I spent the day today down at Georgia Tech serving as a judge in the semi-final round of their annual business plan competition. It was a ton of fun, and I thought I’d drop a post here with a wrap-up, along with some more random thoughts on business plans, business plan competitions, etc.

First, I want to say “thank you” to the entrepreneurs who participated. Without your willingness to open up your respective kimonos and step into the spotlight so a room full of complete strangers can dissect every nuance of your deal, there would be no learning experience here for anyone. And speaking of learning experiences – everyone learns at these things – including the judges.

I also want to say that from a practical level, it is very easy to sit across from an entrepreneur, read their business plan, listen to their pitch, and offer “advice”. Anyone can do it. It is incredibly easy to judge the efforts of others, especially when it isn’t your mortgage on the line.

I’ve certainly done my share of business plan writing and room pitching over the years. The reality is that it sucks to be that guy. You bust your ass for months, probably with a few others buzzing around you, and then you walk into a room full of “judges” whose sole purpose is to find fault in your work, and find a reason to say “no”. It gets worse when you only get a few minutes of feedback, and then are tossed out on the street.

For starters, I wrote my contact information and a personal note on the inside cover of each plan. I offered my help to these entrepreneurs when the event was over. Not that I am the all-knowing guy in the room, but if I’m gonna judge your plan, you at least should have the opportunity to reach back out later and get a deeper understanding of my thought process – and vice-versa. Besides, isn’t that what a community or a startup-ecosystem is all about?

I spent, on average, about 2 hours with each business plan. Yeah, probably way more than I should have. I would guess most judges of these things spend 15-20 minutes on each plan, maybe 30 at the most. But the reality is this: how can someone “judge” your plan, without really taking the time to read it and understand it? You can’t. Sure, you can point out the obvious things that jump out at you, but that is only scratching the surface of the work.

I made three passes through each plan, making various levels of notes in the margins as I went.

The first pass was designed to catch the “obvious” stuff, and to give me a feel for the author’s writing style and the gist of the business. The obvious mistakes are generally caught here.

During the second pass, I actually read the plan, and try to gain an understanding of what the play was about at its core. I start looking at how this thing is coming together – and what the potential holes are in the underlying assumptions. Is this really a business? If your EBITDA goes from 400K one year to 25M the next, I assume you are in the online porn business, and not the software industry as your plan says. Do you have greater first year revenues than the amount of capital you are raising? If so, why are you even here? Why are you taking my money in year one as an angel, and then waiting until year 4, 5, or 6 to get revenue positive?

During the final pass, I tried to reconcile things in my mind, do research on the net, and try to really provide some input on the top 2 or 3 challenges the team is facing. Have they missed obvious competitors? Or even new entrants? Are they marching down a “trail of tears” with their approach, or is there an easier way? More importantly – can I introduce them to a key new customer, strategic partner, investor, or other such resource from my network? Hopefully, at least some of the plans I reviewed took away a little bit extra from all of that. If not, maybe I’ll be able to help them down the road.

By the way …

The obvious or unnecessary mistakes suck. They are real buzz-killers. You get a plan in your hand for an exciting play in a hot space, and you see things like:

• An NDA staring at you after page one. Investors don’t sign them, and neither do business plan judges.
• The “weight” of the business plan. A 50 page plan feels like a brick in your hand, only bigger. Now multiply that times many plans and now I’m basically dragging around a 20 pound bag of cat litter all week.
• The readability of the plan. If your plan has 1/16 inch margins, 5 point font, and little whitespace, it reads like a government-issued report on the mating habits of ostriches – without the riveting pictures.
• Organization of the plan. Do you have all of the constituent parts (executive summary, marketing plan, product overview, etc.). Do you have a sales plan? Do you have a competitive analysis? Financials? Supporting documentation? Do you have page numbers? Is your contact information on the plan somewhere? Does your table of contents synch with the rest of the document?
• Concealment. Nothing reinforces the “we have a strong management team” comment in your executive summary like providing little-to-no info on the team, or worse, burying it in the back of the plan somewhere. What are you hiding?

Attention, entrepreneurs – you have enough real challenges in just trying to solidify your business model, financials, and market positioning. When you fail to pay attention to detail, and make the silly mistakes, it hurts you. Don’t let the little things kill you! There is too much at stake.

It is important to point out that while I spent 2 hours on each plan, a typical investor is going to spend just a few minutes (at best) to make a keep or pitch decision. Even though all of the plans that I read had issues (every business plan does), there were some good ideas in some of them. Business plan evaluation is a not an art, nor is it a science. it is a subjective activity that unfortunately exposes the business plan to the whims of the reviewer. If investors had the luxury of really digging into plans that they received, they would probably make far more investments. But the world doesn’t work that way. Spending time with a plan allows the reader to really uncover the heart and soul of the founders and the idea.

There were 19 deals in the competition, and we had 4 groups of judges (4 or 5 judges in each group). The deals themselves were from teams of Georgia Tech students (including the TI:GER program) and alumni. BTW, if you want to learn more about TI:GER, check out our recent podcast with Kathleen Kurre.

If I had to summarize the five deals our group judged, I would describe them as follows (in no particular order, as they collected my notes, I’m doing this from memory – hopefully, this is anonymous enough):

1. Niche, but lucrative space; company trying leapfrog the next-generation set of players in the space (not the current ones). Huge idea, potentially paradigm-changing play. Capital plan was very sane – only 700K needed to get to prototype. Very experienced SMEs. Interim CEO that is unproven, but sharp enough to ride the horse for now. Huge risk for the first year, though.
2. Hot space, crowded by big players, no product, no IP, management team of all engineers (no vertical experience, sales, etc.), unreasonable capital demands for their stage ($5M)
3. Super hot space – existing product, no early revenues yet. Very inexperienced management team, but they realize this. Very strong revenue model. Unreasonable capital demands at their stage ($3M). Business plan was a little tough to read. Pitch was iffy. But I smelled smoke – there is something smoldering under there.
4. Very niche space, truly probably the only player. Product set to launch this month. Super sharp CEO, very polished. Business plan didn’t get me terribly excited, but the pitch did. Not a massive hockey stick, but I think all the judges agreed, the idea could get bigger. Reality is, he could probably bootstrap further and not even need capital. I still think their demo was scripted, as the URLs from page to page were all to what appeared to be just standard .html files (and not a known server-side processing platform like PHP, Ruby, Java, etc.), but they claim it was live.
5. Hot space, and really solid, appealing product. Revenue model is good, but strategy for getting significant market penetration seemed difficult and risky. Lots of potential suitors – good team. Financials seemed off to me – too long for an exit, too long to get revenue positive, and the ROI there just didn’t jive with my gut.

Now if you read that list, you are probably thinking – “wow – there were a lot of crappy plans!”. Not at all. Each of these teams poured a LOT of time and energy into these plans, and by and large, it showed. Most of these deals will be fine, after some tweaks to their plans and pitches. For many, this was their first time pitching. Hey, if you are going to pitch the first time, better to do it in front of people who are trying to help you, rather than people who you’re trying to get to stroke a check.

In particular, something is drawing me to deal #3 above. Aside from the fact that their technology has a lot of potential, they stated in their plan that they were considering a move out of Atlanta. If you’ve been reading my blog for any amount of time, or have seen me in a drunken stupor on top of my soapbox screaming at the top of my lungs – you know that this bothers me. I spoke to them afterwards, and am going to try and help them refine their pitch and plan a bit. I think that with a small angel round, and some better execution, they’ll be cash flow positive in no time. We need bright, young, motivated entrepreneurs to stay here and be successful. Call it a quest!

I’d like to thank Kathleen Kurre and the good folks down at Georgia Tech for continuing to run this event. It is a ton of fun, and hopefully plays a small part in shaping the future players here in Atlanta. I’ve volunteered to be a mentor for the Georgia Tech TI:GER teams, and I look forward to getting more involved with their efforts …

Cheers.