Entrepreneurial Entropy

I have this diagram on my white board that I need to erase.  It's taking up a lot of space.  It looks like a chemical reaction. It was drawn in a fit of inspiration after I watched a science show about the expanding universe. Entropy is a word that was coined to describe the second law of thermodynamics which basically says that energy in a closed system, will dissipate toward some state of equilibrium.  It is why the universe is expanding but it's also why ice melts and bodies decompose.

The timing of the this epiphany came during a "period of transition" in our community as there are now several organizations that support entrepreneurs; all striving for recognition, relevance... and funding.  So many people competing with each other to do good.  So much energy consumed maintaining the status quo.  It's like our collective energy is dissipating toward some state of equilibrium... ENTROPY!  It's a cloud that represents the community with everything in its place, working efficiently, and well measured.  Then something happens to change things and all of the sudden a lot of energy gets spent to achieve the next state of equilibrium. Equilibrium consumes energy.  Or rather, it dissipates it.

This process is painful.  Innovation is sacrificed for efficiency and a well ordered system.  A lot of money is spent on resources to manage the system.  And perhaps most frustrating, attention is poured into efforts not focused on why you're in business in the first place.

If this is truly an example of Entropy, then, at least philosophically, you can't do anything about it.  It's a law of the universe. It is the way of things.  

If this is true, then this reaction is predictable and therefore can be "managed".  Status quo can be the impetus for change.  Change can be embraced as opportunity.  It can be a time for the innovators to get out and make the way for change.  The key then is to learn to recognize the equilibrium in the system and look for way to focus energy on a new and better solution.  

This is the role of the innovator.  He or she is the one that gets out. Ahead of the status quo. Seeing what's next and going to find it.  To be the catalyst for the next upheaval.  To sense a state of equilibrium and realize a lot of energy could be pointed in a different direction to solve a real problem.  But unlike the profit who merely points the way, the innovator hoists the pack, grabs the walking stick and finds the way.  While the entropic crowd worries about maintaining itself, the innovator discovers a way to provide value to a willing customer.  And when this happens, the innovator has become an entrepreneur.

Do you need a coach?

I was meeting with a client the other day and the discussion turned to running and cycling, two activities we both emerse ourselves in.  I am trying to gear up for a marathon and being a man of a certain age, I am finding the body doesn't react to punishment the way it used to even a few years ago.  I was conveying details (complaining) about my training challenges and how the shins hurt and the heels hurt.  The client asked about my training regimen and during that explanation he indicated that I was probably over-training...running too hard and too fast.  My reply included the fact that I was following a training schedule I downloaded from the internet.  Finally he asked, "Do you need a coach?"   I paused.

Now the explanation for the pause will take longer than the actual pause but stay with me.  I have been running for most of the years leading up to my certain age; basically since the 6th grade.  I know running.  I live running. Plus, I am (I think) tough.  I know what I know and there's not much I don't know...I am sure of it. But then again, what I know isn't working.  "Ummmm,  yeah," was the phrase that ended the pause.

He immediately emailed a guy that lives two hours away who had a pretty cool website and modestly boasted of a couple Olympic runners he has coached.  His name is Randy and I called him.  I asked him why a guy who coaches Olympians would be interested in coaching a middle aged guy who has nothing to prove but wants to defy age as long as possible. Throughout the conversation he said that he wants to help people who have a desire to improve and he especially likes to work with people who have regular busy lives and want to integrate a running lifestyle.  After about 20 minutes on the phone, we agreed it was a good fit.

So now I keep a daily diary and email it to him on Saturdays.  On Sunday, he emails me a workout schedule for that week.  So what's different and why would I pay for something when there's so much free information on the internet and in other resources?  I'm about 4 weeks into it and the answer is this: it's the access to someone who understands what I am going through and the accountability.  I am running more regularly than I have in many years because I know I have to upload my accomplishments each week.  Plus, when something hurts or I have a question about barefoot running shoes, I can ask him. Even though it's just email and an occasional telephone call, I know I'm not alone...

Entrepreneurship is a lonely endeavor.  It's like hitting a golf ball.  I'm told you have to think about fifty things all at once and one thing affects the other 49 in some way.  One of the things we are emphasizing in the CEG right now is to leverage our personal and professional networks to find mentors for our client companies.  Each company and each entrepreneur is different but everyone needs someone they can bounce ideas off and someone to help remind them which of the fifty things they should think about first.  Jim Collins speaks of the "council".  We call them mentors. But they are really coaches.  Sometimes it's a small group of two or three.  Sometimes you meet formally and sometimes it's over coffee or a telephone call.  It's someone you trust and someone who wants to see you succeed. It may be free or it may cost you something.  There's a guy working with me on a technology opportunity.  He told me "you can't afford me so just buy me a lunch every couple months. I gotta eat."  He has been down the path I'm on.  His advice has been very valuable.  I'm not alone...

Do you need a coach?

Beauty is in the Ears of the Listener

Once in a while, we are presented with the opportunity where we must eat our own dog food.  The Oak Ridge National Lab sponsored "Bridging the Gap" which was an opportunity for entrepreneurs and investors to come see a few of their most promising technologies that are well positioned for commercialization.  Our job was to put "investor quality" pitches together and present them to an audience of about seventy people.  Now over the last three years or so the CEG team has helped over a hundred companies prepare their funding pitches.  We have gotten pretty good at telling other people how to present technology to business people.  Now came the time for us to have to do it ourselves.  Guess what....IT AIN'T EASY!!!!!!

One of my assigned technologies was "Nonoxide Fluorescent Nanoparticles"  I still don't really know what that means.  The researcher was very patient with me as he explained free electrons, chemical nanofermentation of metal sulfides and the implications for superparamagnetics and ferrofluids. Perhaps through pity, perhaps through exasperation, he finally explained that the process was just like making beer.  That was my eureka moment.  That was a story I could tell.  A strange thing happened as I spent the next two weeks researching markets and understanding how products from rare earth metals are made.  I began to be absorbed into the world of seven syllable words.  The more familiar I became with the technology, the more I started using the language of the scientist and that found its way into my narrative and my slide deck.  The team got together to review our progress and when it came to me, they stopped me on about the third slide and asked me what the heck I was talking about.  "What do you mean?" I said and proceeded to convince them how cool it was to make heavy metals for quantum dots.  John Morris reminded me of who my audience is and they would relate a lot better to making beer than how to precipitate indium and gallium.  I guess I was proud of my new knowledge or perhaps it was just easier to use scientific language once I understood it.  I went back and based the whole message on how it compared to making beer and rather than listing all the elements that could be made, I used pictures of the products that were made from these materials.  It was a hit as were the other presentations made by the CEG team.

Here are some lessons the old dog had to learn...again:

1. It's really easy to get sucked into the world of complex technology.  The deeper you get, the more you begin to use the foreign language that is "techspeak".  You don't have to have a PhD for this to happen.
2. Practice for others - I recorded myself several times and although I got the "ahhh's" and "um's" out of the story, I completely missed the techspeak.  I must have been impressing myself with how the big words rolled out of my mouth.
3. Pictures ARE worth a thousand words.  I replaced four slides filled with a couple hundred words and about 48 bullets...with one slide that had nothing but pictures of computer hard drives, solar panels and MRI machines.  The people got it and the story was easier to tell.
4. You can't throw it together.  One 15 minute presentation took about two weeks to research, assemble and practice.  I had two of them to do.
5. It's not about you. Your job is to tell a good story to people who don't know who you are or what you are selling.  You have to meet them on their terms, not yours.  They won't be impressed with how casually you can say "superparamagneticism".  If they are, then they are thinking about that and not what a great small business opportunity this is.
6. It's not about the technology.  There...I said it again but now I really believe it.  Technology is cool.  But no one will care unless they can see a pathway to make money with it.  That's your job.

Telling a good story is about communicating an emotion.  It's the listener who gets to judge, not the story teller.  

I hope you enjoy my dog food!  It actually tastes pretty good...

Legal agreements are NOT for when things go well...

One of those basic realities of entrepreneurship is the fact that you can't get there by yourself.  You will need help and it will likely come in the form of partners.  Manufacturing, sales, marketing, finance, accounting, and the list goes on.  Perhaps a typical scenario goes like this: you have a hot new technology but you need someone to help you make it.  Your intellectual property outlines a basic concept for making the product and your challenge is to figure out how to scale up in a manufacturing environment.  So you meet with a few manufactures who are excited about working with you as you are equally excited about making your stuff. You like one particular company and you sign a Memorandum of Understanding (MOU) or a Letter of Intent (LOI) and start the process of figuring out how to make your stuff.  Through several trial runs, you determine the right mix of materials, the best temperature and pressure and your product turns out to be better than expected.  The question is who owns this new intellectual property?  You? Everybody?  Nobody?

Benjamin K. Riley has written a fine article on the Fortune Blog called Three Legal Lessons For Startups in which he goes into some detail about the importance of legal agreements between business partners and joint ventures.  Different legal agreement types carry different weight when it comes to ownership of intellectual property and it's important to understand these differences and make sure your trade secrets stay a secret.

Partners may not stay partners for ever....

By the way, this article came to me via a great newsletter called Lipper Current Weekly. It's one of the best.

References - What's good for staffing is good for VC's and partners

Upon reading Mark Suster's post: "Why It's Critical to Reference Check Your VC", http://bit.ly/ifqKil, I pondered the fact that investments take a long time.  Suster's article and links to his others go into how working with investors is a relationship building process that takes time.  Here are some thoughts on this point.

The negotiations process can be taxing on the patience and sometimes, the emotions.  VC's live in a world of contracts and attorneys so they are used to it.  For entrepreneurs, the negotiation process can appear to be a profound lack of trust with a potential partner when everything leading up to this moment has been friendly.  The point here is not to base your opinion of the relationship on the negotiation process.  You are better off talking with others who have successfully survived a negotiation with this partner to find out about the relationship when everything gets back to normal.  Plus, you should do it long before you jump into a negotiation.  A good recommendation from another portfolio company will help you get through the process knowing it gets better at the end.

When checking references, ask questions that get to the "chemistry" of the relationship.  We have seen cases where VC's are very active in the management of the company and others take a passive approach once the deal is done. Neither  of these cases is either good or bad.  You may benefit from expertise and contacts offered by an active investor or you may be better off with them on the sideline.  That is up to you.  The important thing is to find out how they operate post deal so you are not surprised.

Remember, an investor relationship will last the life of your company, or at least through an exit opportunity.  It is easier to get out of a bad relationship with an employee than it will be with your funding partners so enter into the relationship with your eyes wide open.

The Social Network

I finally got to see the Facebook Movie about a week ago.  I need to see it again when it comes out on DVD before I can write a "7 Things I Learned...." post about it but I did find it to be amazingly in line with many of the experiences our client companies have.  Here are a few thoughts:

The fight between founders over the business model and the exit strategy - I have seen companies dissolve over this one.  While Facebook survived, the friendship did not.  Things will change as a company matures and new opportunities are presented so it's not as simple as saying the founders have to agree on everything... they won't.  Someone has to be the one to make the decision and the operating agreement should spell out what happens in the event of a divorce.

Never sign anything you don't read - Term sheets are confusing because attorneys get paid more that way.  Many of them are boiler plate to begin with and sometimes contain stuff no body intended but it's in the template.  Other times, terms are put in that were not agreed to in the verbal part of the negotiation.  This may or may not be deliberate but it definitely happens.  Read everything and question everything and GET YOUR OWN LAWYER!!!!!  You will pay him/her more than you want to but do it anyway.  Just make sure to get one with experience with startups and term sheet negotiations.

Someday you may get to tell customers what they want - but not likely and certainly not when you are starting out.  It's all about what the customer wants.  That is why you need to get your idea into their hands as soon as possible so they can tell you.  If you are lucky enough to be branded as cool, run with it, but figure out how to get paid for being cool.

Be a Level 5 Leader - I leave you to read "Good To Great" for a full explanation of what a Level 5 Leader is but suffice it to say that although getting rich is a powerful motivator, the all consuming focus of the entrepreneur is for the ultimate success of the venture.

Think twice about taxing the rich - OOTG is about entrepreneurship, not politics so worry not... Geoff Robson found a great post by John Tammy on the Forbes Website, "Facebook Exposes Tax and Consumption Myths."  Most rich people earned their wealth and few waste it..which is why they are...rich.  Peter Thiel, the original angel investor in Facebook chose to put $500,000 into a company led by a young Harvard genius rather than plunk it down on a yacht.  That led to a company worth billions and employing hundreds of people who are paid well and many of which will use their wealth to start other companies.

I guess that's 5 Things I learned from "The Social Network"...

So, "there it is..."

Applied Plasma Products Gets National Attention in the Better World Report

Applied Plasma Products, a licensee from the University of Tennessee and a client of the Center for Entrepreneurial Growth, has been included in the 2010 Better World Report which is published by the Association of University Technology Managers (AUTM).  The tag line for the publication is "The Positive Impact of Academic Innovation on Quality of Life".  The Better World Project was launched in 2006 to promote public understanding of how academic research and technology transfer have changed people's way of life and made the world a better place.

In the early 1990's, a group of researchers at the University of Tennessee became interested in "ball lightning" which is atmospheric plasma.  They wondered if the phenomenon could be recreated in a lab environment.  From their efforts came the One Atmosphere Uniform Glow Discharge Plasma technology.  A microbiologist PhD named Kim Witenberg joined the team in the mid 90's to see if the technology could be applied to kill micro-organisms.  

Fast forward to 2008, Ken Wood formed Advanced Plasma Products, licensed the technology from the University of Tennessee Research Foundation and launched a commercialization effort.  The first product has entered the market, The TriClean Pro and is a stand-alone air purification system.

Here is a link to the report: http://www.betterworldproject.net/AUTM2010BWR.pdf

Apparently, I'm an Entrepreneur

I scored an 80!  According to the report, I'm definitely an entrepreneur.  Blue Horizon Venture Consulting has put out a short self-evaluation that takes about 5 minutes to fill out.  A few minutes later, you get a report with your score on it in your email inbox.  Most of the questions center around your tolerance for risk and whether you like to be told what to do.  One question had to do with where I invest my money.  I chose stocks over mutual funds and bonds but I did not choose other startup companies and high risk investments.  I probably could have increased my EQ if I had gone with that one but it brings up a good point.  Do "real" entrepreneurs have to take risk in EVERYTHING they do?  I heard a wise investor say one time that entrepreneurs are as sensitive to risk as most everyone.  The difference is the risks they take are well thought out and there is a plan... and that's what they have to convince everyone else.

Anyway, Blue Horizon is a consulting organization for entrepreneurs and their survey is a way to generate awareness and potential leads.  But it's worth taking a look.  Check out the survey and their home page:   http://www.bluehorizonvc.com/survey.html

I don't know what to tell you if you score a 30.  I guess you could give back your investment....

A Good Look in the Entrepreneurial Mirror

My business partner Geoff Robson turned me on to Gabriel Weinberg's very fine blog.  This particular post, "Wannabe Entrepreneurs - Symptoms and Cures" is entertaining and hits home.  Those who know me will know that comment, " have you really talked to real customers lately?" resonates loudly.  There is a follow-on post, "First-timers, symptom and cures".

It's really all about focus isn't it?

Here is the link:

http://www.gabrielweinberg.com/blog/2010/07/wannabe-entrepreneurs-symptoms-and-cures.html

LifeKraze Presents at ThrottleUp! 2010 - It's All About The Points

A young startup called LifeKraze from Chattanooga presented their pitch at ThrottleUp! 2010.  LifeKraze is a new social network that encourages people to get active and enjoy life.  To do that, each member gets a daily number of points they can award others in the network for exercising or participating in physical activities. Members can accumulate points overtime and cash them in on discount coupons for products or perhaps health club memberships.  So, it really is...all about the points!

The presentation was upbeat, high energy and downright cool.  One of the judges remarked that our entrepreneurial future is in safe hands with these guys.

Enjoy LifeKraze:

Throttle Up 2010-LifeKraze from Shawn Carson on Vimeo.

LifeKraze - one of 6 finalists for ThrottleUp! 2010, which was held during the Entrepreneurial Imperative in Knoxville, TN on October 27, 2010. These guys convinced the crowd that it was "all about the points".

 

Secure Waters Wins ThrottleUp! 2010

Six promising startups were chosen as finalists for ThrottleUp! 2010.  These companies were invited to come together, share their company pitch and compete for a $5,000 prize (equity free capital!!!!).  

This year's winner is a company from Soddy Daisy, Tennessee, Secure Waters, LLC.  Secure Waters has obtained a license from the Oak Ridge National Laboratory and will commercialize a technology called AquaSentinal which is a bio-sensor technology that can detect and identify toxins in the water supply that may result from natural disasters, regulatory violations or terrorist attacks.  Here is their winning pitch:

Secure Waters Wins ThrottleUp! 2010 from Shawn Carson on Vimeo.

Secure Waters is the ThrottleUp! 2010 Pitch Competition winner. These guys licensed a technology from the Oak Ridge National Laboratory and are currently raising funds to launch their first product. Congratulations to Secure Waters!

The Power of The Community: Entrepreneurial Imperative

Imagine in one place, over a day and a half, being able to hear about how to incorporate social media into your marketing strategy, finding out how a major university can help you start your business, learning from Venture Capitalists what they look for in a company, or watching the pros pitch for millions of dollars....all in East Tennessee.

Entrepreneurial Imperative 2010 was just such a thing.  The first day was hosted by the Y12 National Security Complex in Oak Ridge and the Keynote speaker was Eli Goldratt, the father of the Theory of Constraints (TOC).  Dr. Goldratt is now applying the core principles of TOC to the strategic planning process of startup companies and he boldly invited any company to come to Israel for two weeks and immerse themselves in the process.

The second day was jam packed with sessions of useful topics.  Early morning speakers included State Senator Doug Overbey who was instrumental in helping to pass the legislation that led to the formation of the ten Tennessee Investment Companies (TNInvestcos).  The TNInvestcos have available nearly $140 million in seed stage investment capital to Tennessee based startup companies.  Randy Boyd of Radio Systems Corporation was recognized for the wonderful success his company has achieved here in Knoxville.  

The balance of the morning included 9 workshops on all topics related to entrepreneurship.  In the afternoon, ThrottleUp! 2010 showcased 6 wonderful seed stage companies and was followed by the 15th Annual Tennessee Valley Venture Forum.

Over 250 people enjoyed the conference in person and for those who could not, we video recorded most of the sessions which we will share with you over the next couple weeks in this blog.  By all accounts and anecdotes, it was a huge success.

But that's not what I wanted to talk about....

I want to talk about the power of a community coming together to celebrate and pull off something that no one organization could do by themselves.  At a time when human and capital resources are strained to the breaking point, it is very difficult to pull together a program for a major regional wide conference.  In planning for Entrepreneurial Imperative, we came to the realization that our conference needed to be something larger than the traditional venture forum format we had employed for several years.  Our community, like every other community in our country, needed a shot in the arm and a message that says, "go ahead and start that company...we are here to help!"

East Tennessee has a no shortage of entrepreneurial support organizations, each promoting their fine programs and going about what they do.  We came to the realization that if we could tap into these resources, we could leverage the talent in the region to do something great. So we asked everyone we knew if they would grab a paddle and climb into the boat.  The cool thing is that a bunch of people stepped up.  Here is the list of the host committee that planned and implemented Entrepreneurial Imperative 2010:

• The Development Corporation of Knox County
• Entrepreneurs of Knoxville
• Knoxville-Oak Ridge Innovation Valley
• Knoxville Overground
• Knoxville S.C.O.R.E
• Technology 2020
• Tennessee Small Business Development Centers
• UT Center for Industrial Services
• UT College of Business
• University of Tennessee Research Foundation

These people planned the program, recruited the speakers, served as moderators, and perhaps, most importantly, brought their people.  The community plays a vital role in the entrepreneurial ecosystem and if they can find a way to work together, the multiplier is 5 to 10X.  What investor could resist that ROI?

We hope you enjoy the highlights of Entrepreneurial Imperative in the coming weeks!

Entrepreneurial Imperative 2010--Introduction and Mayor Tim Burchett's Welcome from Shawn Carson on Vimeo.

Mike Cuddy of Technology 2020 opens Entrepreneurial Imperative and introduces Knox County Mayor Tim Burchett for a welcome.

Technology Push Vs. Market Pull

A recent post on the Technology Transfer Tactics website cited a survey of tech transfer professionals.  There was only one survey question: "What are the top three reasons for failure of university startup companies?"  There were the typical reasons you might expect like management failure and lack of capital; and there were some reasons related to culture and policy in the international entrepreneurial stage.  But there was one that was either tied directly or indirectly to several of the others, and that was "Innovation does not meet a commercial need."  (Link to the website post: http://www.technologytransfertactics.com/content/2010/07/14/survey-suggests-top-10-reasons-university-start-ups-fail/) 

Perhaps it should have said Technology rather than Innovation in that one could argue the very definition of innovation is the application of an idea or technology to solve a problem in a market. Semantics aside, there is a strong and vital point being made here that gets to the very heart of entrepreneurship.  There are two failure modes in the commercialization of technology that result from a common root cause.  The first is the self proclaimed entrepreneur who wants to license a technology and start a company.  The individual is convinced that the research institution is sitting on technology that is ready to sell as a finished product to customers that are ready to buy.  The second failure mode is the researcher who has lived with the technology development from grant proposal to research project to invention disclosure. The researcher now wants to start the company that will make them millions as a part time CEO while they retain their position at the research institution.  The root cause for both these failure modes is focus on the technology in the belief that is has intrensic value to a customer.

"The Changing Face Of Venture Capital - Where Will The New Capital Come From?" by Geoff Robson

As we continue to see many exciting advancements in the entrepreneurial ecosystem in our region as well as in the state as a whole, I came across the following article that contains a number of important “nuggets” regarding venture funds.  A few particularly important points in this that were worth highlighting follow.

1. Those with experience in the venture industry will tell you that the typical portfolio (made up of 8 – 10 companies on average – more in very large funds) contains a few companies that are total losses, a few companies that provide a return of investment, and a few companies that provide a return on investment.  Simply put, a small portion of the portfolio provides the greatest return lifting the returns on the total portfolio to the annual target of 25% - 30%.  Experience in the venture industry and specific market segments is a clear differentiator among funds who perform in the top quartile.
2. This article indicates that those returns have been shrinking over the last decade to lower levels much like the general population has seen in its retirement portfolio.  As a result, the overall venture industry is shrinking.  There are fewer funds today than there were just a few years ago by a significant percentage. You see VC shrinking (by capital raised and number of funds) for a couple of reasons. Less returns means less capital for reinvestment in the VC fund. Second, the loss of value in the public markets means that VC, a private source, increased as a percentage of the total fund. Most capital managers don’t want VC and other higher risk funds to represent too much of their portfolio.
3. I hear many venture fund managers today that are focused on a couple of key points among others: Proprietary deal flow and how their team can add value beyond just funding.  This idea of proprietary deal flow is a critical one – they want to source deals that fit a very defined investment profile and then stay very close to the opportunity as the investment round is sourced.

As this article points out, a number of leading institutions (and some very smart people leading these) are working to fill the gap created as the industry pulls back.  I firmly believe that you will see these institutions partnering with people who have experience in this space.  This was a broad practice among the new TNInvestco funds created by the State of Tennessee.  Many of those fund managers, including those with industry experience, reached out to partners who could fill gaps they may have had on their management teams.  I have had the pleasure of meeting a number of these people whom are not only really smart people  but truly good people to work with.  As a matter of practice we encourage among our client companies, it is always good to see this.  Any institution considering launching a new venture endeavor would be wise to practice this as well.

 Click here for the link to the article---->

The Hidden Treasure Of Pitch Competitions - Validating Your Business Model

It seems in our community, as in many, the frequency of business plan competitions is on the rise.  Our organization, the CEG, is responsible for some and we participate in others.  There is often some package of prizes that may include cash, services and free rent at an incubator; as well as the obligatory bragging rights a company can use in their PR upon winning a contest of some sort.  Sometimes there is no prize at all.  In every case a pitch competition gives a company the chance to get public attention in the hopes that an angel investor is in the audience and a term sheet is just a phone call away.

There is a downside.  It takes many hours to prepare a small set of high impact PowerPoint slides and if you follow the advice of Guy Kawasaki, you have to practice 25 times (yeah, right...).  Plus if you look on anyone's top ten list of fears, public speaking is usually among the top three.  If you factor in the fact that there can only be one or two winners in a pitch competition, what's the point?  Wouldn't you be better off writing that extra code for that smash hit iPhone app?

In previous posts, we discussed the importance of conducting primary market research on your product idea, even before you develop the product, to make sure you validate the solution people will buy.  But where do you go to validate your business model?  You can go to advisors which can be of great assistance and you can start the process of raising equity based capital but you will find that a good competition will provide great feedback in a supportive setting.  As an entrepreneur, it is vital that you learn how to communicate your company's value proposition in a way others can understand it, especially if they do not understand your industry or specific technology.  For those potential investors who are familiar with your market segment, you are at a bit of a disadvantage because they can sniff out pretty quickly if your strategy makes money or not.

Pitch competitions provide a laboratory for you to work out how to communicate your great idea to the world and test out whether if others will buy off on your value proposition.  Here are some key developmental benefits of a good pitch completion:

• Focused messaging - competitions typically limit you to 8 - 15 minutes to make your pitch.  That is not a lot of time and you are forced to cover a lot of ground in a few minutes.  With practice, you can learn how to condense a clear message about your company which is always helpful in any setting.
• Feedback - most competitions provide a feedback mechanism for the participating companies from a panel of judges.  This feedback may validate you message or it may reveal weaknesses in your message you don't communicate well.  Make sure to ask for feedback forms.  During breaks, talk with the judges and get their cards.  Ask them for a follow up meeting and buy them some coffee.  Most of them will be happy to talk with you.
• Learning to think on your feet - You have to anticipate every possible question you may get and even then, a judge may throw you a zinger.  You will crash once in a while but you will learn how to respond to those questions with credibility.
• Learning to deal with conflicting feedback - If you present to five judges, it is possible to get five differing viewpoints on your presentation.  Some may love it and some may just not get it.  You will get this in real life and every time you are challenged on one of your claims, you get better at your response.  It is good to get these challenges from time to time because it makes you revisit your message and evaluate ways to make it better.  You can't do this by reading books and taking seminars.  Remember, not all good advise is really good... and not all bad reactions are really bad.
• Dress rehearsal for fundraising - If raising capital is in your future, you will pitch your company to dozens of potential investors. This time it's for real and investors may not be as forgiving, nor will they be forthcoming with helpful feedback.  You're much better off honing your message in a more educational environment.
• You don't have to win in order be there -  Picking a winner is a tough job and good companies are turned down for subjective reasons.  We have seen plenty of follow up meetings with investors come from pitch competitions with companies that were not even among the honorable mentions.  Like Woody Allen said, "80% of success is showing up."

Here is a link to a great article by an entrepreneur who went through a series of failed attempts to win several high profile pitch competitions and the treasures she found by just showing up: http://www.xconomy.com/san-francisco/2010/06/15/hatching-a-lark-an-entrepreneurs-journey-through-the-business-plan-competitions/?single_page=true