"Where do I find money to launch?" is probably the
single most frequently asked question of start-up entrepreneurs.
Typically the answer is friends, family and fools-but college
students and newly minted grads sometimes have trouble convincing
those sources to ante up. Fortunately, there are some solid
alternatives to consider, including venture forums and business
plan competitions. Both have been around for years, but not all of
them are created equal.
In fact, a number of universities have gotten quite innovative
with their competitions. For example, at Wake Forest University in
Winston-Salem, North Carolina, the Babcock Graduate School of
Management has created the Babcock/Eno River Capital Elevator
Competition. In this year's competition, held in March, 27
teams of MBA students representing 16 schools nationwide got two
elevator rides of two minutes apiece to convince a venture
capitalist that their business ideas were worth investing in.
The goal, says professor Stan Mandel, director of the Angell
Center for Entrepreneurship, is to add a touch of realism to the
process: "We wanted to simulate the way the world operates and
show students that sometimes in the [span] of an elevator ride,
you've got to convince a venture capitalist your company is
worth investing in."
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At San Diego State University (SDSU), the instrument of choice
is the telephone. The Golden Phone Award was added to the
school's annual business plan competition this year, the goal
being to interest investors over the phone. Students talked until
the VC hung up or expressed an interest.
Sanford Ehrlich, executive director of SDSU's Entrepreneurial Management Center,
says the competition taught entrepreneurs how to pitch to
prospective investors concisely, in a matter of minutes. Says
Ehrlich, "Every entrepreneur has to be able to connect with a
capital provider and give a pitch that contains a compelling vision
of what they are trying to do and their path to
profitability."
Shelly Peters, 34, president of 2-year-old Atlanta-based
Legacy Data Access
Inc., a hospital data storage and retrieval company,
participated in both the SDSU and Wake Forest events this year.
"We did San Diego State, and we did terribly," says
Peters, who graduated this year from Kennesaw State University in
Kennesaw, Georgia. "From my perspective, it was more academic
than Wake Forest. All the other teams we were competing against had
four or five team members from their schools-from finance,
marketing, etc. Kennesaw State University is a very small school,
and the only academic participant [on our team] was me." At
the time, she was just completing her MBA.
By contrast, Peters' performance in the Wake Forest Elevator
competition was so compelling that both venture capitalists she
pitched are helping her refine her business plan with an eye toward
potential funding. Her team also tied with a squad from the
University of Georgia, Athens, for top honors. Says Peters, "I
think what really convinced them was me saying we would keep going
with the company whether we got funding or not."
Like business plan competitions, venture forums are not all the
same. Most consist primarily of angel investors and can also be
used as a dress rehearsal to sharpen presentation skills. But
don't make the mistake of not preparing, cautions Gordon
Chanen, a director of the National
Association of Venture Forums.
At the same time, Paul Sweeney, board member of the Wisconsin Venture
Network, points out that these angels don't see nearly the
deal flow venture capitalists see, and consequently they might be
more willing to invest in an unproven idea backed by a solid
business plan.
In addition, be aware that while most forums are
general-interest, some target specific industries, and their levels
of sophistication vary. "To be successful at a venture forum,
you should have some proprietary advantage, and the business should
be somewhat [close to] having a product," suggests Chanen.
Beyond serving as a place to find potential investors, both
Chanen and Sweeney say venture forums are a good source of
education and networking with people involved in the private equity
industry-the lawyers, accountants and others who can help you raise
capital.