Entrepreneur and professor Steve Blank authored a blog this morning that expressed his opinion that business plan competitions are useless to startup culture and should be scrapped for business model competitions. Business plan competitions are just what they sound like: students are encouraged to submit a business plan and a winner is selected by a panel of judges, often resulting in some monetary reward for the triumphant student. Blank argues that models, not plans, are much more applicable to the iterative startup atmosphere, but not everyone agrees that business plans are entirely irrelevant.
Looking at the opposing viewpoints, it seems that those against business plans use an alternative approach to their argument than those in support of them. In his points against business plans, Blank takes aim at the plans themselves, dissecting them as unrepresentative of the startup ecosystem and its needs.
“There is no cheaper way to get a lot of energy and excitement going than organizing a tournament. That is really what a business plan competition is.”
– Albert Wenger
“A business plan is the execution document that large companies write when planning product-line extensions where customer, market and product features are known,” writes Blank. “A startup is not executing a series of knowns. Most startups are facing unknown customer needs, an unknown product feature set and is an organization formed to search for a repeatable and scalable business model.”
Blank’s approach is logical. Business plans are meant for larger companies, yet these competitions still exist for startups. Why not change the competitions to reflect the nature of startups? Blank instead suggests the use of business model competitions, which would judge entrepreneurs on what they learned and how they reacted.
Albert Wenger, a partner at Union Square Ventures, is on the other side of the fence from Blank. Wenger focuses his argument on the competition, stating that the excitement and enthusiasm built around startup culture from these competitions is invaluable.
“There is no cheaper way to get a lot of energy and excitement going than organizing a tournament. That is really what a business plan competition is,” writes Wenger. “By offering a meaningful prize to the winner and having a big initial field it is possible to get a large number of students exposed to thinking about startups as an alternative to joining a large company (or worse yet Wall Street).”
His point, like Blank’s, is valid. The ability to excite business students about startup culture is a valuable aspect to business model competitions that can’t be ignore or tossed out the door. The middle ground on these two arguments would be to keep the competitions, but replace plans with models, as Blank suggests. But are business plan competitions too ingrained in B-school tradition? Would a business model competition garner the same excitement?
Investor and Hunch co-founder Chris Dixon seems to be on Blank’s side on this issue. Earlier this month on his Twitter account, Dixon referred to business plan competitions as “a terrible idea,” stating that investors care more about the entrepreneur’s bio. He also believes that business plan competitions reinforce the “myth of the Eureka moment,” which he says keeps entrepreneurs from entering the game. However, Dixon also agrees with Wenger about the importance of exciting young entrepreneurs.
“If it’s a choice between business plan contest or nothing I’d take business plan contests,” Dixon said in a comment on Wenger’s blog. “I just wish they weren’t the dominant startup-related activity for students.”
Are business plan competitions antiquated business school relics that serve only to confuse young would-be entrepreneurs about founding a startup? Or is their true purpose to get students excited about entrepreneurship despite these conflicts? I find myself siding with Chris Dixon on this matter. They serve a valuable role in recruiting students to startup culture, but they shouldn’t be the only way students get excited.
