The value of business plan competitions

Business plan competitions are a good way to build an entrepreneurial culture within a community or region.

What do we mean when we say that a community or region does not have a "entrepreneurial culture"? Or that an economy does not have a "culture which supports entrepreneurial risk-taking"?

I explore some of these thoughts here:

Entrepreneurs need networks to survive and thrive. An entrepreneur is a person who builds a business firm resources that he or she does not control. Networks become critical to success. The thicker and more trusted the networks, the faster resources flow to promising ideas.

When we use the term "culture" we are really talking about patterns of behavior and thinking that prevail in a group or region. These patterns are generally automatic in that we don't think about them; they come to us naturally. (In recent years, scientists have learned a lot about the connections between what we think -- our cognitions -- and how we behave. This research has given rise to cognitive behavioral therapy for individuals and groups.)

So, when we talk about a community or region that does not support entrepreneurs, we are really talking about an economy in which people do not have the natural habit to collaborate. That is, they do not think or behave in ways that regularly cross organizational and political boundaries to build trusting relationships. They are also not accustomed to building these relationships intentionally.

If we do not know how to build business networks -- or if these networks are not apparent or accessible to us -- we become averse to risk. Networks help us manage the risks we face. The concept of insurance is based on the idea of a network coming together to help each other manage risk. When we say that a community does not support risk-taking, we are really saying that the community does not have a strong and dynamic set of networks that entrepreneurs can easily enter and leverage.

Business plan competitions are one way to start changing this dynamic. Through the competition, a community or region can start identifying new networks of people who are capable of supporting fast growth companies. These networks engage people who have grounds in technology, finance, business development, accounting, and legal counsel.

Here's an example of a business plan competition in North Dakota. Read more.

I first started to understand the value business plan competitions when I came across an article by the McKinsey consulting firm in the late 1990s. Download the article. (Free registration required.)

As we began to promote business plan competitions at Purdue, we learned that there was not very much background research available to measure the economic impact of a business plan competitions.

At the same time, these competitions represent very high leverage activities, and they can result in new companies forming quickly.

Recently, The Lyles Center at Fresno State University introduced a new twist on business plan competitions. They are opening their latest competition to entrepreneurs from all over the country. However, they provide it is money and professional assistance only if the winning entrepreneurs decide to open the business in Fresno

In a recent post to the Economic Gardening Google group, Tm Stearns noted:

[Here is a] unique way to support  entrepreneurship while marketing a community across the nation. The Lyles Center for Innovation and Entrepreneurship at California State University, Fresno has launched this morning StartItUp, the first ever business plan competition hosted by a community to attract entrepreneurs from across the country and provide them with an exciting way to launch their business. The $250K contest ($100K cash and $150K services) is seeking executive summary submissions through July 31, 2008. Ten finalists will be brought to Fresno to present their plan at a community theatre with the winner presented at half time at the Fresno State/Hawaii football game on October 3. The funds are only available if the entrepreneur starts the business in Fresno. Of course, we will be chasing the other 9 finalists as well and hope that turns into multiple opportunities!

This new idea is yet another example of how economic development incentives are shifting from a focus on companies (which does not work very well) to  focus on people (which is a far more promising approach).