Note: This post was originally published in FORBES under FORBES Entrepreneurs
This is the fourth article in a series about how a group of students at Penn created a non-profit commercializing a product that empowers the visually impaired by recognizing what’s in front of them via auditory feedback. Check out the first article here.
A lot of student entrepreneurs instantaneously think that as soon as they have an idea, they need to raise money. In reality though, it’s hard to convince investors to put money into student-run companies simply because students have to put up with another major commitment, specifically school.
In our case building up ThirdEye, we had many discussions with major angels and VCs who either approached us because they were interested in investing or because we had reached out for feedback. In each meeting, the investor seemed to send an underlying message along the lines of “we love the mission and drive, but we expect you to drop out if we invest in you.”
Ultimately, we decided to bootstrap the venture completely. We had incredibly low costs, especially considering that we were building the product ourselves and didn’t need a salary, we were already paying rent for college, and our distribution was all digital.
Still, we knew that sometime in the future we would need to raise serious capital to scale ThirdEye, and thus would need a legitimate business plan. With this thinking in mind, we decided to submit a plan to the Wharton Business Plan Competition.
After all, what did we have to lose? Sooner or later we would have to learn how to research business models, write contingency plans, discover marketing plans, do deep market research, find distribution channels, predict our five year net incomes, and form partnerships. Why not start now? Plus, if we did well, we might win some money to cover any of our near-future travel costs.
The only problem was that none of even knew what a discounted cash flow was before the competition, and thus had no expectation of doing well considering that most of the participants—MBA students—have years of industry experience over us.
Beating MBAs at Their Own Game
We spent countless hours researching all the material we needed to cover (we had never formally “learned” how to do it): the current state of the market, competitors, our own product and it’s value propositions, the barriers to entry, the market size domestically and internationally, marketing plans, customer acquisition strategies, customer retention strategies, risk and contingency plans, potential legal problems, market validation studies and experimental design, ensuring customer satisfaction, expansion into future markets, and horizontal expansion.
It seemed like we were applying the lean startup model to actually writing the plan by iterating and incorporating feedback from our mentors, entrepreneurial friends, professors at every step. It was as if we were reading our way to an MBA in a couple of months.It all paid off though. Three months after we had submit our original draft–which had now grown to a 30-page plan–we found out that we were finalists and that we would be competing against 7 other companies for over $125k in prizes.
It all paid off though. Three months after we had submit our original draft–which had now grown to a 30-page plan–we found out that we were finalists and that we would be competing against 7 other companies for over $125k in prizes.
At the end of the day, there’s no rational reason why we should have beaten MBA students–who were at least 5 years older than us and who had industry experience–and yet we somehow beat around 200 mostly MBA teams to win prizes in the competition. If we had known how hard it was to learn all this information in a month, we truly never would have tried.
The Real Power of Business Plan Competitions
But it was precisely the fact that we knew so little about business that gave us the false confidence to believe that we could figure it out . There’s no doubt that after the competition, I felt significantly more comfortable with a great deal of business, planning for the future, dealing with unexpected problems, writing financial statements, understanding how the law works in relations to building businesses, publicly speaking and expressing our plan in a passionate manner, and really getting to the essence of a value proposition. These are skills that I will surely use for the rest of my life (unlike many of the ones I formally learned in school).
More importantly, by working on the business plan, we were forced to have conversations with dozens of successful business oriented minds. Since we were working on something interesting as students and didn’t know what the best way to go forward was, we reached out to dozens of business leaders (especially those who were alumni), told them that we’re students, asked them for some advice on commercializing our product, and had an almost perfect success rate. Because of this, we had the opportunity to learn from successful VCs, entrepreneurs who had exited multiple companies, and corporate leaders.
This really is the power of business plan competitions. You’re forced to break out and learn to ask for help, a skill that has now allowed me to learn from and establish relationships with hundreds of influential people who have made a difference on the world.
Not Just for Dorm Room Founders
Quite frankly, it seems like every university around the nation is trying to encourage entrepreneurship. College really is one of the best times to startup simply because universities are investing so much money into innovation around campus.
More and more schools are starting business plan competitions to encourage entrepreneurship during school; they are rapidly becoming one of the best opportunities for student entrepreneurs to have their first splash into the business world.
But dorm room founders aren’t the only ones who can gain from writing a basic business plan. Almost every single student during college can take something away from planning a business from scratch whether they want to become a historian or a lawyer or a dentist. Every job requires you to have a simple business acumen, learn to sell yourself and an idea, and how to reach out to those with more experience than you for help.
So educators, why is it that so many American students are going through college without having to write a business plan of their own (even in a simple entrepreneurship course)? For all we know, we could be missing out on the next Facebook simply because a college student didn’t think he had the business skills to commercialize his vision.