Kenan-Flagler’s Twist On The VC Pitch

That afternoon, student teams will return to the entrepreneurs. Some entrepreneurs will receive feedback. However, students will negotiate with others and tender a terms sheet for funding. In this year’s competition, five-out-of-the six entrepreneurs received a term sheet. 

GEORGETOWN WINS AMONG JUDGES WHILE MICHIGAN CHOSEN BY ENTREPRENEURS

To evaluate teams, judges ask themselves, ‘which team would I most like to have as my venture capital partner.’ As part of this decision, judges weigh students’ on areas like due diligence, risk assessment, valuation accuracy, mastery of the venture capital process, teamwork, and persuasiveness.  This year, Georgetown University’s McDonough School of Business came in first and won a $5,000 prize. The University of Washington came in second (winning $2,500) with the University of Chicago’s Booth School of Business taking home third.

The University of Michigan’s Ross School of Business earned the Entrepreneur’s Choice Award based on evaluations from the startups. Here, students were assessed on due diligence and who startups would want to get money from.

According to Vernon, “all of the top three were amazing and any one could’ve won it.” So what separated them? For starters, “team personality” was a key differentiator. In layman’s terms, you might call it people skills. “If you look across the activities, Vernon notes, “every one of them is human interaction. You ask questions of entrepreneur, interact with judges, explain decisions, and negotiate to get to a deal.”

Venture capital rewards risk, Vernon adds. By incorporating who they were collectively into the competition, Judge tells Poets&Quants, Georgetown elevated its performance and came out on top. And this “voice” or “chemistry” – as Vernon calls it – came from practice. “[it is] generally the result of a lot of training during which you practice talking with entrepreneurs and venture capitalists and try to find your team’s voice. Many teams come to VCIC and lose because they are just another smart team, too risk averse to show some personality. It’s an industry looking for unicorns. The Georgetown team had a lot of personality on top of being exceptionally well trained.”

“You really need to practice the human interaction piece,” Vernon adds.

COMPETITION WINNERS HAVE A TRACK RECORD FOR SUCCESS

Among companies, HomeSwipe, an apartment app, received the “Startup of the Year” award for receiving the highest number of term sheets from student teams. However, judges rated Testive, an academic test prep service, higher than students did. Both firms had one thing in common according to Vernon: Simplicity. “Some of the other startups were more complicated – one had 3 different products. [Ventures like HomeSwipe and Testive] were easier to wrap your head around…and understand what it is and where it is going.” Vernon adds that both solutions appealed to large markets and could potentially be disruptive forces in their markets.

Participating in VCIC also leads to bigger opportunities. Vernon cites Sympoz (also known as Craftsy), which competed at VCIC 2012. Providing toolkits and training for hobbies like quilting, gardening, cooking, and photography, Sympoz has since raised over $100 million dollars in funding. And its co-founder, Josh Scott, was actually a VCIC champion in 2005.

Overall, 25% of VCIC entrepreneurs end up receiving VC funding. And that number jumps to 40% among competition finalists.

A PLATFORM FOR LEARNING, NETWORKING, AND DOING BUSINESS

Year-after-year, in post-competition surveys, Vernon shares that nearly three-fourths of participants acknowledge that VCIC was among the best educational experiences of their MBA careers. For Vernon, the competition’s appeal stems for enabling students to take on a role and immerse themselves into what venture capitalists really do. “Students play the role of venture capitalists – evaluating pitches from real entrepreneurs and choosing the most compelling plan to invest in. The experience is realistic and intense as they apply what they’ve been learning in their MBA programs as well their skills in communicating, negotiating and building rapport with potential partners.”

While Vernon concedes that “very, very few of these students will become VCs,” he shares that it exposes students to the foundation of business. “VCs are experts at making ideas come to life. That is a great lesson for a wide variety of business school students, whether they want to be consultants and need to know how technology solutions are coming to market, or they want to start their own company someday.” 

And students aren’t the only ones who benefit from the competition. Entrepreneurs can learn about gaps in their timelines, strategy, and resources from students. And judges can tap into potentially lucrative ventures. Best of all, the competition provides a platform for startups, students, and venture capitalists to network and build relationships critical for job hunting and future partnerships.

AN APPRENTICESHIP INDUSTRY 

Will events like VCIC replace traditional pitch and case competitions? While both have merit, Vernon leans towards the VCIC model. “The format of the event is designed to have as much human interaction as physically possible in such a short time frame. VC is a people business.  Students interact with founders and venture capitalists in a variety of ways – venture pitches, due diligence questions, partner meetings, negotiations – each section of the competition is a new challenge that includes interacting with other key players – not just a team, a case, a study room and a final presentation in front of some judges.”

And this interaction is what really makes VCIC special. “Venture capital is an apprenticeship industry,” Vernon concludes. “You have to practice it – that’s how you learn it. I can tell you how to negotiate– but you can’t do it until you practice it…[These] live interactions make it more real. You want to get students out of study room and get them interacting with people and doing things.”