The Ultimate ‘Spine Sweat’ Experience: When MBAs Pitch Silicon Valley VCs

‘THE SPINE SWEAT EXPERIENCE’

The goal: To put them through what Kuratko, known as Dr. K to his students, calls the “spine sweat experience.” When he first started teaching entrepreneurship 33 years ago, explains Kuratko, his skeptical father, an entrepreneur himself, told him that “until and unless a student goes to bed at night and feels their spine sweat, they’ll never know what it is like to be an entrepreneur.”

The lesson stayed with him. For the prof, teaching his students to handle pressure is a key part of the entrepreneurial life.  “I’d say that last night a lot of these students were laying bed with their spines sweating,” he laughs. “These judges are going to be hard on them.”

He’s not kidding. For some of the students, the criticism is direct and unflinching. First up was Akin Adekeye, a former 34-year-old attorney, who is earning a joint-degree online with an MS in strategic management and the MBA. Adekeye needed the flexibility of an online program because he is married with an 18-month-old child and has recently moved from Houston where he had worked in a law firm to move to a new job in Seattle as senior counsel of a joint venture between Microsoft and GE Healthcare.

‘WHAT ARE YOUR COMPETITIVE ADVANTAGES?’ ASKED ONE VENTURE CAPITALIST

Unlike many of his fellow students, he also is already part of an existing startup team that has built the prototype of a new power generator based on six licensed patents from the University of Texas in Arlington. Sporting a jacket and tie, Adekeye dives into his pitch, explaining why they targeted Nigeria as their initial market.

He says that 80% of the population self-generates power and that power outages cost Nigeria $1 billion a year. As many as 40% of Nigerians last year experienced seven power outages in an average week. The propane-powered generators that his company hopes to produce would be more efficient and reliable and cost less than existing products, maintains Adekeye, who says he is looking to raise $400,000 to get to the launch date.

He puts up a pro-forma of the company’s financials and before he gets through the data, the first question comes at him as direct as a bullet.

“What are your competitive advantages?” asks one of the VCs.

Adekeye, who hadn’t provided an analysis of the existing competitive landscape, says ease of use and superior customer service.

“The words you use don’t make any sense,” responds the VC. “What do you mean?”

DESPITE THE CRITICAL REMARKS, THE STUDENT SAYS HE WAS PSYCHED WHEN HE LEFT THE ROOM

The student begins to expand on his answer, but none of the five judges are buying it. They believe it would be difficult to displace the diesel-driven generators currently in use and openly wonder why Adekeye wouldn’t go to a solar-based solution. “You are coming 100 years behind a well-established technology and now solar is taking off,” explains one. “And diesel has a lot of people in the market to fix it if something goes wrong.”

Another judge, already involved in a solar startup, tells Adekeye that it is possible to get solar to work for $150 per kilowatt of energy—not far from the $110 to $180 per Kw of power that the student is saying would be possible with his firm’s propane-powered product.

Despite the tough reception, Adekeye leaves the room without the slightest trace of disappointment. He later acknowledges that the idea didn’t get the warmest of receptions, but his confidence is unshaken. “Propane is cheaper than diesel and it is more plentiful in Nigeria,” he says. “Solar has so little penetration in the U.S. that it will take many years to have an impact in Nigeria. I was psyched when I left the room.”

‘WHAT IS THE BARRIER TO ENTRY?’

Next up is Greer, who had quit his job at Varian Medical Systems in Palo Alto in October of last year to work full-time on his startup with co-founder Jeff Grossman, his best friend from Syracuse University. Greer, who is already married, started the Kelly Direct program in the spring of 2013, and is passionate about what he’s doing. He started the Entrepreneurship and Venture Capital Association for Kelley Direct, and he’s committed to his business, regardless of the criticism he’s taking from the judges.

Greer and Grossman build their company by more carefully recruiting and training home care workers, paying them at above-market rates to lower turnover, and focusing on delivering care to the elderly in their own homes that is superior to anything else available in the market. But the judges, while acknowledging a market need for the business, aren’t convinced he has the right business model.

“If you want to franchise, you have to have something that is differentiated and scalable,” says another VC. “Training is not differentiated. What is the barrier to entry?”