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International Business Plans Attract Venture Capitalists At 2008 McGinnis Venture Competition

McGinnis thumbnailCash prizes. The opportunity to pitch to top-tier venture capitalists. An expert opinion on their business plan. For the 25 teams who entered the 2008 McGinnis Venture Competition at the Tepper School of Business, the stakes and potential payoffs couldn’t get much higher.

The teams — most of them comprised of second-year MBA students from prestigious business schools and more than a quarter from international schools — competed for a total of more than $140,000 in cash and legal/business services to help secure their intellectual property and continue developing their business ideas. In addition to the cash and business services, the top two McGinnis winners will be entered in the Moot Corp® Competition at the University of Texas at Austin, co-founded by Carnegie Mellon and long-considered the “Super Bowl of business case competitions.”

As the McGinnis Venture Competition evolves it is expanding further into international business schools, inspiring students from across the globe to bring their best new business ideas to the Carnegie Mellon campus, where the competition helps them connect with top venture capitalists and angel investors from throughout the United States. For 2008, Tepper School alum Sarosh Kumana (MSIA, 1977) helped sponsor the Al Gore Sustainable Technology Venture Competition in India, which produced two Indian teams that competed in the McGinnis competition.

This year, winners in the three tracks (Life Sciences, Technology and Sustainable Technology) came from the Tepper School at Carnegie Mellon, Yale University and from the University of Manitoba, Canada. The Tepper School team won in the Life Sciences track for Tropical Health Systems, which is developing a device to cure malaria by using a magnetic filter to purify infected blood cells. The Yale team, Ideal Energy, won in the Sustainable Track with an idea to install small wind turbines on customer’s property and sell customers the generated electricity at a 10 percent discount to prevailing utility rates. And the University of Manitoba’s team, Civitech, won in the Technology Track as an early stage company developing system of wireless sensors for monitoring environmental conditions in buildings. Their first product aims to monitor moisture inside building walls to prevent growth of mold.

More than bragging rights, the winning teams receive the tools to help them launch their vision into the commercial marketplace. And for most of the previous winners, that’s exactly what has happened, according to Art Boni, John R. Thorne Chair of Entrepreneurship; Associate Teaching Professor of Entrepreneurship; and Director, Donald H. Jones Center for Entrepreneurship, which hosts the competition.

“Our intent in running this competition is that the students do launch companies,” says Boni. “That’s why we spend so much time and attention with our judging and recruit quality judges who can prepare them for that process.”

In fact, if the winning teams fail to launch their businesses, they do not get the prize money, Boni says. “That stipulation signals the seriousness of our intent,” he adds.

During the five years since the McGinnis Venture Competition was founded, only one team was unable to launch. The rest, including one from the Tepper School, are in various stages of start-up. Boni keeps in touch with many of them. Though the competition does not include formal tracking requirements for the winning teams, many do turn to the Don Jones Center for assistance in the aftermath.

The competition spans the three tracks, Life Science, Technology, and Sustainable Technology, as well as the globe. Participants this year came from as far as Hong Kong, India, Germany and Colombia, and also Canada. Judges hail from throughout the United States, particularly from areas rich in venture capitalists: Silicon Valley, Seattle, Boston, and New York. Besides venture capitalists, the judges also include corporate attorneys, angel investors, and serial entrepreneurs. Judges change following each round of the competition; a presenting team never sees the same judge twice.

The idea is to create as realistic a setting as possible, Boni explains.

“This is not academic; this is a real venture competition,” he says. “They get a simulation of what they’ll see when thy go out to launch these companies. It’s a good combination of real-world experience in an educational setting.”

A key advantage for teams competing in the McGinnis Venture Competition is their opportunity to network with the visiting venture capitalists and experienced entrepreneurs. Outside of the competition itself, at networking events and the awards dinner, the teams get valuable face-time and connections that pay off long into the future for the B-school entrepreneurs. It’s how business is done in their chosen marketplace.

According John DiRicco, Entrepreneurial Education Course Coordinator for the Don Jones Center, the teams must fully answer one key question that the judges ask themselves: “Would you invest in this company?”

Meeting that standard can prove more difficult than many teams anticipate, he says.

“I do think there are some who maybe don’t expect this type of questioning,” he says. “Some of them might not understand until they get here that it’s a little more intense than they thought.”

But to the winner go the spoils, and for an entrepreneur, launching the company can be the first step in fulfilling a long-held dream. NeuroLife, the company launched by a Tepper School team that included 2006 alumnus Ernest Braxton, is in the process of demonstrating proof of concept for its vision of improving detection of brain injury through a noninvasive intracranial pressure monitor.

“Typically with non-software companies, that’s what happens. You’re looking at least at a two-year window,” says Boni.

Though the competition takes months to plan, DiRicco says watching the evolution of the winning team is one of the most rewarding payoffs.

“It’s pretty satisfying,” he says. “It makes you feel good to see that you had a little part in their [success].”


 

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Mark D. Burd

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Tepper School of Business
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mdburd@andrew.cmu.edu
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