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Business plan contests are having a heyday in Boston as big technology employers, deep-pocketed venture capitalists and the governor himself all rush to dangle cash and other carrots before fresh-minted MBAs from the region’s universities.
In the past week, one new contest launched and a second expanded. This coming week, Gov. Deval Patrick and Boston Mayor Thomas Menino are expected to announce the official launch of a third, MassChallenge Inc., which as of March had raised about $800,000 toward a $1 million goal, a staffer told the Boston Business Journal.
Prizes and deadlines catalyze founders, said Bo Fishback, vice president of entrepreneurship at the Ewing Marion Kauffman Foundation. “It gets them spun up in a way that might have taken them years of going out and individually networking,” he said — but no one has yet examined whether contest winners are more likely to establish successful companies.
That has not deterred two $3 billion Waltham venture firms, Polaris Venture Partners and North Bridge Venture Partners. This week, North Bridge launched a $75,000 business plan contest. “It’s the style of investing we do anyway,” said Principal Dayna Grayson. “It’s just adding a sort of pressure cooker to it.”
Polaris expanded an existing incubator program it opened last fall, DogPatch Labs Cambridge, and announced Microsoft Corp. (Nasdaq: MSFT) will sponsor the program. Last month, IBM Corp. (NYSE: IBM) announced the Boston launch of its own tech business plan contest, dubbed Smartcamp.
North Bridge and Polaris are following in the footsteps of TechStars, a venture-backed startup incubator from Boulder, Colo., that opened a Boston program last year. Polaris General Partner David Barrett is also a mentor in the TechStars program.
TechStars Boston Director Shawn Broderick says the legacy business plan contest is often just an academic exercise. Out of about 60 MIT $100K participants that applied to TechStars last year, not one made the program’s list of about 75 finalists — “not because they weren’t neat stuff, but because they were ‘business plans,’ not ‘businesses,’ ” he wrote in an e-mail.
The MIT $100K does not keep data on the percentage of finalists who have gone on to success, Managing Director Daniel Vannoni said. However, it reports its participants have generated 2,500 jobs in aggregate. Boston University Institute for Technology Executive Director Jonathan Rosen said at least two out of nine BU contest winners have formed successful companies. Babson College and Harvard Business School were unable to provide contests metrics.
Some contests have changed their approach. The nonprofit MassChallenge has backed off its original goal to raise $25 million and invest it in up to 30 companies a year, said CEO John Harthorne. He declined to comment on the organization’s new fundraising goal. He said MassChallenge will grant 12 to 20 prizes a year, about $50,000 each, funded by sponsors who will take no equity.
“There’s an opportunity right now to catalyze another Massachusetts Miracle,” he said.
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