The envelope please.
Second-year Harvard Business School students Michael Schrader and Anura Patil walked off the Burden Auditorium stage yesterday (April 24) as the latest big winners of the school’s annual business venture competition.
Together with five other teammates, including students from Harvard’s Kennedy School, Law School and Faculty of Arts & Sciences, the MBAs won for Vaxess Technologies. The company is working to commercialize a Tufts University technology that stabilizes vaccines into a thin film strip which can be shipped and stored without refrigeration, increasing access to life-saving products for people all around the world.
The team won the top $25,000 cash prize along with another $25,000 in in-kind services, including work space in the new Harvard Innovation Lab.
Harvard’s competition is among the biggest and most influential of all the business plan contests run by business schools. But it is hardly the only player in this game.
Top 20 b-schools and their universities now award $1.6 million in prizes each year
The top 20 U.S. business schools and their universities now dangle more than $1.6 million in prize money annually to students who enter their business plan competitions (see table below of competitions at top 20 schools). That sum is still only a fraction of the total available to students. Last month, for example, Rice University’s Business Plan Competition handed out more than $1.55 million in cash and prizes, including the top prize of $450,000 to three Northwestern University students and a faculty member for a company called NuMat Technologies which invented a nanomaterial that can store gases just like a sponge soaks up water. The founding team, which includes two JD-MBA students from the Kellogg School of Management and Northwestern’s Law School, won a total of more than $874,000 in prizes from Rice.
Notes: First prize can sometimes include not only cash but the value of in-kind services, such as legal and financial consulting.
The Rice competition, the world’s richest and largest business plan contest, attracted 42 teams across the globe to pitch their new tech business plans. Most contests are local affairs, such as the Harvard Business School events, which require a current MBA or alum, to compete. Harvard has three separate contests: two for current MBA students, one in new ventures and one in social enterprise, and a third for alumni. Harvard’s top prize is worth $50,000, half of it in cash and the other half in $25,000 in cash and $25,000 in in-kind services. Only three years ago, the top prize was $20,000, with half of that in cash.
Mostly, though, these contests provide learning and guidance. The prize money thrown at winners tends to be the icing on the cake rather than actual seed funding. “It would be great to give someone the equivalent of a seed round of prize money but it’s unrealistic for us,” says Michael Roberts, executive director of Harvard Business School’s Arthur Rock Center for Entrepreneurship. “We want it to be about the experience and the learning rather than the lottery ticket. People have the opportunity to present to really phenomenal people and they get great feedback.”
‘Not a business plan contest, but a business idea contest’
While Harvard labels its competition a “business plan contest,” it’s less about business plans and more about real businesses. “It’s not a business plan contest,” adds Roberts. “It’s a business idea contest. In many cases, particularly in the consumer web space where it is so inexpensive to get into business, you see the students embrace many of the lean startup ideas they’re taught. They just don’t sit and write a plan. They think it through, talk to customers, develop a product, and then iterate.”
The prizes dangled in front of competing students is hardly easy money. Most contests consume many grueling months of competition on top of fairly demanding academic schedules. NYU’s Entrepreneurs Challenge is an eight-month ordeal in which would-be entrepreneurs test their ventures ideas, prepare financial statements and plans, pitch investors, and get coaching and feedback from entrepreneurs, investors and faculty.
The results of these contests can be impressive. In the past 12 years, NYU’s Stern School has awarded some $675,000 in cash and pro bono services to 31 startups. MIT claims that its competitions over the years have facilitated the birth of more than 160 companies with aggregate exit values of $2.5 billion and a combined market cap of over $15 billion. These companies have generated over 4,600 jobs and received $1.3 billion dollars in venture capital funding. The Harvard Business School contests have spawned hundreds of business plans and many successful enterprises including Finale, a Boston-area restaurant chain serving desserts and beverages, and Rent the Runway, which provides access to designer clothing at deep discounts.
If anything, the contests often encourage MBAs who might otherwise have gone into such traditional fields as consulting and financial services to do their own thing. Last year, some 65 MBA students at Harvard launched businesses by graduation. This year, thinks Roberts, it could be as many as 75 and the following year it could very well be higher because of the new mandatory requirement in the MBA curriculum for teams of six first-year students to create startups. “It’s a pretty big number of businesses and it’s exciting for us to see them create their own businesses this early in their careers. And for those that don’t work, students will get great experience. In this country, failure is not fatal and in Silicon Valley it may be a badge of honor.”
The contests started at the University of Texas in 1984 with Moot Corp
The competitions have their origins at the University of Texas where a pair of MBA students, Steven A. Mailman and Barbara Oppenheimer, in the early 1980s imagined a contest that would be as challenging as “moot court” in law school. In 1984, the inaugural “Moot Corp Competition” was launched at UT’s business school. Teams began to conceive an idea for a new business, develop the idea in a written business plan, and present it to a panel of entrepreneurs, venture capitalists, accountants and lawyers.
Moot Corp., renamed in 2010 the Venture Labs Investment Competition, was the first competition of its kind for MBA students. The contest went national in 1989 and then international in 1990 when just three business schools in England, France and Australia were invited to participate.
Next month, some 40 teams of MBAs from around the globe will gather at The University of Texas at Austin each May to present their business plans to panels of investors and compete for $135,000 in seed funding. This year’s “Global Champion” will receive $25,000 in cash along $25,000 worth of consulting services and mentoring, office space, and access to discounted legal, accounting, and businesses services from top tier providers. The winner even gets a full-page ad in Inc. magazine, another $25,000 worth of consulting from the school’s entrepreneurship faculty and an invite to close the NASDAQ stock market in July.
Surprisingly, Stanford’s Graduate School of Business does not sponsor a business plan competition. Instead, its contest is run by the Business Association of Stanford Entrepreneurial Students. With support from Silicon Valley’s lawyers and venture capitalists,, including Sequoia Capital and Accel Partners, the group has been able to raise a $150,000 kitty for its annual competition.
This year 168 teams faced off in Harvard’s three new venture contests
This year’s new venture competition at Harvard Business School drew 80 teams this year, up from 63 in 2011. Another 49 teams competed in Harvard’s social enterprise track. The largest single competition–at least by number of competing teams–was the school’s alumni contest this year. Some 139 plans came in from HBS’ 14 alumni clubs in 11 regions around the world. The program booklet Harvard issued on the competing teams was more than 60 pages long.
“The consumer internet stuff is the single most popular bucket,” says Harvard’s Roberts. “Probably 60% of the plans were from that ilk this year. There is a good mix of conventional retail and some higher tech, including eight medical or health care plans and four of five enterprise software plans.”
The 80 teams that entered Harvard Business School’s new venture contest had to submit their applications by mid-December and turn in their business plans by March 29. Just two days later, on March 31, each team had a half hour to make their pitches before more than 100 judges. The 80 teams were immediately winnowed down to 12 semi-finalists until four survivors walked into Harvard’s Burden Auditorium yesterday afternoon for the finals.
Besides Vaxess, which won in Harvard’s business venture track, this year’s three runners-up were:
- RallyPoint, founded by first-year student Aaron Kletzing and Yinon Weiss (MBA 2011), revolutionizes the way military professionals connect, develop, and pursue fulfilling opportunities throughout their military careers.
- SaferTaxi, founded by second-year student Jonathan Lo, provides a smartphone application that allows consumers in Latin America to book taxis with added convenience and transparency, aiming to bring greater efficiency and safety to the existing taxi booking process.
- Zumper, founded by second-year student Anthemos Georgiades, allows tenants to search for and close annual apartment leases in a much more transparent manner. Georgiades already has raised $450,000 from three venture capital firms.
The winning team on the social venture side this year was eTransitions, a company founded by MD/MBA joint degree candidate Lissy Hu, Harvard Medical School student Jessica Hohman, incoming MBA student Kira Yugay, and Jonathan Helm. eTransitions is a web-based solution that streamlines the transition of patients from the hospital to post-acute care facilities.