Business Plan Competitions vs. Silicon Valley

Vincent Chia of Oaktree Research recently posed to me a question: Do business plan competitions really work? Or does the “informal” VC setup like in Silicon Valley work better?

Good question, I say. I find this issue highly pertinent
especially to young budding entrepreneurs who are looking for ways to
jumpstart their business. Some think that entering business plan
competitions (BPCs) would be a good way to gain exposure and hopefully
in the process, they’ll be able to impress some VCs into funding their
ideas, while others shun BPCs saying that it’s all a farce and that such
competitions only promote academic entrepreneurship and nothing
practical. In my experience with the judging process of a few business
plan competitions, there is always the question of /how /to judge the
plans. We usually leave it up to the judges to strike a balance between
the feasibility of a plan and how good it actually is. As we all might
know, a comprehensive plan that covers all bases may not be workable in
reality as the idea might not have enough oomph in it, or that perhaps,
it is way too early for the market (for example, time travel).

In addressing this issue, I see this in relation to the question of
whether immersing oneself in an entrepreneurial hotbed like Silicon
Valley will do better for a startup. One main benefit I see being in a
setup like the Valley would be opportunities. The big names of the
high-tech are all gathered here; everywhere I go, I drive by some big
guy like Yahoo!, Google, Apple or Adobe. I pass McAfee everyday to work and am situated right next to Intel.

Because of this congregation of big companies, their corresponding big
name venture capitalists (VCs) like Sequoia Capital are also clustered
here, and of course, the young startups with dreams of making it big
flock here to network with VCs and to brush shoulders with the giants.
Even if companies are headquartered elsewhere, you can almost always
find a branch located here in the Valley. Pop into any cafe in the
Valley and you will inevitably meet someone working at somewhere
internationally known. Who knows you might accidentally spill coffee
onto the VP of Marketing at Google while lining up at Starbucks, grab
that opportunity to make contact! Who will we meet in Starbucks in
Singapore? Junior college kids, university muggers, the occasional
businessman or TV star. VCs? Nah.

This close proximity creates many opportunities for contact. Those
chance meetings may just be the catalysts needed to jumpstart your
startup! Business relationships are much easier to forge as the personal
one-to-one contact that is possible (given close proximity) contributes
an extra sense of depth in the relationship. So if you plan to make it
big, I say such an environment would be good, if not beneficial to a
certain extent. Of course, whether or not you actually succeed depends
largely on yourself and your team. (Remember, the team is often the most
important component of a startup, be it how good the business plan
actually is, VCs look at how strong the founding team is to decide
whether to fund you or not.)

Having said that, how useful then, are BPCs like Start-Up@Singapore,
Global Start-Up@Singapore and MIT-50K? Contrary to popular belief, these
competitions are anything but – at least to the competing teams. Many
teams write their business plans and submit them so that they are able
to attend all the presentations and sessions where VCs and entrepreneurs
gather and hopefully mingle with them during the tea breaks. Yup, those
yummy sandwiches and éclairs are just tools around which are
conversations are struck and ginger first steps are taken to win the
investor over. Lots of networking opportunities abound at BPCs, make use
of them.

But moving on to the plan itself, BPCs can be useful if you are serious
about your business plan. During the competition, you have a rare
opportunity to present to investors when usually these busy investors
ignore the 100 plans that they receive everyday and only have time to
arrange meetings for those few potentials. And after presenting,
hopefully a few of them will come up to you and say, “Hey, I like your
idea. Let’s set up a meeting to talk more about it.” Jump for joy then,
not when you’re declared the winner of the competition but no interest
in your idea or plan has been shown by any investor present.
What else is there to be gained from BPCs? In my opinion, many people
join such competitions to “learn”. In this respect, a BPC that also
provides a ground for education would greatly add value to the
experience that competitors receive. For example, at Start-Up@Singapore
which I helped organize and played a large part in (as can be read from
my previous article on the SOE award to NES), a comprehensive plan to
help their participants improve on their business plans and in
entrepreneurial knowledge has been in place for a few years and quite a
number of participants have actually given feedback on the usefulness of
the numerous forums and it’s highlight: the Bootcamp. I myself was
impressed and still am, at the effort put in to give the public easy
access to entrepreneurial information. If you feel that you’re lacking
in marketing knowledge, just pop by the “Marketing” forum and panel
discussion sometime in January or February and listen to the experts.
Start-Up@Singapore makes it a point to invite highly qualified speakers
with vast experience so do grab those opportunities to pick their
brains.

Having said all of that, I don’t really think I’ve answered Vincent’s
question fully yet. To summarize some of my thoughts, yes, such
competitions can actually work, if you know how to use them the right
way but they can also fail if all one does when entering the competition
is to expect that through it, VCs hear about it, people get to know
about it, and before you know, it’s the next big thing. It ain’t that
easy. And yes of course, a more “informal” setting like the Valley would
do much good to anyone hoping to make it big. Because it is the
high-tech capital of the world, many people here talk about business and
entrepreneurship and this is a great place for exchange of ideas. Much
can be gleaned through conversations and simply observing the world by
being right next to news-breakers. Google and Yahoo! are always in the
news these days, it’s kinda nice to have the possibility of simply
driving by one afternoon and popping by their offices to take a look.
Even if you don’t always see the big guys, who knows, they might just be
going out for lunch and pass by you at the front door.

I guess there is no one answer to this key question and in the end, it boils
down really to what one makes of one’s situation. To use an earlier example, I can stay in France for the rest of my life but not bother to learn French. Won’t that be a pity?

Comments