggregates social venture business plan competitions and specifies that they limit the contests to those with a corporate social responsibility (CSR) or sustainable focus or track. Contests from seasoned social venture investors, such as Social Venture Network and Investors Circle, are currently active.
And, ladies, a Cartier Women's Initiative Awards program supports women entrepreneurs. They’re looking for female-led for-profit ventures with an original concept and one year to no more than three or four years of operation. Leaders must have a strong command of English. A winner is awarded in each of seven regions: North America, South America, Europe, Sub-Saharan Africa, Middle East and North Africa and Asia/Pacific.
In 2012, there were more than a thousand applicants from 80 countries. Winners received a cash prize of $20,000 and one year of coaching.
Women in Business Challenge 2013 is another competition specifically designed to support female-led businesses in emerging markets. Since 2009, this challenge has provided coaching, visibility, support and financing for its participants. The competition is divided into categories such as Social Entrepreneurship and Virtual/Online.
Women 2.0 business plan competition is open to early stage high growth ventures around the world with at least one female in the founding team. The 2012 winning start-up received one-year service of Rackspace (valued at $24,000), a meeting with legendary Internet entrepreneur and investor, Marc Andreessen, and an automatic finalist interview in the heralded accelerator, TechStars. Besides an online application, contestants needed to send in a "napkin business plan", literally a napkin with the business idea scribbled or doodled on it, plus a two-minute video pitching the business to the target audience and a two-minute investor pitch video. If this sounds off-the-wall, it's actually part of a larger trend in which old-school business plan competitions have transitioned from 60 page business plans to the new school preference for shorter and sharper forms. This trend is underscored by the proliferation of competitions divided into smaller, more digestible components, such as business idea, model and pitch, which get to the core questions quicker.
Last but not least, Astia and The NextWomen organise the 2013 Global Pitch Competition in collaboration with the 2013 We Own It Summit. This annual event seeks to showcase the most promising woman-led companies from around the world and will invite finalists to compete for cash prizes, global visibility and the chance to pitch in front of an international audience at the Fourth Annual We Own It Summit in London on June 27. Qualification Criteria: An innovative product or offering in a high-growth sector such as Technology, Life Science, Clean Tech, or, in certain circumstances, high-growth Consumer products or services; A high-growth investment opportunity - at any stage of growth; An exceptional team, product, and business strategy; A significant market opportunity with initial customer traction or feedback; A defendable competitive advantage; At least one woman in a leadership role (at C level) or in significant position of equity or influence.
If you are looking for funding, exposure, connections and feedback, business plan competitions, in all their various forms, may be well worth your time.
A special thanks to Katie Petersen of iStart.org for her time and insight.
Elizabeth Crowell is the co-owner of Sterling Place, a multichannel retail company that sells eclectic antiques, fine home decor and specialty gifts. Profitable from year two, the business has steadily grown, with two store locations in Brooklyn, as well as a website. Sterling Place has been profiled by the NY Times and Elizabeth has been a repeat guest expert on Martha Stewart Living Radio. In 2011, Elizabeth was selected as one of 10 in the inaugural class of Pipeline Fellows, a program designed to train women to angel invest in women-led triple bottom line ventures, ie. profitable, environmentally responsible and delivering social impact. She is in the process of building out her own angel portfolio. For more information on Elizabeth, see her profile.
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