27 Apr Harvard Business School’s Annual Contest for Entrepreneurs is a Case Study Unto Itself
A dozen early-stage startups on Tuesday will make their case for why they should receive $75,000 and, perhaps more importantly, a whole lot of attention from the venture capital world.
Those are the rewards of the annual Harvard Business School New Venture Competition, which this year celebrates its 20th anniversary. To mark the anniversary, the Globe looked back at some notable participants in the competition.
(Read on Boston Globe)
One early winner’s business grew fast after the competition, but was humbled by the dot-com bust. A more recent victor’s potentially important product hasn’t gotten out of the development stage.
Those who fell short of the top prize are also illustrative of the contest’s history, including its founder, who went on to work in venture capital, and a company that was ridiculed by the contest’s judges but has since raised more than $150 million.
This year’s finalists include companies making bug spray that can last for days, wearable devices for women meant to guard against sexual assault, accessories to make football helmets safer, and an app that lets anybody with a car ship packages.
Throughout the school year, the judges, who include Harvard faculty, venture capitalists, and entrepreneurs, have whittled nearly 300 entrants to just 12. The contest ends Tuesday night, producing three winners — one each from sub-categories added over the past two decades.
The most straightforward category is open to any proposed business that includes at least one active HBS student as a founder. There’s also a category for alumni that requires competitors to have at least one HBS graduate on their executive team. Finally, companies in the “social enterprise” competition must focus on solving a major social issue. The winners, as decided by the judges, will each get $75,000, up from $50,000 last year.
Past winners and finalists have focused on fertility issues, ride-hailing in Asia and South America, and using Internet-connected devices to improve 911 emergency services. Some have grown to become well-funded companies, while others no longer exist.
Harvard wasn’t the first school with this kind of contest; the Massachusetts Institute of Technology’s pitching competition, for example, is closing in on 30 years of history. Nor is the contest the only one at Harvard, which since 2011 has held the President’s Innovation Challenge for the entire student body.
But each year, the HBS competition provides a fairly public look at some of the ideas bubbling up at one of the top business schools. And the two-decade mark offers a chance to look back at some of the companies that have been born out of it.
A dubious distinction
A few years back, Michael Schrader was excited when his company, Vaxess Technologies, became the first-ever two-time winner of the competition, collecting the business track award in 2012, followed by the alumni award in 2013.
It turned out to be a dubious distinction.
“Someone said to us, ‘Do you know why you were the only one to win twice?’ ” said Schrader, Vaxess’s chief executive. “We were the only ones who failed to raise venture capital funding within the first 12 months of winning.”
Under the contest’s rules, companies that have received more than $1.5 million in funding are ineligible for the alumni competition, he explained. In effect, his company’s lack of success allowed it to be a double winner.
Vaxess, which now operates out of an office at Harvard,did get plenty of meetings with potential funders after winning.
Those investors, however, weren’t particularly interested in putting money into the company’s product, which uses silk to allow vaccines to be shipped without refrigeration.
It’s a concept with the potential to make a meaningful difference in the way medicines are transported, but not the kind of thing guaranteed to make money. At least — given the long regulatory process facing such a product — not anytime soon.
Because the company struggled to attract funding, the $25,000 reward money mattered more for Vaxess than it may have for others. Vaxess used other pitch competitions, including the HBS alumni competition the next year to raise $160,000 that went to funding studies and other work. It eventually captured some bigger money, highlighted by two recent grants from the Gates Foundation totaling $6 million. But it has yet to seek Food and Drug Administration approval for its “silk biopolymer platform for encapsulating and stabilizing biological compounds.”
The launch of the competition was itself the result of student entrepreneurship, when a trio of students worked with faculty and staff to raise $25,000 in prize money and get the contest started. (After that, the school started funding the competition.)
Jennifer Fonstad, who launched the contest with classmates David Rosenblatt and John Iannuccillo, said she wasn’t interested in competing in it, as much as providing an opportunity for Harvard entrepreneurs to pitch their ideas.
“I saw myself much more as a catalyst for others to help people get their businesses started,” she said. “I was playing the role of a founder myself in launching the business-plan competition.”
Fitting, perhaps, given that since graduating from HBS in 1997, Fonstad has spent her career in venture capital in San Francisco — judging ideas and helping them get off the ground. But that doesn’t mean she lacked the entrepreneurial bug. She launched her own Bay Area firm, Aspect Ventures, in 2014.
Fast to rise, fast to fall
Tony Tjan credits his win in 1998 largely to his interest in a quickly growing sector: the consumer Internet.
Tjan’s Zefer Corp., an early Web-development consultancy, already had clients and revenue. That impressed the judges, he said; many of the companies in the competition were more conceptual.
“We were one of the first groups to actually be a real business,” Tjan said. “I had full intention of doing this as my business, post-graduation.”
The judges’ decision proved well-founded, at least for a while. Shortly after graduating, Tjan had raised $100 million. Zefer opened offices in Boston and elsewhere in the country and hired about 1,000 people.
Tjan said the performance in the HBS contest wasn’t the reason he got the funding — but it probably helped him “get a seat at the table.” More importantly, Tjan said, after winning the contest, its head judge, the famed venture capitalist Henry McCance, became a mentor.
Zefer was preparing for an initial public offering of stock when the dot-com bubble burst. The company was hit hard by the collapse, laying off hundreds, closing its Boston headquarters, and eventually selling its remaining assets to a Japanese computing company, NEC. The wild ride had lasted less than five years.
His Zefer days long gone, Tjan runs Cue Ball Capital, a venture capital firm in Boston. McCance is on its board.
The reviews were not great for Rent the Runway when it competed in 2009. The company, which offers high-end dresses and accessories for rent, didn’t even make the top 10. Judges’ comments included “classic Web startup rider” and “poor risk-reward ratio.” Today, New York-based Rent the Runway is worth more than $650 million.
But the privately held company’s performance in the contest wasn’t surprising to cofounder Jenny Fleiss, who recently left the company and this week was named head of Walmart Stores Inc.’s first startup, a shopping service called Code Eight. At the time, and until 2013, the contest was called the Business Plan Competition — and that was a poor match for Rent the Runway.
“We never really had a business plan,” Fleiss said. “One thing we constantly told people is that we were anti-business plan.”
Instead, she and cofounder Jennifer Hyman were focused on getting the company running by renting dresses on campus and determining whether the idea could scale up. The contest, she said, provided an opportunity to practice pitching and receive some feedback.
It may have helped. Shortly after flunking out of the contest, the company got seed funding from Bain Capital and has since raised more than $150 million.