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