What is a business plan competition?
As part of a New Venture Challenge team, I’ve had considerable experience with business plan competitions. Most business schools have business plan competitions, and these contests are an integral element of business school culture overall.In a standard competition, 20 to 30 companies take turns pitching business ideas to potential investors. There are two rounds. After receiving feedback based on the first round, competitors are expected to craft significantly more refined pitches for the second round.
These competitions are intended to simulate a venture capital pitch. The assumption is that if you succeed in the contest, you have the basic skills needed to actually give a business pitch to a real VC group. Whether this actually does prepare you for a real VC pitch is debatable, and probably varies depending on the program.
Good: business plan contests give you great experience.
I found these contests useful primarily as a tool for gaining experience. Actually winning or losing a contest doesn’t matter nearly as much as putting yourself out there, practicing your sales skills, and working with a team. You’ll meet other people interested in entrepreneurship and get a sense of the ideas currently out there.Bad: business plan contest feedback isn’t very useful.
When it comes to feedback from judges, I wouldn’t expect much. The quality of the feedback varies depending on the judges, and if your pitch and your interests are focused within a specialized field, there will most likely not be a judge who can provide the detailed response you are looking for. For example, competitors with pitches relating to heath care are often disappointed by their feedback, since judges rarely have the necessary expertise. In many cases, you could get the same sort of general feedback from your fellow students.Bad: business plan judges carry regional investment biases.
The judges' backgrounds tend to have a major impact in determining the winner of a pitch contest. Different judges look for different things, and will evaluate your pitch based on a variety of possible investment philosophies. For example, Twitter would probably lose in a Chicago-based business plan competition, since investors in that region tend to avoid business models that rely on building a user base before pursuing monetization. They want something that can generate revenue early on.Bad: students become too obsessed with business plan contests.
Another potential pitfall for business plan competitions is their outsized effect on student culture. People tend to place excessive weight on the results of these competitions, which they view as a form of validation. Winning, however, doesn’t necessarily mean you’ll succeed, and losing doesn’t mean your idea and presentation weren't great.Basically, business plan competitions are helpful if you approach them with the right mindset. The contest itself isn't nearly as important as practicing your skills and meeting other entrepreneurs.
