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Wednesday, 01 February 2012 13:55

Investors see biz plan competitions as way to find, vet new ideas

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WEST MICHIGAN — The $100,000 was nice.

But just as valuable to Barry Nowak were the connections he made by participating in the 2011 Great Lakes Entrepreneur’s Quest, an annual business plan competition that provides capital to young businesses in the state that can prove their mettle to judges.

The mentorship and networking that resulted from the 2011 competition led to further opportunities for Syzygy Biotech, a year-old Grand Rapids company that replicates DNA material for use by biomedical researchers.

“It is a big part of why we’re in business,” Nowak, a founder and the CEO of Syzygy, said of the contacts made last June through the Ann Arbor-based business plan competition.

They have led to opportunities to secure additional capital from venture capital and angel investors he met through Innovation Michigan, Nowak said.

Syzygy, which employs five people full time and potentially could hire dozens more in the next two years, is one of numerous young companies to benefit from business plan competitions in Michigan.

Among the larger competitions are the long-established Great Lakes Entrepreneur’s Quest and relative newcomers such as the $1 million Accelerate Michigan Innovation Competition. A number of West Michigan colleges also host their own student competitions and collaborate on a regional event annually, and there’s Momentum, a Grand Rapids venture company that annually works with startup companies formed by college students in the state.

Designed to identify and reward promising companies and entrepreneurs, the competitions are one element of a much broader goal to diversify Michigan’s economy and create a greater culture of entrepreneurism in Michigan.

Kevin McCurren“It goes hand in hand to what we’re trying to do in Michigan,” said Kevin McCurren, executive director of the Center for Entrepreneurism & Innovation at Grand Valley State University.

The center hosts an annual $10,000 business plan competition for GVSU students. The winners go on to a two-year-old regional event to compete against students who won events at other colleges: Hope College, Calvin College, Aquinas College and Davenport University.

The regional event has spun out three small companies in two years, including BHRS LLC, which is developing a device for fishermen that allows their hook to break away when it gets snagged, avoiding the loss of an expensive fishing lure.

Miles Smith, a 21-year-old GVSU student behind the idea, won $2,000 in the 2011 regional competition. He subsequently secured another $32,000 from investors he met through the Accelerate Michigan Innovation Competition who will put another $18,000 into the business if Smith meets certain milestones.

Smith wants to take his device to market by himself and produce it with Michigan suppliers.

A Zeeland native majoring in international business, he credits the competitions with helping him become more strategic in his thinking about how to commercialize the Breakaway Hook Release System and formulating a “plan of attack.”

“The hardest part is just knowing the next step and knowing which one is more important and not getting discouraged,” said Smith, who hopes to have a prototype and the final design for his device ready by this summer.

That Michigan, with its well-documented economic woes of the last decade, has seen the formation of a number of business plan competitions is evidence that the state is making progress in cultivating an entrepreneurial culture, Accelerate Michigan Executive Director Lauren Bigelow said.

Bigelow doubts Accelerate Michigan — which in two years has awarded $2.1 million in capital and in-kind support to 32 companies and university students — would even have been able to find enough participants a decade ago.

“I think it’s indicative of how far we have come,” she said.

Bigelow believes the competitions can help retain young entrepreneurial talent in the state and considers them “one aspect of a broader foundation of our economy.”

Helping students and young entrepreneurs hone their skills and providing them seed capital to move their ideas forward are just a couple of the benefits behind business plan competitions, organizers say. The events also offer exposure for everybody involved, from both the competitor side and the judges.

Dale Grogan“For us, it was the exposure,” said Dale Grogan, co-managing director of Michigan Accelerator Fund I.

The Grand Rapids-based venture fund entered one of its portfolio companies, nanoRETE Inc., in the 2011 Accelerate Michigan event. The company, which is commercializing a nano-technology developed at Michigan State University to improve food safety and security, didn’t win but did gain exposure to prospective investors who served as judges.

“You had everybody in the venture community in Michigan looking at plans,” said Grogan, who also served as a judge in the medical device category at Accelerate Michigan.

Grogan liked what he saw: a number of potential investments for his venture funds.

“We got to look at a bunch of promising plans,” he said.

In that regard, the competitions effectively bring together innovators and potential investors on a regular basis and create connections that go on well after an event, Bigelow said.

“It’s been building community with a capital ‘C,’” she said.

As an investor, Grogan sees the competitions as a good way learn about and vet ideas. The same goes for the entrepreneurs whose ideas get dissected in the judging process.

“The plus side is it is a very good way for entrepreneurs to hone their story because there is always feedback. They can hone their story so it can become more attractive to the investor,” Grogan said. “It’s a very, very good discipline to get the entrepreneur to tell their story in an efficient manner.”

While the existing business plan competitions in Michigan each have a particular niche, the formation of any further events needs to build on what’s already established, Bigelow said.

“We have finite amount of resources in this state. You have to make sure they are additive, not redundant,” she said. “The ecosystem of entrepreneurship and investment is something that is relatively new.”

Accelerate Michigan, now in its third year and geared toward startup business with an established product that’s ready for the marketplace, is now surveying winners from its inaugural event in 2010 to gauge their job creation and how well they were able to attract follow-on investments, Bigelow said.

Despite his enthusiasm for the events, Grogan believes business plan competitions in general need to avoid becoming a place just for “big ideas” without enough regard for the likelihood of success for the business. He cites as an example the potential for competitions to reward a business plan for a clean-energy technology that, despite its promise, would require massive investments in the existing infrastructure to deploy and make it unfeasible.

“A lot of these ideas require a sea change in market forces and that’s tough to overcome, but the idea is sexy, right?” Grogan said.

At GVSU, the Center for Entrepreneurship & Innovation has altered its event to work with winners beyond the monetary award and provide them business caching and support to improve their chances of business success.

“We’re learning to make these more relevant, so it’s not just an academic exercise,” McCurren said. “How are you going to get the little fish to become bigger fish if you don’t get them into the process?”

Read 1990 times Last modified on Sunday, 12 August 2012 21:55

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