It was standing room only at MIT's Sloan School of Management last month as 150 teams gathered for the first round of eliminations in the school's "I Wanna Be a Gazillionaire Geek" contest. The students were competing to offer the best business plan for a newfangled start-up. Why work for General Motors or anybody when you can invent your own company, strike it rich--and retire before you're 30? The prizes: $50,000 in seed capital. The MIT students had digitalia and electronic commerce and the Internet on their minds: 23 of the teams had ".com" in their names, while nine began with an "e" and four more began with an "I." In the age of eBay and Amazon.com, wouldn't yours, too? In all, there were 600 contestants--ranging from the PayMyBills.com team to RoboToys to e*dental.com, which aims to provide... one-stop shopping for dentists worldwide. Each of the semifinalist teams had just a minute or less to pitch its great idea that would change the world--or at least make them rich while trying.
Once upon a time, M.B.A. students wanted to grow up to be mere investment bankers on Wall Street. Now the ambition at American business schools, even the elite ones like Harvard and Stanford and MIT, is to be the next Bill Gates or Jerry Yang or one of the thousands who've made millions in the new business landscape that the Internet has created. Harvard's on the East Coast, but it's now got a full-time administrative outpost in Silicon Valley: each winter, hundreds of students descend upon the Valley to look for jobs at established companies like Apple and Intel or, better yet, to pick up the entrepreneurial bug. But despite the myth of the garage start-up, it usually takes investment dollars and marketplace connections to unleash a revolution. Programs like MIT's 50K Entrepreneurship Competition or the Wharton School's Venture Fair--the ultimate talent shows--help tomorrow's tycoons get launched.
In a few weeks, the MIT finals will be held for the remaining 39 contestants. These days, the teams are preparing full business plans for the competition judges, who are venture capitalists, "angel" investors and veteran entrepreneurs. The microEngine Corp. team, for example, will be pushing its proposed gas-turbine engine that's the size of a nickel. They say the device will be able to power portable electronics like laptops and cell phones, making batteries obsolete. By contrast, the idea of Zippy Cool Inc. strives only to make Budweiser better. Using a thermal electric device used by NASA, Zippy Cool has invented a sleeve to wrap around a beer can--to chill it in minutes. Sort of the opposite of a microwave oven--Mr. Freeze at your service. Clever ideas--but are they commercially viable? Proving they are is the key part of the pitch for these entrepreneurial young guns.
Venture capitalist Mark Gorenberg of San Francisco calls the B-school competitions "May Madness," the gearheads' response to the NCAA's basketball "March Madness." Over the last few years, virtually every major business school in the country has organized one. In the classroom, the interest in entrepreneurship has spawned new seminars and lectures. At the University of Chicago, enrollment in entrepreneurial studies since 1995 has doubled; at MIT, it's more than tripled. Student interests represent a "sea change," says Stanford engineering professor Tom Kosnik. "The twenty-somethings realize life in corporate America no longer offers job security--just grueling, unpleasant work which you do like a dog and then get laid off." The Internet has changed things. "It's like the end of the 1800s when the railroad opened up a distribution market for mass production," says the University of Chicago's Steve Kaplan. You still work like a dog, but have the chance to earn more biscuits.
This generation of tycoon wanna-bes likes the competitions because they offer a way to get advice and make contacts that wouldn't otherwise be available. Just ask the Sierra Sky Technologies group at Stanford. The three research biologists spent eight months trying to interest the business community in a device to eliminate organic molecules from the air. Even though their small, mobile afterburner could theoretically do away with most urban pollution--not to mention indoor irritants like dust mites--they found no takers. "We're biologists, not businessmen," says team member Laura McIntosh. Then they entered the 1998 Stanford Entrepreneurs Challenge, hooked up with business students and made it to the finals. Today they're in negotiations with three diesel-engine companies eager to comply with new government guidelines to reduce emissions.
The contests are typically run by students, but funded by major business interests and judged by big players. The investment community watches it all like piranha at a beach; venture capitalists love to troll university Web sites for previews of the competing business plans and then judge the contests firsthand. Gorenberg's firm sends judges to MIT, UC Berkeley, Stanford and the University of Texas. Nasdaq sponsors the international business-plan contest at UC San Diego. Today, students; tomorrow, members of the exchange!
MIT's, now in its 10th year, is the best-known of the competitions. It has generated more than three dozen start-ups. There's software company Stylus Innovation, the 1991 winner later acquired for $12.9 million. And Internet security firm Firefly, the 1995 winner later bought by Microsoft for $40 million. Flash Communications, an e-mail company, didn't even make it into the semis in 1997, but last February it, too, sold out to Microsoft, for $18 million. The latest hit is last year's co-winner DirectHit, a Web search technology that targets sites by popularity. DirectHit incorporated and raised $1.4 million from VCs in a three-day trip to Silicon Valley before its plan even reached the MIT finals. DirectHit won, but by that time the trio was flush enough to give the prize money back.
As popular as the contests are, only a small percentage of students wind up incorporating. That's probably wise. Start-ups are not for the fainthearted, especially in an economy where an M.B.A. might pull down $135,000 at a regular job. Michael Mochel learned the hard way. His business plan was to sell "playons"--wax crayons shaped like cartoon characters. His team from UC San Diego won the 1995 intercollegiate bowl at the University of Nebraska. Buoyed by their success, the team landed a deal to sell playons shaped like the Ziggy mascot at the Atlanta Olympics. They sold 20,000 early on--but 80,000 never made it to Atlanta because the distributor went belly-up. Lessons learned? "We didn't want to start small," recalls Mochel. "We got great advice in the competitions--but we ignored it." There's always law school.