Editor’s note: This article first appeared as our cover story in the latest magazine edition of Talk Business Arkansas. You can access the complete magazine online at this link.
When Seth Shumate created the biggest leap in solar cell efficiency since the early 1970s, he knew he needed a strong business plan, influential relationships in the industry, and a multidisciplinary team of individuals with skills different than his own. So he took a class and entered a contest.
Dr. Carol Reeves’ New Venture Development graduate course at the University of Arkansas has spawned 13 companies that have collected $15 million in grants and investments and employ 150 people. And it exists largely because, 13 years ago, Sam Walls with the Arkansas Capital Corporation created a business plan competition now known as the Donald W. Reynolds Governor’s Cup.
Forty-six teams from 13 public and private colleges and universities have said they will compete in this year’s competition. From written plans submitted to judges, 12 undergraduate teams and six graduate teams will be selected to present their ideas April 4-5 at the Chancellor Hotel in Fayetteville. They’ll present for 20 minutes and then answer questions for 15 minutes from judges watching to see how they handle the heat. In all, $154,000 will be awarded, including $25,000 to first place teams in both graduate and undergraduate categories. The top two graduate and undergraduate teams then will compete in a Tri-State Competition in Las Vegas against teams from Oklahoma and Nevada for a slice of a $118,000 pie.
For many of these teams, these are not simply fun class projects with a payoff at the end. Business plan competitions match ideas with investors.
According to Reeves, the judges at competitions like the Governor’s Cup and the Rice Business Plan Competition, where more than $1 million is awarded, are looking for deals.
“At Rice, the judges get the business plans in advance,” she said. “I’ve had teams get called before they go to Houston saying, “I want to set up a meeting with you now to discuss investment.”
Since 2009, Reeves’ graduate-level class has won 16 business plan competitions awarding $1.4 million in cash to students – a record she believes is unmatched in higher education. The winners of the 2008 Cup, Stan Zylowski and April Seggebruch, turned their idea into Movista, LLC, a company that sells app-driven software that allows companies to monitor the activities and results of outside field staff. The company signed its first contract in February 2012 with Tempur-Pedic and now has four national customers, 17 full-time employees, and three part-timers. It expects $2.5 million in revenues this year.
Zylowski said the Governor’s Cup introduced them to people who became mentors and, ultimately, investors.
“That’s the beauty of the competition is that it takes people with ideas, and it connects them with people with resources, and not just financial resources but intellectual resources,” he said.
Shumate, 28, was already working for Silicon Solar Solutions, another company created as a result of Reeves’ class, when he invented his process in December 2011. Solar cells are exposed to atomic hydrogen as they are being produced, making the cell’s surface less positively charged so that it is more efficient than competitors and also requires less silver. The patent application has been submitted and could be approved in a year.
He had a revolutionary product. He had experience. What he needed was a solid business plan and connections. So he and his fellow Silicon Solar employee, Matt Young, 25, enrolled in Reeves’ class. Both technically minded individuals, they attended a mixer organized by Reeves and met Trish Flanagan, a 31-year-old St. Louis native who had run a school in Honduras and also is a student at the Clinton School of Public Service. They also connected with Michael Miller, a graduate accounting student. Flanagan was the networker and organizational leader they needed to be president, while Miller became the chief financial officer.
They solidified their roles a few days later while bowling a few games at Ozark Lanes, and the company now known as Picasolar was born. Shumate’s process will enter the marketplace as a joint venture between Picasolar and Silicon Solar.
Shumate said he could have created his business plan and management team the old-fashioned way by writing the plan on his own and interviewing employees. However, he said, “It’s a really cost-effective way to do the exact same thing. We rely on our consultants and collaborators all across the globe to tell us the things that we don’t know. The things that we do know are how to write a business plan because Carol does such a good job at saying, ‘This is what it needs to look like. These are the elements that you need to have in there, and these are elements you need to think about to start a successful business.’ So yeah, it’s a really cost-effective way, and not only that, but you can get paid to do it, which is just a really amazing concept.”
Walls, chief executive officer of Arkansas Capital Corporation, made that concept a reality in Arkansas. After a series of economic studies over several decades showed it would become increasingly difficult for Arkansas to compete through traditional industrial development, Walls decided the state needed to invest in its own businesses. A venture capitalist, he had worked himself through college, been introduced to entrepreneurial concepts as an employee at Dillard’s, and then gone out on his own as an investor before joining Arkansas Capital. He wanted to give other college students the head start he didn’t have.
“The reality is that if you want to bring about change, the first thing you have to do is change the way people think,” he said.
He quickly found support for a business plan competition among the education community and among Arkansas Capital’s board of directors, who agreed to fund it partly with the company’s own money for three years while he found support elsewhere. The first year, 2001, demonstrated the idea had promise. By the third year, he found a sponsor through the Donald W. Reynolds Foundation, whose benefactor had founded Donrey Media. To make it even more interesting to the foundation, Walls proposed creating a Tri-State competition bringing together students from Arkansas, Oklahoma and Nevada, where Donrey had business interests. The first was held in Las Vegas in 2008.
According to Steve Anderson, the foundation’s president, Walls’ passion was part of what drew the foundation’s support.
“Leadership’s always a factor in every grant that we make, so with Sam’s leadership running the program, we felt comfortable that it would be a success, and it was a success and continues to be a success,” he said.
Walls agreed that it’s been a fruitful partnership. “I cannot say enough good things about those people, the Reynolds people, and doing business with them,” he said. “They are business people. We understand each other, and they were there when we needed them, and they have stuck with us all the way through this.”
Part of the goal of the competition is to produce companies such as Picasolar. But even more important is creating a statewide entrepreneurial ethic. Business education in Arkansas has tended to focus on teaching students to work for a corporation or manage a small business. When Walls created the Governor’s Cup, few students were learning how to bring transformative ideas like Picasolar to market. The first state winner in 2001 was a bowling alley.
“You can see the cultural shift,” the UA’s Reeves said. “When we got started, it was all a game. … It was a class project, so people just said they were going to do such and such. And they learned a lot. The education was tremendous. Even then, as a class project, it was just an amazing educational experience. But then, people started saying, ‘Okay, I’m actually starting to believe this.'”
Now it’s serious business.
Walls compares the multi-stage competition to the NCAA basketball tournament, where the best team can lose on an off day. The key is to survive and advance. The teams selected to compete in Fayetteville all have good ideas and refined plans. What separates the winners from the also-rans is how well they know their stuff and how likely their idea is to succeed.
“Every year it gets tougher to win, so it’s kind of a given now in my view that the technical piece of it is correct,” he said. “You’ve got to have what will sell to the judges as a doable project, and when you’re presenting that project, it’s show biz. It’s show time.”
Picasolar recently won $20,000 in the 2013 IBK Capital-Ivey Business Plan Competition at the University of Western Ontario. That’s a nice start on the $750,000 the company hopes to raise to bring the product to market.
Another UA team, ParadigMed, made the finals. Formed by MBA students Stephen Kayode and Tara Mink, the company is trying to bring to market a disposable adult male circumcision product for use in Third World countries. Kayode, a 41-year-old Nigerian native, says adult male circumcision is a principle strategy in combating AIDS, but most procedures are performed surgically. That means overseas non-governmental agencies and ministries of health will be interested in a product letting health workers set up shop in tents and do the deed on an outpatient basis using a disposable product. A prototype developed by a Conway urologist would sell for $300, but Kayode says manufacturers have told him that, with changes, the price point can be lowered to $25 per unit.
A third UA team, HomeDx, nearly made the finals of the Toronto competition. HomeDx has an agreement with a Canadian company to sell over-the-counter tests for infectious diseases and food intolerances. Student Calvin Smith, 28, who is also the director of business development for the UAMS Northwest campus in Fayetteville, has lofty goals and well-connected partners, including Jeremy Wilson, a former Walmart executive and now chief administrative officer of Rockfish Interactive, and Kevin Clark, CEO of IVAX Diagnostics, but he’s the only student among the principals.
He said the company hopes to have a 10,000-square-foot manufacturing facility in Northwest Arkansas in two years employing 50 people with an average salary of $75,000. A former Governor’s Cup judge, Smith has used the class and the business competitions to make contacts and raise much of the $250,000 HomeDx needs to gain FDA approval.
“It’s easier to get funds from some of these people that way than it is to just call and say, ‘Hey, can we get a meeting?'” he said.
John Brown University’s undergraduate Strategic Management class has produced teams that have placed first and second in both the state and tri-state competitions the past two years and in 2009. Two businesses have grown from the program, including Agricultural Food Systems. That company, founded by former student Lawson Hembree, sells a device developed by a University of Arkansas scientist that measures the tenderness of beef carcasses on the production line.
Instructor Eva Fast said students enjoy the real-world nature of the class and the competition. They also understand that it could result in them owning their own business.
“It’s an opportunity to get them in front of such high-caliber judges,” she said. “(It) really boosts their confidence before they go into their professional careers and kind of opens up their ideas for their own careers. You know, this Lawson Hembree, he didn’t know he was going to become an entrepreneur before this class, and it definitely opened up windows into that.”
Farther south, Lindsey Fowler, a junior at Ouachita Baptist University in Arkadelphia, is trying to market her company, TrustedWills.com, which would enable users to create wills, living wills and powers of attorney documents online for $50 per document or $150 for a married couple to do all six. She won a recent Business Plan Battle of the Ravine involving teams from OBU and cross-street rival Henderson State.
In that contest, she completed an online will in less than eight minutes while describing her product to the judges. Like Calvin Smith, she also has partners outside the competition: OBU Hickingbotham School of Business Dean Bryan McKinney, who conceived the online document idea, and former OBU professor Terry Sargent, who wrote the program. Fowler is in charge of organization and marketing. The product is scheduled to go live June 1, but the site has been designed and can be viewed at www.trustedwills.com.
The only thing that’s keeping it off the market is that active businesses cannot compete in the Governor’s Cup, and Fowler wants to take advantage of the competition’s benefits. According to McKinney, the Business Plan Battle of the Ravine came into existence so that students would get more involved in the Governor’s Cup.
“If the Governor’s Cup decided to quit doing what it does, which we know it’s not going to, we’d keep doing it,” he said. “This has been a really neat thing that’s kind of created a life of its own that’s just been fun for our students and faculty.”
That’s exactly why Walls started the competition – to encourage the entrepreneurship ethic in Arkansas education to take on a life of its own.
Arkansas Capital now sponsors business plan competitions for students in grades 5-8 and grades 9-12. Walls is hoping to expand it to grades 1-4 so that students are exposed to entrepreneurial concepts throughout their educational careers. He says it’s one of his company’s greatest successes, which is saying a lot for an organization that he estimates has invested half a billion dollars in Arkansas companies.
“Other people would not have taken the risk that we took to make this happen, and I understand when I back away and look at it why I have board members who say it’s the greatest thing we’ve ever done,” he said. “And they’re not talking about just the product and this sort of thing. They’re talking about what this has meant out in the state, out in the marketplace.”
Walls added, “You’ve heard about how the schools were not even into teaching entrepreneurship and this sort of thing. Let me tell you: Harvard and MIT and Stanford and all those people, they’ve been teaching entrepreneurship for a long time. It’s not new to them, but we were not doing it. Now we do it.”