Take Sergei Rodionov WG’03, a 30-year-old Russian who, besides his Wharton MBA, boasts a bachelor’s degree in economics and a master’s in applied mathematics. His Internet-based medical technology company Axibase was also one of 2002’s finalists. Axibase offers technology that allows manufacturers of diagnostic imaging scanners to service their equipment over the Internet.

Being in the competition was not central to Rodionov’s plans—like the other competitors, he declares his determination to launch his company in any case—but it provided valuable guidance on putting together a viable business plan. “Our financing section was pretty weak—there was a lot of red ink in the strategy,” he says. The competition “helped us to get a realistic balance sheet and to understand that the judges were realistic” in their views of what would succeed.

Judges and mentors also helped with presentation skills, and Wharton alumni opened doors at a corporate level that would have otherwise been inaccessible, Rodionov says. “Alumni connections really helped a lot. We’d be asking, ‘Can you guys get us into this company at the right level?’”

Preparation for the Business Plan Competition became the main event in Rodionov’s time at Wharton, at some expense to his academic work. “A couple of classes were hurt by being in the competition,” Rodionov says. “I would pay less attention to my homework. I didn’t really care about grades that much; all I really cared about was meeting my professional expectations.”

In the spring of this year, the company had yet to find paying clients but had raised $1.1 million (“Enough to keep running for a couple of years”) and had two employees in addition to Rodionov. He expects to be generating revenue by the fourth quarter of this year.

For some entrepreneurs, however, success in the competition hasn’t been enough to overcome the dour financial climate. NovaEx.com, an Internet-based platform for buyers and sellers of nutritional products, was runner-up in 2000 but stumbled when a backer withdrew a promise of funding after the Nasdaq plunged that April.

“The president of the company told me, ‘The money is in the bank, and we’ll pay you $2 million tomorrow,’” recalls Adam Zong, CEO of the now-defunct startup. “The next day the Nasdaq crashed, and I knew something was wrong when the guy refused to get on the phone with me. I knew the deal was off.”

Undeterred, Zong raised some $250,000 from friends, family, and his own savings, and worked hard to publicize his idea. He attended seven trade shows in 2000, visited a venture-capitalist conference, and was interviewed on Radio Wall Street. But by 2001, he was running out of money and was forced to wind up the venture.

Zong, now senior manager of new business development at Pfizer Inc., is candid about his mistakes. They include hiring two experienced industry insiders in a bid to gain credibility with potential funders, but at a salary that the fledgling company couldn’t afford without a revenue stream. Zong was unable to persuade them to take equity in the company instead of a portion of their salaries. With hindsight, Zong also now believes he should have started charging clients to use a limited version of his product, so that he would have some revenue, rather than waiting until it was fully developed before drawing revenue from it. “Maybe I was too ambitious to include all the services on the online platform,” he says. “Maybe I should have started small.”

But the slumping stock market and accompanying withdrawal of venture capital also contributed to his failure. “The euphoric attitude is gone and it’s going to be an uphill battle,” he says. “A lot of companies lost a lot of shareholder value, and had that not happened, it would have been easier to raise money.”

Some entrepreneurs do find creative ways to keep their fledgling businesses alive despite the lack of funding. Steve Woda of BuySafe, for example, is developing his business plan within The Rutherfoord Companies, an insurance broker, which has provided insurance brokerage support, corporate infrastructure, and industry expertise in return for an unspecified but “significant” share of the business. It would have been “downright impossible” to have set up BuySafe any other way in light of the shortage of capital, says Woda.

Woda’s Internet-based product represents a waning trend in the competition. The early years saw a focus on Web-based entries, reflecting the dotcom mania, while last year’s final eight included only one Internet-related product and no e-commerce entries.

Another change is that the number of teams has fallen while the total number of entrants has risen sharply. Last year’s phase two, the first competitive stage, drew 81 teams, down from 114 in 2002. But there were 403 total participants, compared to 288 in 2002. Only about half of 2003’s competitors were Wharton students, while 12 percent came from Penn’s other schools, representing disciplines from engineering to education to music. The rest of the participants came from outside the University, signaling the desire to expose the competition to the world outside Wharton.

“The teams should feel that they can get external resources because that’s what they would do in the real world,” says Nicole Righini, associate director for Wharton Entrepreneurial Programs and the principal administrator for the event. The emphasis on creating viable enterprises, rather than on conducting an academic exercise, is heightened by the fact that the average age of a Wharton MBA student is 29, and most have come to the school with at least five years’ work experience.

The diversity of the people involved helps distinguish the Wharton competition from other such events, says Mitchell Blutt. “Wharton thrives on multidisciplinary activity and the competition attracts business plans and ideas that reflect that, such as bio-technology with an engineering element,” he says. “I suspect you’d see less of that at Harvard,” whose business school runs its own competition.

The Wharton Business Plan Competition, like Wharton’s Entrepreneurial Programs overall, attracts students who are energized by a belief in their project and in their own destiny as entrepreneurs, Righini says. “They are a different kind of student; they tend to think of new ways of doing things, and if they don’t make it this time, they’ll be back to try again next year.” The current scarcity of financing, she adds, “will just make them work harder than ever to make sure their project is viable.”

Jon Hurdle is a freelance writer who has written for many business publications.

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2003 The Pennsylvania Gazette
Last modified 09/02/03

FEATURE: Nurturing Enterprise
By Jon Hurdle
Illustration by Josef Gast