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.