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Something about startup competitions just doesn't feel right

July 11, 2010

It's tough to put my finger on exactly what it is. I think it comes down to one simple question: What is the objective of a startup (or business plan) competition? Is the objective to generate interest in entrepreneurship, to get more people talking about startups and interested in the process? Or is the goal to provide validation for startups and indicate, in some way, that some startups can be judged to be more likely to succeed than others.

It seems like the process for competing in business plan or startup competitions is only tangentially related to what really needs to be done to launch a real, viable startup. If your goal is to launch a company, which I assume is the goal of most of the participants, then I have a feeling that excelling in the environment of these kinds of competitions is, at best, inefficient use of time and effort and at worst, teaching potential entrepreneurs the wrong things to focus on for launching a company.

Of course, this is assuming that there isn't a strong correlation between winning or placing in a startup competition and general success as a startup company. I wonder if the success rate of companies participating in startup competitions is any different from startups "in the wild" and if this data is available somewhere.

This unsettling feeling with regards to startup competitions was recently stirred up again after attending the Momentum Summit put on by Scott Kirsner. One of the guest speakers was the Chief Scientist at Akamai. He spoke about the startup history of that company and talked briefly about the MIT 100K competition (then called the 50K) at Sloan, a club program at MIT. I'd often heard Akamai trumpeted as one of the success stories of that particular competition. At one point he said something to the effect of "The common mythology is that we won the 100K competition, the truth is, we didn't even place in the final round."

Akamai is interesting from a couple of perspectives. The first, if we're assuming that startup competitions are for generating interest and entrepreneurial activity, it was clear from the story that Akamai would never have happened if it wasn't for the impulse from the 100K competition. On the other hand, one of the most successful companies to emerge from the 100K was eliminated, and didn't even place in the competition. Granted that's only a single sample, but does it maybe indicate that winning such a competition has no real correlation to success as a company? In that light, what does it mean to win a startup competition? If winning is relatively meaningless from the perspective of startup success, what's the impetus to participate for people for whom that's the real goal?

Startup competitions are popular because they overlay structure, clear rules for winning and losing over an inherently messy and unpredictable process. I think that's why most schools and governments like startup competitions, they make the unpredictable predictable and establish a clear way to crown winners and losers. Startup success is, unfortunately, a very messy and unpredictable affair.