When I first met the WePay guys on TechTrek, I asked them when they had written their business plan. They hadn’t.

I’ve been interning at WePay for a few weeks now, and I’ve had the opportunity to meet a bunch of really cool startup founders in Silicon Valley.  Most of them have raised significant capital, but not one of them has written a business plan.  I guess this makes sense for consumer internet plays, where traction is king (see point #3), but even the startups doing some pretty serious stuff, have never written a plan.

I was particularly surprised by this because Bill, one of the founders of WePay, was also one of the founders of the Boston College Venture Competition (BCVC), of which I am the current Executive Director.  Was I wasting my time?

A few months ago, I read an article that suggested that losing in a business plan competition was better than winning one.  As the Executive Director of BCVC, I had a pretty visceral reaction. After all, BCVC was entering its 4th year and it had already produced two companies that were accepted to Y Combinator and that went on to raise additional capital.  In addition to WePay, WakeMate (the BCVC 2009 winner) is making waves out West and getting ready to ship its product to thousands of early customers.  How could a business plan competition not work?

I guess it depends on what you mean by “work”.

In his article, Vivek Wadhwa argues that Business plan competitions don’t work because they don’t breed winning businesses: “Unlike winning a beauty contest, building a business is a marathon that requires steady and constant effort, surmounting regular difficulties, and living through emotional peaks and valleys.” No surprise there. Great ideas and a ton of money do not a successful business make. I get it, it’s all about execution.

So if success in a business plan competition is a poor predictor of future execution and commercial success, how can business plan competitions remain meaningful and relevant?

Before I get into all that, it’s worth noting that you need to actually start a business plan competition before you start trying to make it meaningful and relevant. So what do you need to start one? Well, the same things that you need to start a business:

• Capable and passionate advisors will help you structure a good competition, navigate the competition through the appropriate administrative and beaurocratic university channels, and put you in touch with alumni who are willing to participate as mentors, judges, etc.
• Good analytics. Getting people to actually compete is like optimizing a signup funnel. You need to attract as much interest as possible, and see where people are dropping off. Measure where interest is generated (what acquisition channels are successful), and where it is lost (if at all).
• Willingness to Pivot. You’ll make a lot of decisions about how to structure the competition. Some of those choices will be wrong. The quicker you can recognize and remedy wrong decisions, the better.
• Relentless Drive. Starting anything significant is tough, and starting it in a university is even tougher. Prepare for battle.

Making the experience relevant and meaningful is a bit more challenging.  First, I think positioning a business plan competition as the inception point of a business or as a predictor of future success is the wrong way to go – so I would throw that out.

A more realistic approach is to treat the competition as the point of conception – when business ideas are conceived, rather than when they are born. This profoundly changes expectations (not higher or lower, just different) and more clearly defines the purpose of the competition.

Although most startup founders have not written a business plan, almost all of them (who have raised money) have a pitch deck: 10 or 15 slides that neatly summarize the business.  These slides (presumably) show that the entrepreneur has thought critically about his or her business: how big is the market, why is this the right team, how long will it take the product to be built, how will customers be acquired, how much will it cost, how much is a customer worth, who is the competition, etc.

As much thought goes into a (good) deck as goes into a good business plan. Often even more thought is required, since boiling down complex ideas into succinct messages is a challenge in itself.  Most entrepreneurs, if they took the time, could pretty easily extend the information contained in a simple 10-slide deck into a robust 20-page business plan.  They usually don’t need to, though, because the people willing to write investment checks can (and do) usually fill in the gaps themselves.

I think participants in business plan competitions should look at it the same way: the business plan is just a construct in which to think critically about your idea/product/market, and a standardized way to present those thoughts to others.

From there, I think judging is easy:  are you (the judges, investors, etc.) convinced that this person has thought critically about their idea/product/strategy, that they’ve reached the right conclusion (specifically, that this idea is one worth pursuing), and that they are the right team to pursue it.

Implicit in this argument is that the judges and mentors have a thorough understanding of the product that the team wants to sell, and the market that they’re going after. The BCVC mentors are Boston College alumni who offer advice throughout the competition.  They generally come from the industry that the new business is looking to enter, or are veterans in the venture capital industry.  Teams are not required to work with mentors, but those that do are consistently more successful than those that don’t.

Business plan competitions should be looked at as a way to promote entrepreneurship at the university as a whole, as opposed to a way to select the best business ideas. The actual competition should be a secondary consideration compared to the opportunities for students to meet investors and other like-minded students, and to listen to successful and experienced speakers.

I agree with Vivek that losing a business plan competition isn’t the same as losing other kinds of competitions.  If you lose a business plan competition, you reap just about the same rewards as  if you win (save for a few thousand dollars).  In fact, losing may provide an even better experience, since it’s the first real taste of startup life.