10 Truths About Winning Business Plan Competitions – And Raising Venture Capital
I judged the Oklahoma Governor’s Cup business plan competition a couple of weeks ago. It was 8 hours of tough, solid work, but it was rewarding.
Meeting enthusiastic groups of students presenting promising businesses – some of which are already well on their way to launch – and working with an amazing panel of smart, experienced judges, is a very satisfying experience for a serial entrepreneur.
Having now judged many years of business plan competitions, including my own mini-competition that we put on each year as a part of my class at Rice University, I’m going to jot down a quick list of things student teams need to do to be competitive in these things.
These are some brutal truths that may not be politically correct and that the books and professors probably don’t tell you about business plan competitions. Here they are.
1) Be highly selective in what you choose for your business.
If you don’t start out with the right raw materials, trying to build your business plan and win the competition is an uphill battle.
All of the contests, to one degree or another, say that the business you select to represent shouldn’t matter nearly as much as the plan and presentation given. In theory, the competition is trying to judge the student’s accomplishments as budding businesspeople, not serve as some kind of weighing machine for viable businesses.
There is some truth to this assertion. A business plan competition – particularly those oriented around new technologies – can’t really evaluate the validity of the science or much of the technology underlying a business plan. There’s a bit of evaluation that goes on, a few questions are asked. But overall, this isn’t the focus.
However, judges have a nose for businesses that have a good chance of working in real life, and those that won’t. Sometimes the reason a business won’t work are not even discussed in the business plan, but are obvious to an experienced judge.
Regulatory or political barriers, product development risk, and gigantic potential liability are good examples of obstacles that judges take into account, but that are often insufficiently addressed in business plans.
So, the message is this: The business you choose to present matters intensely. You can’t create a silk purse out of a sow’s ear. Take your time choosing a business, don’t be afraid to reject a lot of promising business ideas that are good, but not great, and make sure you choose a business that looks like it has a better than average chance of succeeding. Often, the simpler business models are the best. The more moving parts in the first year or two of the business, the more risk it faces.
In theory, a fantastic business plan and a fantastic oral presentation can make any business look great, but you’re fighting an uphill battle if you’ve chosen your business poorly. Don’t do it.
2) When your professors tell you to build a diverse team with a wide range of skills and backgrounds, do it!
This isn’t idle advice. If you’re an engineering team and you put one token business major into the mix to be your “marketing and operations person” or when you are a business school team, and you throw a researcher into the mix to cover “all of the technical questions,” you are doing yourself and your business plan a disservice.
Every team needs a good mix of science/engineering to support and defend the technology, a business person who is a strong operational and financial leader, and some members who can present promising sales and marketing skills.
The team needs to look well balanced and credible. Don’t put people onto the team who aren’t there to serve a purpose. And make absolutely sure that the role and skills of each team member are introduced before and during your oral presentation. It needs to look believable.
3) Validate, validate, validate.
Business plans that show up without a lot of support for their premise usually get trashed, and with good reason. You need to have studies, statistics, endorsements, references, client testimonials, etc. Sounds hard? It is.
This is especially true for business plans around new technologies and new markets. Any form of validation is important, even if it is tangential to the business plan. Statistics from similar, related markets, studies around similar products, or very early or relatively unscientific studies, are all valuable.
Don’t show up for the competition without tangible validation for your technology or market. Weak studies are better than no studies. Use expert testimonials if you have to. Come up with something.
4) Teams that appear to be actually launching their businesses in the real world do better.
This is just a fact. When all steps are taken to make the business look like you are about to launch it, the judges respond positively. The presentation is more convincing, the team is more coherent, more of the proper steps have been taken towards launch and more of the real, practical barriers to launch have been identified and addressed.
Teams that present plans that are never going to launch show it. The plans are less convincing, the business model less researched and validated, the team less coherent.
If you’ve got a choice between joining a team that has a real business and a team that has a fake business, join the real business team.
5) Speaker quality matters enormously.
Just like in anything else, appearances and speaking skill matters. Whether you’re trying to make the sale to the big client, or trying to win a business plan competition, you need to put your best foot forward.
Your primary presenter needs to be professional, polished, well practiced, confident, and have a great command of the business plan, the business model, the proposition for investors, and a reasonable command of the technology and financials. Deferring detailed financial and technical questions to team members is expected, but the core presenter and presentation needs to be complete and polished.
And it needs to be practiced. Spend time in front of a mirror and in front of friends and family. Your business plan presentation for judges should be your 20th or later presentation of the plan. It should not be your third or fourth reading.
Don’t walk in stumbling over words and phrases, forgetting where you are in the presentation, mixing up slides, etc. This is a contest. Try to win.
6) You need to look and act coachable.
Yes, this matters. A lot. VCs and judges like teams that are coachable. We like teams that appear to respond to questions and suggestions positively, no matter what you really think.
Just like anything else, you get points for listening and responding appropriately and positively, even if you think the question or the suggestion is silly.
You don’t want to appear under-confident in your plan. You need to be able and willing to defend it, but at the margins, be open to suggestions.
7) Know why your competitors are succeeding or failing in their markets.
When you’re trying to convince a group of judges that a business plan can succeed, you need to understand why your competitors have succeeded or failed and be able to contrast your business with theirs.
Don’t walk into that room to make your presentation without being able to point to and explain how another company has done something analogous and been successful.
It doesn’t have to be your business model – it just needs to be close enough to convince the judges that you’ve looked around, done the research, and can explain why your new and novel market is going to emerge and grow. For really new ideas and new markets, this is especially important.
8) Have a fantastic command of your investor proposition.
Seeing business plans that have great science, a great business model, and great team – and a terrible investor proposition or a proposition that isn’t well presented or thought out – is very disappointing.
Engineering and science teams sometimes neglect this aspect of their plans. This is a huge mistake. It is the “build a better mouse trap” theory of business.
Neglecting your investor proposition in favor of presenting a technology that everyone “just has to buy because it is so terribly awesome,” represents either arrogance or naivete. Neither are good for winning business plan competitions.
Businesses that don’t present a compelling investor proposition will never raise money and never launch, no matter how strong the technology. I’ve seen great technologies fail to come to market over and over. In real life, it happens all the time.
Sometimes, a founder gets greedy and goes to market with a poor investor proposition. He or she then works for 12 or 18 months to develop the prototype, commercialize and plan using money from friends, family and angels.
However, because they don’t have a sound investment proposition, they never raise the capital needed to launch the company. They end up shelving the technology until another management team comes along, or an established commercialization company discovers them and buys it.
You must have a great investor proposition and present that proposition well if you want to win business plan competitions, even if you would never offer the proposition in the real world.
9) Be ambitious.
Seriously, don’t present a plan that makes very little money. Why do that? Even if the ROI is good, business plans that don’t make a lot of money really don’t work for judges. We know that VCs won’t take you seriously and so neither will judging panels.
You will be forgiven for having an overly ambitious plan plan if you’ve scaled it correctly to manage risk in the first few years and then blow the doors off in later years. We know it doesn’t always work out that way, but we like to see the ambitious plan that uses the money and business opportunity well.
But what we cannot tolerate are plans that don’t really create much value and don’t maximize market opportunity. This isn’t good for the business, it isn’t good for investors, and it doesn’t employ as many people in the community. And venture capitalists won’t fund it.
Classic mistakes are raising too little money, raising only one round of money, not setting ambitious milestones, not addressing all of the potential markets and all potential buyer demand, and not offering contingencies to expand the business, etc. Your plan needs to avoid these mistakes.
Little businesses are fine, but they don’t win business plan competitions very often. If you’re going to take our time, be ambitious, please.
10) Passion matters.
Don’t try to present a business about which you are not personally passionate. Passionate entrepreneurs win and judges know this. Teams that come on lukewarm will get a lukewarm response from the judging panel.
We question whether this is an opportunity you believe in. We question whether you’re the right team for this opportunity. We question why you’re bothering with the competition. We question why we’re bothering to volunteer to be on judging panels. Don’t make us do that. Be passionate.
One final, fortuitious comment: Almost all of these rules apply not just to business plan competitions. They also apply to real life fundraising!
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