No One Wins In Business Plan Competitions
steveblank.com
steveblank.com
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.
For example, one of the winners at a business competition at my school was a guy who invented a new type of RF amplifier. His plan is to get it into cell phones. But what if it turns out that his amplifier would be a better match for another market? He can pivot by changing his market instead of changing his product.
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.
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.
College business plan competitions exist to bring awareness of entrepreneurship to an academic setting. A typical judge is either an angel investor, venture capitalist, or successful entrepreneur. Interaction with judges allows both serious and non-serious contestants to improve their idea from round to round, even competition to competition. Among other things, these judges take into account what kind of leg work the entrepreneurs have done to support their entry.
As far as theory versus practice, real-world judges run the show. They are the ones who give feedback and pick winners, not academics.
Since students typically attend college far away from where their chosen industry is based, business plan competitions enable them to pitch their ideas to adults with a lot more experience than they or their professors have.
A large body of entries come from full-time undergraduate students who gain valuable feedback about one or more ideas they've been thinking about for years. The other group of people these competitions attract are PhD students seeking help to convince the college to make their research available for commercial licensing, subsequently founding a startup that licenses this same research the founder created as a student.
- 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.
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.
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"?
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?
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".
Wouldn't more people be interested in math if it wasn't arbitrary?
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.
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.)
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.
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.
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.
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.
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.
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.
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.
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?
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.
They were just presentations pitching to potential investors. So in that sense the words mean totally separate things.
New York Public Library sponsors a business plan competition. http://legacy.www.nypl.org/research/sibl/smallbiz/nystartup/... Glad to read that he eloquently articulated what I thought about this endeavor: Good for the library bureaucracy and useless for the entrepreneur.