Contrary to popular belief, winning isn't everything. But for companies that are trying to raise money, winning may be the first thing. Across the country, business plan competitions are helping both early and growth-stage companies jump-start their fundraising. And for one Weston, Wisconsin-based company, U.S. Trail-maps Inc., winning a cash prize in a business plan competition unlocked the door to even bigger sums from angel investors and venture capitalists.
A few years ago, Eric Antonson, co-founder and vice president of U.S. Trail-maps, didn't know where he'd find the money to roll out his new GPS technologies for off-road mapping. So, like any good cartographer, he started by creating a map. That map—an 80-page business plan—caught the eye of the Wisconsin Department of Commerce and eventually earned Antonson, 42, a spot in the Wisconsin Governor's Business Plan Contest, a statewide business plan competition.
The competition, which is open to any Wisconsin-based company that has not yet been funded by angels or venture capitalists, is one of a growing number of contests springing up around the country. Typically, they are sponsored by a variety of government and private organizations aiming to promote economic development, support small business and sometimes simply identify investment opportunities for VC firms. Although these competitions aren't likely to provide all the money needed to grow a business, there is big money at stake. The Wisconsin contest gives out $200,000 in total prizes, with $50,000 in cash going to the winner this year.
In California, where venture capital flows more freely, the nonprofit group Golden Capital Network has found that cash isn't the most important thing entrepreneurs get from its annual competition. "There used to be a financial reward when the competition started in 2003," says Alan Chamberlain, program director of venture events at Golden Capital Network. "But the press release is what they really want. They compete for bragging rights for best of show."
"We won about $5,000 in cash, but the most valuable part was the credibility and PR," says Antonson. "We had been talking with three angels in our area and an early stage VC out of Madison. We got the award in June and closed on $160,000 with the angels shortly after, then on $400,000 with Kegonsa Capital Partners." Antonson estimates that the company's second-place finish in the Wisconsin contest "weighed in about 60 percent" on the angel investors' decisions to provide funding. "It settled whatever nerves they had," he says.
There are other noncash rewards that come from winning a business plan competition. Bang Ventures has a business plan competition that awards winners three months of rent in an incubatorlike environment, complete with technology, accounting and management help. Mark Modzelewski, general partner at Bang Ventures, says that the combined services of the prize are valued in the six figures. And as an interesting twist, the public can visit youbethevc.com to vote on who should win the Bang Ventures contest. Says Modzelewski, "These kinds of advisory services are going to help someone go from zero to 60 in a matter of seconds."
In most cases, the prize money in itself won't justify the effort of competing in a business plan competition. But the process of competing and the nonfinancial rewards that come along with it are almost always worth the work. Looking back on the whole experience, Antonson says that the contest not only helped him improve his business plan, but also validated his reasons for building his company. "People who are a lot smarter than me read [my business plan], and it made sense to them," he says. "I can take stock in that."
—By David Worrell, who is author of the e-book Finding Funding. Contact him at firstname.lastname@example.org.
Copyright © 2008 Entrepreneur.com, Inc. All rights reserved.