01 Apr 2001
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New Ventures New Gains

HBS Business Plan Contest Thriving
Re: Alison Wagonfeld (MBA 1996); Bill Nussey (MBA 1996); Jennifer Fonstad (MBA 1997); David Rosenblatt (MBA 1997); John Iannuccillo (MBA 1997); David Perry (MBA 1997); Bryn Zeckhauser (MBA 2001); Bob Rosin (MBA 2000); Sarah Boatman (MBA 2000); Bob Dreyer (MBA 2000); Tony Tjan (MBA 1998); Matthew Burkley (MBA 1998); Alexander Scherer (MBA 1998); Kristin McClure (MBA 1999); Kathy Krueger (MBA 1999); Karl Wiley (MBA 1999); Paul Conforti (MBA 1997); Kim Moore (MBA 1997); Kristen Krzyzewski (MBA 1997); Stig Leschly (MBA 1997); Myra Hart; Josh Lerner; William Sahlman; Joseph Lassiter; John Deighton
by Julia Hanna and Susan Young

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Entrepreneurship is nothing new at HBS. The first course in entrepreneurship was taught over fifty years ago, and the list of alumni who have founded profoundly influential companies — from Continental Cablevision to Staples to Bloomberg — is lengthy and impressive.

But while past alumni often waited seven to ten years before setting up their own shops, today’s graduates are taking the plunge much sooner. In 1997, the first-ever HBS Business Plan Contest yielded a formidable number of participants and mobilized a strong contingent of entrepreneurs who turned an academic exercise into business realities. “In recent years, the student appetite for entrepreneurial ventures has increased significantly,” says HBS professor of management practice Myra M. Hart, who has studied the career trends of HBS graduates. “The contest gives them an excellent opportunity to test their ideas in the public arena.”

In the process of teaming up with fellow students to write business plans, working with their faculty advisors (and getting academic credit for their efforts), attending seminars designed to help them with the nuts and bolts of starting their own business, and pitching their final plan to a panel of real-world venture capitalists and entrepreneurs, HBS Business Plan Contest participants gain a unique, out-of-classroom learning experience. Since the contest was first launched, it has played a crucial role in shaping the career paths of many HBS students.

Class Project to Religious Quest

Like the businesses that have sprung up from the contest, origins of the HBS Business Plan Contest can be traced to a classroom exercise. In 1996, Alison J. Berkley Wagonfeld and William C. Nussey (both MBA 1996) proposed the contest as a project for Professor Josh Lerner’s Venture Capital and Private Equity elective. “We looked at it as not just a theoretical paper for class but a sustainable plan,” says Wagonfeld, who was then president of the Small Business & Entrepreneurship Club and is now a SVP of Greenlight.com, which recently merged with CarsDirect.com. “It moved quickly from class project to religious quest,” adds Nussey, the former CEO of e-business consulting firm iXL and current president and CEO of Silverpop Systems.

Wagonfeld and Nussey pitched their idea to HBS faculty members, including early supporter William A. Sahlman, and passed it along to entrepreneurship club members Jennifer Scott Fonstad, David M. Rosenblatt, and John N. Iannuccillo (all MBA 1997). “We were really focused on spawning entrepreneurship on campus,” says Fonstad, now a managing director at Draper Fisher Jurvetson. While she recalls the administration initially voicing concerns that the contest might distract students from their studies, the trio persisted, offering solutions to concerns and securing sponsorship from credible outside sources before eventually winning the School’s approval. “HBS has always been good at running experiments — reinforcing the ones that make progress and killing the ones that don’t,” says HBS professor of management practice Joseph B. Lassiter, who, together with Sahlman, worked with student organizers to make the contest a reality. All parties agreed that the competition must be connected to the curriculum, that judging would be conducted professionally, and that there would be a consistent faculty presence to maintain an institutional memory and continuity for the event.

The organizers knew they were on to something when 37 teams submitted plans to the first contest. The climate was ripe in 1997. Enrollment in courses like Entrepreneurial Finance and Entrepreneurial Management was way up; the Internet revolution — with its low barriers to entry — was in high gear; venture capitalists were looking for big ideas; and the phrase “dot-com” was gradually entering the vernacular. “I wrote four business plans while in school,” says David P. Perry (MBA 1997), who was a finalist that first year and went on to implement his plan upon graduation. Perry’s start-up, Chemdex, rode the dot-com roller coaster and quickly went public with shares reaching a high of $243 amidst much media fanfare. But like many early dot-com success stories, Perry, who has been called a founding father of the business-to-business online marketplace, has experienced the effects of gravity lately. Chemdex is now defunct, but Perry is successfully running its parent company, Ventro, which provides services for online exchanges.

While the gold rush days of the late 1990s may be over, there is still a tremendous amount of enthusiasm for entrepreneurship among HBS students, faculty, and alumni. “The change in the economic climate may have reduced the buzz on campus about the Internet, but the students who are really passionate about their ideas and about creating something themselves are still committed to the contest,” says Bryn Zeckhauser (HBS ’01), one of seven student organizers of this year’s contest. “There is no putting the genie back in the bottle,” adds HBS executive director of Entrepreneurial Studies Michael J. Roberts, who, as the contest’s faculty organizer, works closely with the student representatives. “The overall interest in entrepreneurship is solid. People have seen how much fun it is and how rewarding and satisfying it can be.”

Feet to the Fire

The road to those rewards can be a bumpy one, but the Business Plan Contest gives participants a chance to test and hone their ideas. The founders of Bang Networks, the plan that took last year’s first prize, saw the contest as an opportunity to practice their pitch for the network technology company that they planned to start. “Having to submit the plan formally and knowing it would be scrutinized forced us to spend a lot more time making sure all the details — especially the financials — were perfect,” says Bang Networks president Robert B. Rosin, who spent spring break finalizing the plan with MIT collaborator Tim Tuttle and fellow Class of 2000 teammates Sarah Boatman (now director of strategic marketing) and Robert Dreyer (vice president of engineering). “We probably wouldn’t have pulled any all-nighters if we weren’t entering the contest. It forced a certain discipline at an early stage. Certainly we’re glad now that we spent all that time focusing on the plan itself and on the basic economics of the business.” After graduation, the group headed to San Francisco to raise money and launch Bang Networks, which went live this winter and now employs 45 people.

Chemdex founder David Perry echoes Rosin’s sentiments: “If you are serious about being an entrepreneur, the contest is a great experience because it will hold your feet to the fire on deliverables.” That said, Perry readily admits that “the plan we originally entered and the plan we ultimately came up with looked almost nothing alike,” and that, most participants agree, is an important feature of the contest. Perry’s research led him to “disqualify” his initial idea and sent him down a different path.

While Anthony K. Tjan (MBA 1998) says the idea for Internet consulting company ZEFER was first discussed in a pub in Toronto before he came to Soldiers Field, it was fine-tuned during his second year at HBS. “The contest and our field study afforded us the opportunity to test ideas in a relatively risk-free environment,” remarks Tjan, a founder, director, and EVP who developed the plan for ZEFER with Matthew P. Burkley and Alexandre Scherer (both MBA 1998). “I think you can do a lot as a student. There’s less formal pressure because you haven’t taken in investment or signed on people. You are much more able to experiment. We realized that this was the best time for us to really test a concept.” With their faculty advisors acting as “healthy skeptics,” the team laid the groundwork for ZEFER, which has received more than $100 million in venture funding, earned over $100 million in 2000 revenues, and boasts over seven hundred employees in six cities.

Some contest participants have found that the experience has boosted their confidence. During her second year at HBS, Kristin S. Rhyne (MBA 1999) set about researching an idea she thought was a good one — putting spa services in airports. She solicited the support of teammates Kathleen G. Krueger and Roland K. Wiley (both MBA 1999) and conducted customer research. “We learned that we needed to provide more than just services,” explains Rhyne, who added prestige cosmetics sales to the mix and wrote a solid business plan that was the only non–Internet-related finalist in 1999. Rhyne founded Polished upon graduation and opened the first location at Boston’s Logan Airport last December. “The fundamentals of the company have not really changed,” she says, adding that the contest gave her the courage to take the entrepreneurial leap. “Having a bunch of smart people say that I had something that looked viable made me realize that this was something I was meant to do.”

People, People, People

After brainstorming restaurant concepts over pizza in Harvard Square, Paul D. Conforti (MBA 1997) and some friends got the idea to open a dessert establishment. When he and classmates Kimberly A. Moore and Kristen E. Krzyzewski began to pursue their idea for Finale, an upscale dessert restaurant and bakery they launched a year after graduation, they found their affiliation with HBS helped them tremendously. “There was not a door that did not open for us when we said, ‘We’re students from HBS; would you be willing to talk to us?’” observes Conforti, who is now Finale’s president. Their HBS credentials, recalls Conforti, were “also very helpful in convincing investors that we were going to manage the inherent risk of running a restaurant better than others might.”

The entrepreneur’s version of the real estate mantra (“location, location, location”) might be “people, people, people.” Everyone interviewed for this article mentioned the importance of people — both whom you know and whom you pick to work with — in getting and keeping a business going. As ZEFER’s Tjan puts it: “People are crucial. It’s what you hear at HBS that you don’t fully understand when you’re there — that all the OB and leadership classes and the ‘softer’ side of HBS are among the most important lessons to remember.”

Part of that “softer” side is the ability to make contacts, and contest entrants now have a strong group of previous participants with whom they can network. “There is a critical mass of alumni who serve as judges, speakers, mentors, funders, and partners,” says Stig Leschly (MBA ’97/JD ’98), a former contest participant and two-time judge. Leschly maintains a sense of humor about the fact that contest judges panned his business plan for Exchange.com, an online marketplace for rare and hard-to-find items he founded upon graduating and sold to Amazon.com for a reported $200 million in stock seven months later. Leschly counts himself among the new network of alumni who can help budding entrepreneurs. Kristin Rhyne, whose plan for Polished captured the interest of angel investors, not the big-ticket venture capitalists that some of her classmates enticed, reports, “Most of my contacts in some way, shape, or form were initiated at HBS, especially in terms of fundraising and advisors.”

“There has always been a powerful set of voices on campus for more traditional careers, but entrepreneurship didn’t have such a strong, organized voice previously,” says Mike Roberts. “Now that the contest has gained some traction and several past participants have been successful and come back to the School to discuss their experiences, there is even more credence given to the entrepreneurial path.”

Spotlight on Learning

The spotlight in any traditional contest usually shines brightest during its most dramatic scenes — the panel of judges, nail-biting moments of anticipation, and the awards ceremony. For participants in the Business Plan Contest, however, these highlights represent a fraction of the months of preparatory groundwork that go into formulating the plan itself. The official timeline for the contest begins in the fall, with organizational meetings and HELP (HBS Entrepreneurial Learning Program) seminars — student-sponsored talks given by venture capitalists and other business professionals on topics such as market research and financing. Besides providing practical information and support, these get-togethers serve as a catalyst for students to form teams and articulate early versions of their concept. In the course of conducting research, each team can apply for and receive a grant of $1,000 to defray expenses — the telephone bills, plane tickets, and office supplies incurred by any budding start-up.

Faculty advisors provide an early sounding board for business plans, and the contest requires that the work underpinning the plan be conducted in conjunction with an MBA course taken for academic credit. A student, for example, might enroll in a field study course for which the final project is a business plan.

Mike Roberts notes that the contest allows students to get out of the classroom and experience a different educational model. “Cases can’t always completely capture the way the real world unfolds,” says Roberts, explaining that participants must source primary data and conduct in-depth analysis in their business area. “When students work on a project that they have a personal stake in, it ratchets up the energy and enthusiasm they bring to it,” he adds.

Sometimes, of course, that enthusiasm needs to be tempered by a more clear-eyed perspective. “For faculty, the balancing act is between being a cheerleader and a realist,” comments Finale’s Conforti. “The professors we worked with asked tough questions that made us think about the critical issues and figure out if we had a viable business.”

“John Deighton was — in a very positive way — a healthy skeptic,” says ZEFER’s Tjan of his faculty advisor. “He helped us push and refine our ideas so that we were iterating versions of our plan faster than we would have otherwise.”

By early spring, all plans are finalized. In March, weeks of fieldwork and late-night strategizing lead to “Super Saturday,” a 1999 addition to the contest that gives every team the opportunity to present its plan before a panel of judges composed of venture capitalists and entrepreneurs. Each team gets feedback from the experts, and ten semifinalists are selected for the second round of judging, at which point the field is narrowed to four finalists.

Some of the judges (who are selected by the faculty involved rather than by students to avoid any potential appearance of conflict of interest) are past contest participants. Exchange.com’s Stig Leschly comments on what he is looking for as a judge: “A team’s résumé is important, but it’s relevant to just a fraction of the problems that need to be solved. The qualities we look for are a strong work ethic, people skills, judgment, maturity, and a sense of humor.” In terms of the plan’s presentation, he continues, “you need a big, crisply articulated idea, conveyed in a cogent presentation that is nondefensive and straightforward and that acknowledges the risks involved. The conversation you have about the business is the main way an investor figures out whether or not you have the people skills to actually make a plan happen.”

The judges’ rankings are unveiled at an awards ceremony in late April. Each of the four teams makes a final presentation before the winner is announced and presented with the $10,000 Dubilier Prize, which honors the late Martin Dubilier (MBA 1952), cofounder of the prominent LBO firm Clayton, Dubilier & Rice. (Each of the three runners-up receives $5,000.) While the prize money (and $25,000 of in-kind services shared among the finalists) is not insignificant, faculty and student organizers emphasize that the contest’s value lies well beyond such monetary rewards and services, which are donated by corporate sponsors and the HBS Entrepreneurship Program.

“The measure of success is not whether a team wins or loses,” says Joe Lassiter. “What matters is whether or not the students can use this experience to get to where they want to be in ten or fifteen years. In the end, the most significant benefit any MBA experience can give students is a better idea of who they are and what they want to do with their life.”

“The contest is a learning tool,” concurs Myra Hart. “As an educator, my goal is not so much the immediate output as it is the long-term knowledge being built.”

Climate Changes

At press time, 59 teams had submitted entries for the 2001 contest, including 11 for the Social Enterprise Track that was established this year to meet the increasing student interest in nonprofit plans (see sidebar). While that number is down from past years, it shows that even with a changing economic climate, HBS students are interested in pursuing entrepreneurial endeavors. Contest organizer Bryn Zeckhauser, noting that plans have been entered for low-cost eyeglasses and for software for cardiologists, says she expects to see fewer Internet-related plans this year. Myra Hart observes that while some students may not be as willing to take the risk of implementing their plan right out of the MBA Program, they appreciate the value that the contest has to offer. “Whether students see the contest as an immediate payoff or as a way to gain a credential in the future, I think they believe it is something worth doing,” says Hart.

In conversations with past contest participants, each stressed how much they learned by participating. Such a foundation, they say, can help MBAs no matter what they end up doing. “You’ve got to make sure that you understand the likelihood of failure — no matter how smart or how good the plan is,” says Stig Leschly. “It takes a certain type of person to put up with this risk. If you define success as learning, you are better off.”

And Ventro’s David Perry emphasizes that the learning process has only just begun once you’ve written a plan. “Writing a business plan is extremely important, but it is really just 1 or 2 percent of what it takes to build a business,” he remarks. “There are huge unknowns. You invariably underestimate the work in front of you. It’s probably a good thing, otherwise you’d never do it.” Entrepreneurs, he concludes, “are almost by definition optimists. If you took a cold, analytical look at what you are doing — the risk versus the reward and the chances of success — you’d probably go work as a consultant.”

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