Love/Hate Business Plan Competitions

I love business plan competitions.

I hate business plan competitions.

I Love Business Plan Competitions
I had a breakfast with a friend who has founded a few companies in Thailand and started the New Ventures Program at one of their universities. He was visiting Stanford and mentioned how proud he was that several of his Thai students were here in the States for a business plan competition. 74HGZA3MZ6SV

For those of you who don’t know, business plan competitions are held by universities who get their students to enter and compete to see who has the best business idea. Local venture investors and/or companies offer cash prizes for the winners.  In exchange, these VCs/companies get early looks at new deal flow and offer aspiring entrepreneurs feedback and advice on their business plan.

These competitions started in the early 1980‘s at the University of Texas and have sprouted like mushrooms in the last 10 years.  Just Google the term and you’ll be amazed.  Almost every university, region and car wash now has a business plan competition; the rules, who can participate, how large the prizes and who are the judges vary by school.

Over scrambled eggs and diet coke, I listened to this seasoned startup veteran describe the excitement of his students who came to the U.S. to compete. I finally understood how valuable these contests can be for students in cities or countries without a venture capital or entrepreneurial infrastructure.  At a university business plan competition, for the first time they can swim in the sea of expertise that we/I take for granted in the middle of Silicon Valley.  Win, lose or draw, these students have a life changing experience where they can network and get smarter as they see what good startup thinking looks like.

I love business plan competitions (and with my valley-centric bias, I think Berkeley and Stanford have two of the best.) If you are outside of Silicon Valley, you ought to jump into them with both feet.  You’ll learn a lot.

I Hate Business Plan Competitions
Yet this same conversation reminded me why every time students at Berkeley or Stanford tell me they’ve entered a technology business plan competition, I question whether they are wasting their time.

For all the reasons why business plan competitions are wonderful for students from outside the U.S., or even outside of Silicon Valley, I am left speechless when a student in a 50-mile radius of Sand Hill Road (who tells me they’re serious about starting a company) thinks their time is better spent entering one.

I have seen students spend well over a year refining a business plan competition pitch when they have could have gotten the same advice within a month by literally stepping out the door and aggressively pursuing it.  And with the other 11 months, they could have been well into actually building a company.

In the real world, most business plans don’t survive the first few months of customer contact.

And even if they did – customers don’t ask to see your business plan.

Here’s a simple heuristic: if you are one of the lucky few who are within one- or two-degrees of separation of venture capital and startup resources (law firms, patent attorneys, etc.) and you are chasing a technical business plan competition, you are signaling that you really don’t want to start a company.  (And that may be fine with you. Just don’t confuse the time you’re spending with actual progress in building a company.)

I hate business plan competitions – when they encourage students to write a “winning plan” rather than teaching them how to get out of the building and use locally available resources to start a company.

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17 Responses

  1. The caveat would be for undergrads at a school like Stanford or Berkeley. There are very few opportunities that can’t wait for an undergrad degree. I’m a grad school dropout, so even if I felt the same about grad school (I don’t) I’d feel weird insisting that the same were true of grad degrees.

  2. I’m a PhD Student in CS at UT Austin, and Austin too has all the crucial resources necessary for startups (VCs, angels, law firms, top talent, etc.).

    Rob Adams, the director of MootCorp, is doing an amazing job at providing value to all participants, whether it’s feedback on their business model or making the right introductions. MootCorp in particular has an impressive track record of putting early stage tech companies on the right path towards funding. Take a look at the companies who have raised money (and are still going) after competing: http://www.mootcorp.org/companies.asp

    Preparing the pitch for a year is definitely excessive, but I don’t see the harm done in taking a few weeks of doing brutally honest market validation, surveys, financial forecasts etc. as one attempt to clearly define how exactly the company is creating value in the market.

    • As a Moot Bowl Judge who just returned from that competition (May 7-10, 2009), I think that Business Plans provide a framework for the judges and founders to understand the entire business. It provides a guideline for a methodical growth path for the company. Rob Adams along with the qualified judges do an amazing job at both the areas you mention. Preparing for a year is not the best way to spend time, rather getting customers is the better way to an Investor’s heart.

  3. Great post. Thanks. But: scrambled eggs with diet coke? Oh my god, really??? Perhaps I am just too european for that…

  4. Bravo!

  5. Do you think business plans are absolutely necessary for start-ups or are they a luxury?

    I spent months and months working on our plan for our startup and as you gain traction and learn it evolves so quickly, it seems impossible to have the same plan from the time you started through the first year.

    • Jon,
      I used to hate business plans and avoided them like the plague. I now think that was a mistake. I was simply confused about what a plan was for.

      My two cents is that a business plan is the single place to collect your thinking about about your: business model, distribution channel, demand creation plan, financial assumptions, and customer and product development plan. If you’re text averse like i am, try to diagram these key items and then write-up the diagrams. (Your investors may require something quite different.)
      The plan allows you to share your thinking with your team and your investors. And the process of writing it/drawing it, forces you to think it through.

      But as I said, the goal isn’t the plan, it’s the business. So the plan should be iterative as you get out of the building.

      steve

  6. Steve –

    Thanks for you note back. I listened to you speak at the Startup2Startup 2 weeks ago. It made me re-think some of the fundamentals of what we were doing and make a few more user/customer meetings on one of our next releases. Funny, but with their feedback, we changed several parts of the product.

    On the business plan, we now do just what you had suggested. We did need the full written document for the PPM for our investors, early on. What I am finding challenging is the keeping up with what we are learning, articulating it legibly and keeping the business plan up-to-date. So, as you have said we spend more time diagramming and power-pointing out the b-plan now.

    I asked that question because I several months ago I had just spent a week re-writing our plan and some VC blog talked about it being a “luxury.” It made sense, but there does have to be a central road map the allows for evolution.

    I need to keep focused on driving the ball down the field. It’s a challenge to keep the play-book up-to-date as we are doing it.

    With all that said – startup is the best job in the world!!

    Thanks again.

    Jon

  7. [...] Love/Hate Business Plan Competitions Steve Blank [...]

  8. Steve,

    I think the problem here isn’t with Business Plan Competitions, but with the way they are organized.

    I agree that as a startup, you need the bplan for collecting your thought, pinpointing weak spots and augmenting it while you’re developing the concept, for helping to pitch your company, get your idea across etc…

    But submitting it to a bplan competition that can get you anywhere from 5k or 10k for next to no work other than a few hour application and a day or two spent networking it and presenting it in front of angel cap during the event, is in my eyes well worth it.

    And even if you don’t win, participation in the event itself can open up your network and lead to possible future possibilities.

    Just my 2¢

    • Jacek,
      We’re going to have to “agree to disagree” on this one.

      Your customers don’t read your plan, and companies that worry about “winning” a plan competition is a clear sign they don’t have a clue what’s important in building a winning company.
      1. You won’t win with a few hours or a day or two. And even if you did it’s the wrong focus, and time spent for a startup
      2. If winning $5-10K is your goal, you’re not a scalable startup, just a small business. And the rest of the advice on this blog is irrelevant.
      3. If you are outside of Silicon Valley or a tech center, networking might be the only valid excuse to spend the time on a competition.

      steve

    • Jacek said: “I think the problem here isn’t with Business Plan Competitions, but with the way they are organized. ”

      You are most probably right.

      Jacek said: “…bplan competition that can get you anywhere from 5k or 10k for next to no work other than a few hour application and a day or two spent networking…”

      A few hours to $5~10k?, hmmm.

      Have a look at the other extreme: Participants in Ideas Inc are required to incorporate their business plan into a company (during the competition) and from what we have seen, all 6 finalists (and a few semi-finalists) have spent no less than 90 man days on their startup, check out

      http://www3.ntu.edu.sg/ideasinc/schedule.html

      Do you know of other bplan competitions that are as intensive as the NTU BPC?

  9. when u are making a plan; all you are doing is basically saying that you know what elements are taught in the MBA Program

    you dont know the customer unless you meet the same and you dont really know the customer unless the customer trusts you.

    making a plan and winning is like writing a great profile for dating. the pitch is the profile header : yeah if there is a competition for attention, the catchy phrase works – but you know what happens with dating profiles – dont you? — yeah you dont get a date by publishing your profile..

    bplan document is just that.. gives a sense of preparedness.. and these venues for competition provide the exposure –

    that is all

    cheers
    olga lednichenko

  10. [...] is the business, not the plan. As Steve Blank, one of the pioneers of the Lean Startup movement, says: “customers don’t ask to see your business plan.” Ideas are worthless in the absence [...]

  11. Really nice post, is just a matter of business theory and practical competition

  12. Thank you for your post. It really helps me find my direction. I used to be business competition lover, but not anymore.

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