Monday, April 2, 2018

Business Plan Competitions Don't Work - Or Do They?

I don’t know if you’ve noticed, but lately, there’s a renewed interest in Business Plan Competitions (BPCs) as a means of identifying and funding entrepreneurs in Africa. As an example, Kenya recently sponsored a call for Expressions of Interest to screen 10,000 SME’s and fund a large number of them. Startup of the Year Africa 2018 has just been completed with 44 countries participating, and BMCE Bank sponsor’s the prestigious African Entrepreneurship Award and there are many more. But there’s a problem - Business Plan Competitions don’t work. BPCs do not necessarily select the strongest entrepreneurs, they do not guarantee success in business, they do not identify which companies will have the strongest investment performance over their lifespan, nor do they demonstrate which business ideas will have market appeal and grow into unicorns. 

BPC’s often do identify innovative individuals with excellent communications skills, and if the winner of a BPC grant is also successful in hiring a skilled management team with finance, marketing, product development and technology skills, while at the same time receiving the long-term advice and counsel of a network of mentors and advisers, BPC’s may achieve the intended outcome of creating employment and contributing to a growing economy. In other words, if the ecosystem is efficient and provides the proper level of support, companies in BPCs may be successful.

Here’s another thought: BPCs have a greater reach than just the entrepreneur community. They stimulate the imagination, enthusiasm, and inventiveness of people who may not yet even understand that they are entrepreneurs, and the competitions give them the encouragement they need to make their innovative idea a thriving business.

A successful BPC isn’t about injecting grant money into the economy, but rather stimulating entrepreneurship.  It’s about carefully analyzing the participant companies’ business models, selecting those companies that appear to have the best chance of survival, qualifying the technical innovations suggested by the proposal to ensure they are credible, understanding the challenges ahead of the company once it receives an award, and then coaching winning companies to grow into job creation machines generating employment, paying taxes, and helping middle income countries become high income countries.

And that is the point of a competition isn’t it - to select the most promising ideas, and by providing funding, help entrepreneurs find the training, financing, prospective management team members, mentors, and other resources they require to be successful, and create employment.

So, maybe BPCs don’t work, but they are a highly effective economic development strategy employed by the public sector to demonstrate leadership by providing start-up funding that will encourage private sector investment in the winning companies and help them grow rapidly.