Profiles from the $50K
Students who participate in MIT’s business plan competition spawn new companies.
Todd Zion sat in Kresge Auditorium on May 14 thinking, “Please don’t call my name.” On stage, Alexander d’Arbeloff ‘49, chairman of the MIT Corporation, was about to announce the two runners-up in the 2003 MIT $50K Entrepreneurship Competition, the Institute’s annual business plan contest. Chemical engineering PhD candidate Zion had higher hopes for his team, named SmartCells, than one of the two second-place $10,000 prizes. He wanted to win.
D’Arbeloff smiled at the audience as the competitors wriggled in their seats. “The first runner-up,” he began, but then he paused for effect. He waited a moment, then proclaimed, “NeuroBionics!” The audience cheered while the teammates who had created a “pacemaker for the brain” shook d’Arbeloff’s hand and collected their prize. Then d’Arbeloff returned to the podium. Again he smiled at the audience, as Zion and his partners, along with the seven other finalist teams, waited with mounting anticipation. “The next runner-up,” d’Arbeloff began, but again he stopped short, giving the teams a moment to stew in their anxiety. After a second, he declared, “Brontes Technologies!” The team with a method for producing 3-D images using single-lens instruments took the stage. Now, Zion knew it was all or nothing. Either SmartCells would win the $30,000 top prize or he would pat his friends on the back with a conciliatory “Good job.”
“And now for the grand prize,” d’Arbeloff said. He paused once more, and the tension in the room became palpable. “SmartCells!” Zion and his four teammates jumped from their seats, grinning and hugging one another, and bounded on stage amid applause and camera flashes. “I couldn’t wipe the smile off my face for probably the rest of the evening,” Zion says.
Zion is one of the many successes-winners and nonwinners alike-to come out of the $50K competition in its 15-year history. It began in 1990 as a $10K event, a joint project between the MIT Entrepreneurs Club and the Sloan New Ventures Association. Today the student-run contest, whose mission is to encourage future business leaders, is recognized as one of the most prestigious business plan competitions in the world and has spawned more than 75 companies. These include Akamai Technologies, a star of the Internet boom, and companies acquired by the likes of Microsoft, Motorola, and Cisco. The $50K has been so successful at leveraging MIT technologies into businesses that its organizers now hold an annual conference, the Global Startup Workshop, at which entrepreneurship aficionados learn methods for promoting innovation-driven business development in their own areas, including starting their own plan competitions.
Internally, the $50K’s deadlines, requirements, and events give students from all five MIT schools valuable experience in building businesses. Along the way, the participants network with business leaders and consult with mentors who help shape their plans. Thus, with a little startup money and a lot of practical guidance, the $50K plays a unique role in nurturing entrepreneurship within a university community that prizes innovation. Its value in inspiring students to become business leaders is most clearly evident in participants’ stories.
Road Map for a Win
Zion’s story began when he entered MIT’s chemical engineering doctoral program in 1999. He chose the Institute because it encouraged invention, and when selecting a lab, he opted for one centered on practical applications. For four years, he has worked in the Nanostructure Materials Research Lab, where his focus is chemically engineering nanostructures that respond to stimuli. “The idea is, make them intelligent,” Zion says.
Thus far, his most successful structures deliver insulin to diabetics who need the chemical to process the glucose in their blood. The insulin is encapsulated within the nanostructures, which are injected under the skin. When glucose is present-and only then-the structures dissolve, releasing just enough insulin to process the glucose. The more glucose, the more structures dissolve. This technology became Zion’s PhD project and the core of his $50K team, SmartCells.
The team formed when Zion met Robert Bruch, a Sloan MBA candidate looking for a technology on which to found a company. After discussions with Bruch, Zion decided to “take his technology to the next level” by entering the $50K. Bruch then assembled the rest of the team: Sloan MBA John Hebert and Harvard Business School students Martin Curiel and Tsafrir Vanounou. (Non-MIT students and businesspeople may participate as long as one team member is an MIT student.)
SmartCells entered MIT’s $1K contest, a warm-up for the $50K. The team submitted a three-page executive summary that was judged by a panel of potential investors, entrepreneurs, and professional-services providers. In December, SmartCells won one of 10 $1,000 awards. According to Matt Richards, one of two lead organizers of this year’s $50K, the awards are given to motivate teams to enter full business plans in the main event.
SmartCells used its executive summary again when it competed against 113 other teams in the $50K semifinals. Each team gave a one-minute “elevator pitch” about its plan to the judging panel. Zion’s was convincing enough for SmartCells to be named one of 36 teams to move on to the final round.
For the finals, the team had to develop a full business plan demonstrating that the company filled a need in the marketplace and could generate revenue. “Many of the things you’ve captured in a few sentences [in the executive summary] you really have to explain in more detail for someone to catch on and believe,” Zion says. In the end, the team showed that its insulin delivery product would reduce diabetics’ frequent and painful glucose tests and limit insulin injections to one per day. And it would allow physicians to aggressively treat diabetes without risking patient hypoglycemia and to begin insulin treatment in reluctant diabetics. The team also showed that third-party payers, such as insurance companies, would pay well for the insulin delivery system: over time, it would reduce their costs for glucose testing, syringes, and treating diabetic complications.
The team submitted its plan in April. Then, the Friday before the final awards ceremony, the judges chose eight finalists from among the plans. Again, SmartCells was selected.
That weekend, team members prepared presentations they would give privately to the judging panel four days later. To help the teams polish their presentations, organizers planned a “Midnight Madness” event. Between 9:00 p.m. and midnight on the evening before the final presentations, each team made its pitch to members of the MIT Enterprise Forum, a nonprofit organization that promotes the founding of technology-based companies. The teams received feedback and then had an hour to address concerns before giving their pitches again. Zion says this forced him to think about presenting his plan on different levels for different audiences.
The next day, SmartCells delivered its pitch to the judging panel and answered judges’ questions. Zion believes this part of the presentation put SmartCells on top. “You can never polish for questions; you can only anticipate potential issues,” he says. “How you deal with that plays a big role in how they perceive you as a team.”
Zion says he and his teammates felt like underdogs when they heard about the other finalists’ businesses and remarkable technologies. The difference, in his opinion, was his team’s confidence in responding to the judges. Hebert, Zion’s teammate, says it came down to the simple merits of the plan. “We truly fulfilled the requirements of a great business plan: great market, great defensible product, and great team.”
Now they’re finding that although the prize money has been helpful, the publicity from their victory has been more important. It has solidified business relationships that weren’t fully developed before the contest. Immediately after the awards announcement, audience members began passing Zion business cards. Calls and e-mails started coming in. SmartCells is now seeking additional funding and focusing on moving its technology through clinical trials.
Having survived the competition, Zion appreciates the $50K’s mission. The competition’s value lies in its ability to “breed the ambition to go and do,” he says. It also furthers MIT’s mission of getting technology out to the people. “It brings business minds together with technology…and for that reason, it’s incredibly valuable.”
A Business Plan Detour
Vincent Han didn’t make it past the semifinal round in the 2003 competition, but today, the second-year Sloan MBA student is using his experience in the $50K to launch a company.
Han, whose bachelor’s degree is in music, came to the Sloan School with entrepreneurship in mind and with a desire to be competitive in the $50K. In fact, the competition was part of what influenced him to choose MIT. He had already helped launch two companies, and to him, the $50K was an excellent opportunity to get another one going.
First-semester graduate-school demands meant that Han got a later start than he had hoped in finding a technology to anchor a $50K team. He missed participating in the $1K, but in late fall he began preparing for the spring competition. He and fellow second-year Sloanie David Galper met regularly to brainstorm business ideas. In addition, Han became one of the competition’s organizers, launching a new Web site, coordinating events, and facilitating the execution of the judges’ duties.
Spring term came, and Han and Galper still hadn’t found their “home run” idea. But Han says, “We had two or three pretty good ideas, and we said, Even if we don’t win, it’s a healthy exercise just to go through it. So let’s just choose one.’” They picked an idea relating to peer-to-peer file sharing, a huge concern for universities because a significant number of file sharers are students. Their plan was to help music companies find a workable business model that would entice college students away from controversial peer-to-peer networks.
In the semifinal round, the pair submitted an executive summary of their plan for a company called the College Entertainment Network. They hoped to make it past one round and buy themselves time to develop the idea further. But when the semifinalists were announced, Han’s team wasn’t among them.
Even so, Han didn’t give up. “We were a little disappointed, but by this time, we had made enough progress where we were excited about the opportunity,” he says. He and Galper spent the rest of the semester developing the idea. They leveraged media coverage of file-sharing problems to gain access to university leaders and music executives, who expressed interest in their ideas. And they started getting investment interest as well.
By summertime, they were ready to take a risk. Instead of accepting internships-traditionally very important for MBA students-they secured some short-term backing to spend the summer developing their idea.
The business is still in its earliest stages, but Han is optimistic. Several universities have shown interest in pursuing his licensing plan. He credits the $50K with helping him get to this point. “It was the $50K deadlines, the $50K ideals that forced us to not wait around for the perfect idea, but to take an idea that could potentially be a business and go do it,” Han says. In the end, he says, while it was disappointing not to advance in the competition, “nevertheless, we are grateful it was there.”
Fruits of the $50K
As an undergraduate computer science major, Michael Bryzek ‘99, Mng ‘00, entered the $50K in 1998 with a plan based on his volunteer work in Cambridge schools. His team, Volunteer Solutions, had a simple business idea: posting volunteer opportunities online to encourage volunteerism and match people with organizations. The idea grew out of a heavily used database Bryzek had helped develop for MIT’s Public Service Center. Bryzek and his teammates reasoned that they could charge nonprofits a fee to use their Web site to find volunteers, and they developed a business plan to enter in the $50K.
That spring, Volunteer Solutions became the first and only nonprofit organization to win the competition. It beat $50K poster company Akamai for the top prize. What led to the win? Bryzek says his company had simply progressed farthest at the time of the final awards. By then, it had been doing business for almost a year. Indeed, $50K entrants often submit plans while simultaneously seeking outside funding and moving forward with their businesses.
But the competition was only the beginning for Volunteer Solutions. The contest publicity brought critical contacts, including an angel investor from California, who provided money for expansion. In addition, the win and the organization’s early growth subsequently attracted the attention of the United Way, which acquired Volunteer Solutions. “With them, we’ve been able to grow more then tenfold in the first year and a half, and revenue has probably grown 100-fold,” Bryzek says. Thanks to the merger, Volunteer Solutions is now in 52 communities nationwide and serves up more than a million Web pages of volunteer opportunities every month. About 100 new volunteers register on the site every day. “In different communities, we’re starting to see the final impact of all of this work.”
Bryzek’s story doesn’t end there. Revenue from the sale of Volunteer Solutions fed a new venture, the Nonprofit Funding Competition, a $100,000 national business plan contest for nonprofit organizations. The competition took place for the first time in 20022003. Structurally, it was modeled closely on the $50K. And the response to the call for entries was overwhelming. “We expected we would get 60 entries,” Bryzek says. “We ended up with 185 executive summaries.”
Today, Bryzek works full time for Volunteer Solutions and donates his time to the new competition. He says winning the $50K changed his life. “It was the first time we received validation for the business model,” he notes. “To get validation in front of [the $50K] group gave us confidence that I don’t think we would have gotten anywhere else.” Five years later, the United Way still markets Volunteer Solutions by mentioning that it won the $50K.
In the final analysis, each participant’s experience is unique, but all students involved, whether team members or organizers, learn matchless lessons about entrepreneurship. Competitors learn to write business plans, but also to see their ideas through and leverage social networks to gain support. Organizers learn to facilitate others’ growth while soaking up participants’ entrepreneurial passion. As Sloan School dean Richard Schmalensee says, the $50K is “first and foremost an incredible educational experience.” He adds, “I suspect the number of ventures that have been made successful because key players had the $50K experience earlier in their lives is enormous.”