In its first five yearswhich, as it happens, is longer than most small-business startups survivethe Wharton Business Plan Competition has given hundreds of would-be entrepreneurs the chance to test their ideas against the reality of the market.
In the summer of 2000, then Wharton MBA student Steve Woda WG01 paid $1,200 at an online auction for a computerwhich he never received. Woda assumed he was doing business with a reputable counterparty whose presence on the auction site ensured he would receive the goods he had paid for. Instead, he became one of a growing number of victims of online auction fraud. Unlike most, though, Woda did get something out of the deal.
Painful though the experience was, it set him thinking: How could he have protected himself against losing his money in the auction process? Shouldnt the auction house require those selling goods and services on its site to provide evidence of their honesty? And, by reducing their risk, wouldnt such an endorsement encourage buyers to pay more?
I started to think about how we ought to protect consumers in an online auction, says Woda, 34. Even though there are lots of protections that eBay says are out there, they didnt protect me.
The company that emergedof which he is founder and vice presidentwas BondMyAuction, later renamed BuySafe, a service designed to protect online auction buyers by certifying sellers integrity, track record, and creditworthiness. Wodas second year at Wharton was dominated by his work to develop and refine the idea for the schools annual Business Plan Competition; it was one of eight finalists in 2001.
The competition was launched in Fall 1998 to complement Whartons entrepreneurial courses. It aims to encourage students from all of Penns schools and other entrants to take advantage of the array of business expertise at the University and in the wider Philadelphia community, as well as to facilitate their access to start-up capital. The program also draws on mentorship from business advisers and experienced entrepreneurs.
The odds against any new business succeeding are steep. According to the U.S. Commerce Department, of every 10 small businesses launched, only two are still around after five years. Participants in the competition have not done noticeably better. Only a few entrants have actually become full-fledged companies. But the school doesnt gauge the programs success by the number of startups that emerge from the competition, says Peter Winicov, associate director of communications for Wharton Entrepreneurial Programs. The idea is not so much to launch successful businesses but to create a learning environment for the entrants. A lot of them just want to have the experience, and the competition is a great way to test their ideas against the realities of the market.
The process begins in November each year. In the first, non-competitive, phase, each teamwhich must include at least one Penn student, but is otherwise open to allsubmits its business concept (in 1,200 words or less) for review by experienced business people and entrepreneurs. Interested individuals can also participate in seminars on generating good business ideas, recognizing opportunities, and the early stages of putting together a business plan. Next, in a maximum of 2,000 words, each team submits a refined version of its idea, addressing issues such as competitive strengths, barriers to entry, and financial projections. From these, the judges select 25 semi-finalists, as well as providing written responses to all the entries. The group of 25 present full business plans, which typically run 30-50 pages and are likely to represent 80-100 hours workin addition to entrants regular academic work. Eight finalists are then chosen to present their plans before a panel of judges at the annual Venture Fair, competing for cash prizesand to convince venture capitalists on the panel and in the audience that their ideas are worth backing.
Last year there were 62 judges in phase one, another 68 in phase two, and 25 more sitting in judgment over phase three, from companies including venture capitalists, media firms, and biotechnology enterprises. In addition, 30 mentors were available for consultations throughout the competition.
Last years Venture Fair was held in April in Huntsman Hall, where the seven judges grilled teams on everything from their financial projections to marketing plans to assumptions about the demand for their products.
Presentation skills, judges and entrants agree, are a crucial requirement for success in the competition. Youve got to communicate your ideas in a way that makes sense to the venture capitalists, says John Henry Fox Jr. GEE91 WG01, whose software company, Designware, took second prize in 2001. You might have the best idea in the world, but if you cant communicate it, you wont get anywhere.
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By Jon Hurdle
Illustration by Josef Gast