Student entrepreneurs pitch the next big idea

Students gain the experience, contacts and confidence necessary to launch their own companies.

A student promotes his e-commerce site, fairautorepair.com, during the competition. Photo by Mary Levin.

From the stairwell, the voices sound like a distant river. At the doorway, they grow to a dull roar. Finally, as if rounding a bend and finding a waterfall, you enter the HUB’s West Ballroom and the noise becomes a torrent—raw capitalism at full churn.

Inside, 35 teams of business students from four universities are striving to make a splash. And with good reason. They are pitching business plans—everything from a drive-up video store to a funeral parlor co-op—to people who could help any one of them become the next Bill Gates … or at least the next Pete Findley.

Findley, ’98, may never match the Microsoft mogul’s billions, but this University of Washington graduate already has a place in history. Findley and his former partner and classmate, Alexa Ingram-Cauchi, won the University’s first Business Plan Competition last year. Since that time, Findley has built their contest entry, Cybercamps, into a multimillion-dollar business.

On this gray day in May, UW student Jonathan P. Nicholas is trying to be the next Findley—and pocket a $25,000 first prize.

His booth is part of the “investment round” of the 1999 Business Plan Competition, the marquee component of the UW’s burgeoning Program in Entrepreneurship and Innovation (PEI).

Students are crammed into the HUB with their elaborate booths to display, demonstrate and describe their projects. They also prowl the ballroom floor in pursuit of the bankers, business owners and venture capitalists who are judging the contest.

Nicholas is working the room like a highbrow carnie. Clad in a dark blue suit with a white handkerchief tucked into his breast pocket, he spots Bill McAleer cruising between booths.

The purple ribbon attached to McAleer’s name tag is like blood in the water. It means the Seattle venture capitalist is one of the 50 judges toting $1,000 in fake “PEI money.” After visiting the booths, judges “invest” in the companies of their choice. The 16 firms gleaning the most PEI dollars advance to the next round.

McAleer, managing director of Voyager Capital, has done his homework, reviewing summaries of each contestant’s business plan and taking note of those worth visiting during the HUB’s hubbub.

Arts Patron Magazine—the brainchild of Nicholas and his partners, Andrew Tempest and Matthew Carr—was not on McAleer’s list. But even the best-laid plans of a successful venture capitalist are no match for a budding entrepreneur’s bravado.

Clutching a full-color mockup of the magazine, Nicholas intercepts McAleer as he is headed to another booth. “Bill,” he shouts as he sticks out his hand, gives a firm shake and makes his pitch. Arts Patron will be a lifestyle magazine distributed free to members of various arts organizations such as the Seattle Symphony and Pacific Northwest Ballet, Nicholas explains, and will draw advertisers coveting a Mercedes-driving, Chardonnay-sipping audience.

Despite the pitch, Nicholas didn’t get much of McAleer’s PEI money. “I gave him a little bit, mainly because he had a lot of chutzpah,” he explains later. “I gave more to a couple of others.”

McAleer may not be overly impressed, but other judges are. Arts Patron Magazine survives the investment round. The following week, it advances from the semifinals to the final round. Later one night at the conclusion of a banquet at Bell Harbor Conference Center on Elliott Bay, the winner is announced. Nicholas and friends collected the big check—and something even more valuable than the real $25,000 in startup funds it represents.

Professor Gary S. Hansen, director of the Program in Entrepreneurship and Innovation

“The money’s trivial compared to the exposure and contacts they made during the event,” says Gary S. Hansen, director of the Program in Entrepreneurship and Innovation.

For the Arts Patron partners—all M.B.A. candidates at the UW—as well as members of the 34 other teams, the Business Plan Competition fostered the kind of real-world exchanges “you couldn’t buy (for) $25,000,” Hansen says.

Nicholas agrees.

“It changed our outlook on the business plan,” says Nicholas, who with his partners plans to launch Arts Patron in Seattle later this year and eventually publish editions in other cities. “Even though we knew it was a good idea, having that sort of interest has impressed upon us that it really was quite a good idea.

“I’ve also been impressed by how the business community has reacted to the Business Plan Competition,” continues Nicholas. “I didn’t realize that so many people out there knew it was happening and were interested in the result.”

University officials also are pleased, but not entirely surprised. After all, what better place to inject entrepreneurship into the curriculum than the hometown of companies like Microsoft, Amazon.com and Costco? And before them, Nordstrom, Eddie Bauer and REI?

Retiring Business School Dean William Bradford

“The personality of this region is one of entrepreneurship,” says William D. Bradford, retiring dean of the UW Business School. “This is an area where businesses that have been created from scratch are a foundation of our economy.”

But that wasn’t always the case. Or at least it wasn’t embraced.

When Doug Overturf graduated from the UW with a business administration degree in 1968, the University was “cranking out people to go to work in big corporations,” he recalls.

There was “nothing” like PEI at that time, he says, noting the curriculum didn’t even stress sales skills, let alone entrepreneurship.

Founder and co-president of medical equipment distributor CoMedical Inc., Overturf serves on PEI’s 20-member advisory board. He helped judge the semi-final round of the competition.

Like entries in the NCAA basketball tournament, the 16 semifinalists were ranked according to how much PEI money they had earned, then seeded into one of four groups.

The four teams in each group bared their business plans, including financial statements, to separate panels of judges. Each panel then picked the strongest team in its group to advance to the “Final Four” championship round later that afternoon.

During the final round, the four teams described their companies to seven more judges—all founders and CEOs of one or more companies and acknowledged “master” entrepreneurs. They included David Giuliani of Optiva, named the nation’s 1997 Entrepreneur of the Year by Ernst & Young, and Findley, who launched a tradition of having the previous year’s winner help judge the finalists.

Although both undergraduates and masters candidates must enter the Business Plan Competition to earn a PEI certificate, “this is not a classroom exercise,” says Connie Bourassa-Shaw, managing director of PEI. “They’re here to win. They want seed money. They want to start their businesses.

“Some of these companies already have been started. They’re up and running.”

Besides participating in the Business Plan Competition and several other activities, PEI undergrads and M.B.A.s must complete separate sets of core classes to add a PEI certificate to their regular degrees.

Undergrads start the program as juniors. Many of the companies entered in this year’s competition were conceived in their first required class, Creating a Company.

Jerry Ralston, a professor of marketing and internal business, teaches one of the course’s four sections.

Or does he?

“We don’t try to teach them anything,” he explains. “We just try to keep them out of trouble.”

The process reverses the normal order of instruction, placing practical experience ahead of lectures and book work.

“The thinking behind it is it will be more beneficial to them to have the experience of starting a company if done totally on their own at the beginning … rather than at the end,” Ralston explains. “Having gone through the exercise, the classes will have a lot more meaning.”

Students begin by splitting into five teams and then preparing business plans for an in-class competition. The contest’s top three teams then spend the rest of the two-quarter sequence forming, launching and operating their businesses.

Along the way, they obtain licenses, incorporate and apply for startup loans from Wells Fargo Bank, a major PEI booster.

“It’s sort of understood that they’re going to get the loan, but we don’t make it easy,” says Ralston.

Students from the losing teams must apply for positions with the successful teams. “It’s kind of like working really hard on your job and getting fired,” says Ralston. “They are absorbed … not always very smoothly. But that’s part of the educational process, too, and a tremendous learning experience.”

At the close of the quarter, students must disband the company. If they lost money, they owe Wells Fargo nothing, but if they finished in the black, they must repay their loan. Any additional profit goes toward repaying the loans of less successful classmates and building a reserve to repay loans for future classes.

For many, this isn’t the end, but a beginning as numerous students choose to restart their companies at their own expense.

The course’s sink-or-swim approach prompts some students to bail out early, but “the students who finish have almost to the last person said what a tremendous leaning experience it was,” says Ralston.

You won’t get an argument from Findley. He says PEI helped steel him for the real world, where “if you make a mistake, you are the one who has to fix the problem. You learn the best that way. And you learn the fastest.”

PEI instructors “really turn you loose,” he says. “If you trip, they’ll help you sometimes get back on your feet. But it’s by and large up to you.”

Findley’s company is setting a tough standard to follow for future Business Plan Competition champs. Cybercamps conducts weeklong computer courses for children 8-16 years old on college campuses in five western states. The company has 16 full-time employees and 80 seasonal instructors. After earning $1 million in its first year, Cybercamps is on track to triple that this year, running 40 camps and serving 3,500 children.

“The goal is to build the company up to a national brand,” Findley says.

If he succeeds, it won’t be the first time such a dream became reality for a fresh-faced Seattle entrepreneur (the 20-something Findley declined to state his exact age for fear it might damage his credibility).

The success of local startups, especially in high-tech, has transformed the image of business from hidebound to hip for a whole new generation lured by the passion, creativity and potential wealth entrepreneurism represents, says Findley.

“Seattle is a hotbed of entrepreneurial activity,” he says. “It doesn’t matter what the field is. There’s just an amazing amount of successful entrepreneurial companies that have come out of Seattle.

“I think the University of Washington saw a natural fit and made a correct decision in putting a lot of thought and emphasis on this program.”

PEI grew in two phases, the first slow and serendipitous, the second rapid and planned. Ranked 46th in the nation two years ago and 12th last year by Success magazine, the UW’s entrepreneurship program is climbing toward top-five status, says Hansen.

“I wanted to have a top 20 program right now,” says Bradford. “It’s probably done a little better than I anticipated.”

Bud Saxberg, professor of management and innovation, got the ball rolling in 1990-91 when he used a $10,000 donation from an alumnus to build interest and momentum around the study of entrepreneurship, says Hansen.

Over the years, a handful of courses were offered, internships created and student organizations formed, but the program was not a department priority.

“There wasn’t really a strong curriculum here and there wasn’t a strong capstone event,” says Hansen.

That began to change in 1996 after the business school completed a new strategic plan that identified entrepreneurship/innovation as one of three focal points for the future. The others are management of technology and international business.

“We teach the classic fundamentals,” says Bradford, “then we offer our students the ability to get world-class education in those three areas.”

Adopted after consultation with the local business community, the plan fits the region’s profile well, says Bradford, especially PEI.

Bradford dismisses the notion that the current entrepreneurial fire will flicker as soon as the economy cools, snuffing the careers of students hoping to start their own businesses.

“No matter what the economic climate, entrepreneurship and innovation is going to be a strong educational concept,” he says. “In a down time more than other times, firms need to be able to take risks and innovate to survive.”

Besides, says Bradford, the sizzling pace of technology will likely keep the fire burning.

“I think there is a fundamental shift because we’re always going to be coming up with new ideas,” he says. “The issue is how do you change that idea into reality. That is always going to be a key issue and a fundamental one.”

What’s more, the skills PEI grads acquire also make them attractive to established companies, says Hansen. “What makes an employee valuable is the ability to create new business,” he says.

Venture capitalist McAleer says the curriculum provides “a solid footing” and students are “well-trained to go into other entrepreneurial companies as employees as opposed to founders.”

Hansen considers the program a resource for the entire University. Students from other disciplines such as biology or computer science can enroll in some or all of the courses and gain the skills and contacts necessary to turn their ideas into the next biotech or software “phenom.”

“There are entrepreneurs all over the University of Washington campus,” he says. One 1999 entry, Cakes OnLine, was created by two law students.

Hansen and Bourassa-Shaw are key elements in the success of the program.

“I took the risk that this would be an area of value, but the people who made this work are Gary and Connie,” says Business Dean Bradford. Earlier this year, Ernst & Young gave Hansen a “Supporter of Entrepreneurship Award” for the state of Washington.

Although the University has hired two assistant professors specifically for PEI, faculty with other backgrounds and instructors from the private sector teach many of its courses. The formal study of entrepreneurship is so new that the pool of potential professors is shallow.

That’s one reason an endowed chair for the program—created by Michael Darland’s $1 million donation—sits vacant. Darland, ’65, ’69, is a PEI board member and local entrepreneur with several startups under his belt.

“We don’t have a lot of faculty who have done the research or leadership (in entrepreneurism) fitting an endowed chair,” says Bradford.

Another reason is that the University must compete with approximately 30 other schools around the country with entrepreneurship chairs. Most boast fatter endowments, says Bradford.

Bourassa-Shaw noted that not everyone at the University considers entrepreneurship worthy of academic emphasis, especially if it comes at the expense of support for other fields. “There is a group of people who think there is no intellectual content to entrepreneurship,” she says.

Ultimately, says Bradford, PEI will be judged by the number of new companies its graduates create. But it also should be measured by how many students in established companies say PEI enhanced their careers, he says. Other yardsticks will include building a tenure-track faculty and grooming the Business Plan Competition into a star of the Pacific Northwest business scene, Bradford says.

Darland, itchy for the UW to fill the chair he endowed, hopes that happens sooner rather than later.

“I think they need to get it under way a little more aggressively,” he says. Compared to entrepreneurship programs at other universities, the UW is “in the game. They’re not on the sidelines. (But) they’re not the leading team on the field.”

Still, all of Bradford’s goals appear within reach. Enrollment is climbing, alumni support spreading (grads of the program have formed Friends of PEI), private-sector recognition building and the Business Plan Competition, which is open to students from neighboring universities, improving.

Not only did the number of entries grow from 23 to 47 (12 were eliminated before the investment round), but the quality rose this year as well, says McAleer. The competition drew entries from students at Seattle University, Seattle Pacific University and Pacific Lutheran University as well.

“It was a bigger success in general,” he says.

MIT’s business plan competition is the gold standard for the 20 or so such contests held nationwide every year. According to Newsweek, it has generated three dozen startups in 10 years and regularly attracts venture capitalists—not just as judges, but as eager investors.

Hansen predicted similar status for the UW competition.

“In a couple of years, you won’t want to give up the opportunity to come to the UW one,” he says.

Whiz-bang business ideas … and a few fizzles

One PEI judge gets a pitch from an eager entrepreneur. Photo by Mary Levin.

This year’s Business Plan Competition was the UW’s second such contest, but the first to include an “investment round.”

It won’t be the last.

Part carnival, part serious business, the event captured the spirit of entrepreneurism in way that no chart or graph could hope to match.

“When I got here and actually talked to the people, it was so much more exciting than what I read in the plan,” says Terry Byington, executive director of the Washington Council of the American Electronics Association and a judge in the competition.

“The experience these people are getting here, having to pitch themselves over and over again, is invaluable for their careers,” says fellow judge Jennifer Boyer, ’96, ’98, commercial banking relationship manager at Wells Fargo Bank. “There were some good sales people here.”

The previous year, students were judged solely on their written material and oral presentations. The investment round allowed students to bring their business plans to life.

Or, in the case of one idea, to death.

Amid the wide variety of booths students fashioned to hype their businesses, one entry buried the competition.

The company, a co-op intended to strengthen the purchasing power of independent funeral parlors, turned heads by displaying an open casket. A mound of miniature Baby Ruths and Butterfingers sat on a nearby table. A sign read, “It’s such a sensitive business.”

Many students wore matching golf shirts emblazoned with their company’s logo. The team from On-Site Deluxe Car Wash donned white T-shirts and blue jeans with white towels tucked in their left front pockets. Their rivals at fairautorepair.com wore spiffy white coveralls over dress shirts and ties.

Just about everybody flashed business cards and flyers.

But showmanship only went so far. Judges wanted to see gumption as well as gimmicks.

“I went with passion, the passion of the entrepreneur,” says Brian Donaldson, ’83, ’88, describing the companies he favored. Donaldson is president and CEO of Authentic8 Inc., a software producer. “There are a lot of good ideas, but in an entrepreneurial endeavor, the person is what really makes a difference,” he says.

Other winners in the competition included fairautorepair.com, which gives on-line car repair estimates; allstudents.com, offering comprehensive Web pages for college campuses; SmallWorld.com, an electronic shopping mall for Third World artisan imports; and The Straight Edge, a men’s hair salon.

For sheer determination, it was hard to top the team from Adventure Cove, a proposed amusement park near Olympia.

Partners Michelle Blake and Dece Todd traveled from Pacific Lutheran University to enter the competition. Along the way, their props—a treasure chest full of small toys and a 6-foot tall papier-mâché lighthouse—flew out of the back of their pickup.

Although both items remained attached to a rope, the treasure chest coughed up numerous toys and the lighthouse took a beating as they cartwheeled down I-5.

But the spirit of the entrepreneur prevailed. Arriving at the competition just five minutes before it started, Blake and Todd restocked the treasure chest, taped the battered beacon together and found a way to smile.

There was only one catch. “We’re afraid to turn (the lighthouse) on,” says Todd. “We might electrocute somebody.”