Here Comes the Competition
Fortune Small Business
October 30 2003
If you think it's not a great time to start a business, you're right. Three years after the tech market crash left the Pets.com sock puppet in the Goodwill bin, investors aren't exactly clamoring for the next big idea. "The amount of noninvested venture capital is staggering," says Randy Swangard, director of the University of Oregon's Lundquist Center for Entrepreneurship.
But with the job market stagnant and the image of corporate America suffering from a spate of scandals, some of the nation's top MBA students are fearlessly choosing entrepreneurship as their most attractive career option. While there are no hard numbers available, the sense is that the startup spirit is thriving on U.S. campuses, with students launching businesses either while still in school or immediately after graduation. "Certainly the tight job market makes entrepreneurship more of a viable alternative, and that is very significant," says Clifford Schorer, entrepreneur in residence at Columbia Business School.
But instead of trying to start the next Amazon.com, many students are following a path that Michael Dell paved when he launched Dell Computer at the University of Texas. They're creating tightly focused ventures that they can finance on their own. And we're not just talking tech startups. Students are venturing into a wide array of fields, from running an urban recording studio to marketing organic horse manure to gardeners.
So who are the most promising young entrepreneurs to emerge in an uncertain economic climate? To find out, we launched our first annual business-plan competition, the MBA Showdown. We invited winners of the business-plan contests at top MBA programs across the U.S. to face off in a contest devoted to finding the best of the best. It soon became clear that we had some tough decisions to make. Fifty-six entries arrived from 49 schools ranging from the Haas School of Business at the University of California at Berkeley to the Wharton School of the University of Pennsylvania. Both graduate and undergraduate students could enter, as long as they had first won a competition run under the auspices of their school's MBA program.
Brigham Young University's Property Solutions emerged as the first-place winner, with new software for property managers. KidSmart, a startup from the University of Georgia that designed a smoke detector for children, came in second. The third-place team, Harvard Business School's Jadoo Power Systems, develops fuel-cell batteries.
We had a difficult time choosing these three from among scores of outstanding business plans. They ran the gamut. One venture at Northwestern University's Kellogg School of Business plans to rent Segway scooters to vacationers on Caribbean islands. At the University of California at Davis, the biotech startup SialoGen is building a business around a patented technology that it hopes will stop the spread of cancer. As for the traditional technology startups that entered, they were far more focused on solving specific problems than predecessors of the past few years have been. One at Purdue, for instance, proposed a more efficient way to keep laptop computers from getting too hot. "Tech's grown up, shaved, and gotten a job," says Sam Hill, president of Helios Consulting and one of our judges.
To evaluate the entries, we relied on the expertise of our judges (see "The Judges," at the end of this story). They set up a scoring system based on the approach that many investors use to evaluate business plans (see "How We Chose the Winners"). The most difficult tasks, they said, were passing up amazing ideas not backed up by strong business plans, and evaluating extremely diverse enterprises. "It's challenging when you have to compare opening a desert cafe with a technology company that could have a multibillion-dollar impact but hasn't yet been to market," says judge Kay Koplovitz, the founder of USA Networks.
The eight teams that scored the highest had the chance to compete in our oral competition. Students had ten minutes to pitch their businesses by phone, the way they might to a venture capitalist. The first-prize winner won $50,000; the second, $10,000; and the third, $5,000. The prize money came from the Edison Preservation Foundation, a nonprofit dedicated to preserving Thomas Alva Edison's legacy of innovation, and from Entrex, an Internet company based in Washington, D.C., that connects private firms with potential investors and that was founded by our judge Stephen Watkins.
It won't be clear for years whether the winners we've profiled or their many talented competitors will leave a permanent mark on the entrepreneurial world. But you may wake up someday and find one of them breathing down your neck.