Sonoma Mountain Business Cluster and Sonoma State University have teamed to produce the first Seed Round Business Plan Competition.
With the headlines still full of stories of high unemployment, tight credit and threatened redevelopment funds, the timing couldn’t be better for a ray of hope. This spring, the North Bay is playing host to a new business plan competition, the result of a burgeoning partnership between business and academia. The competition has the potential to launch one very lucky winner (and possibly many of its participants), into the world of entrepreneurship. Organizers are betting on its ability to create roots in the community and grow opportunities for employment throughout the North Bay.
The Seed Round Business Plan Competition is being co-produced by Sonoma State University’s School of Business and Economics and the Sonoma Mountain Business Cluster (SMBC), a business incubator founded three years ago in Rohnert Park. The mission of SMBC is to create high-value jobs by helping local entrepreneurs and startup companies connect with the investing, mentoring, networking and physical resources they need to succeed. Housed in Sonoma Mountain Village, an eco-friendly complex near the outskirts of town, SMBC currently contains a wide variety of businesses, including software firms, services and companies developing environmentally friendly technologies and products. By being part of the incubator, the companies are able to share many tangible things, like copiers and conference rooms. More important, they’re able to support each other by sharing experience, ideas and contacts.
North Bay iHub
In 2010, the North Bay was given the distinction of being named one of 12 California Innovation Hubs (iHubs) by the governor’s Office of Economic Development. SMBC acts as the coordinator of the North Bay iHub. Ivo Austin, an attorney and SMBC business development manager, describes one of the program’s goals as the commercialization of technology. This often means trying to find inventive ways to get business creators and investors together to facilitate the movement of new technologies to the marketplace.
The relationship that the leaders of SMBC and Sonoma State University (SSU) have worked to cultivate over the last three years played a critical role in the North Bay’s selection as an iHub. Each of the designated iHubs was founded on a partnership between local universities, business incubators, research parks or federal laboratories, and other community organizations and municipal governments with a shared interest in economic development through innovation. Another example, the Greater Mission Bay Area iHub, located in San Francisco, is based on a partnership between UC San Francisco, the California Institute of Quantitative Biosciences (a consortium of university laboratories) and the city’s Small Business Development Center.
Austin describes the relationship between the iHub, SSU and its other partners as one based on collaboration and mutual interests. He’s committed to working with iHub partners such as SSU to create targeted initiatives that help them share the workload of job creation. Several iHub initiatives are already in place to help emerging technology firms in the region. Based on the success of business plan competitions in other areas, however, Austin believes the Seed Round will expose our local talent to an even broader audience.
The “American Idol” of business
The Seed Round competition, named for the first financial help, or “seed money,” that businesses receive from investors to begin operations, was conceived as a way to accelerate the pace of innovation in the North Bay. It’s open to individuals or groups with an original concept for a growth-oriented business. Ideally, entrants would be proposing a business that targets at least $5 million in revenues within five years, can maintain a competitive advantage (such as a technology that can be patented), and that addresses a significant need for a large market.
The competition’s rules lay out strict residency requirements for contestants and set limits on the location of any previously created ventures. Companies that have already received venture capital or any financing over certain limits are ineligible. These barriers to entry are meant to focus attention on residents of Sonoma, Napa and Marin counties whose ideas may be underrepresented and will benefit most from exposure to investors. Organizers also believe that a homegrown company is more likely to remain here for the long term and supply jobs to the area.
Applications for the inaugural competition were due March 16. Participants had to submit a brief executive summary to the iHub, introducing themselves and outlining their plan. Qualified applicants were then invited to take part in a private business plan workshop, held on March 30. Soon after, each team was paired with a mentor, who will remain with them throughout the competition.
Mentors were culled from the local business community and include primarily serial entrepreneurs with direct startup experience who are volunteering their time and expertise in moving ideas from the conceptual phase to reality. Whenever possible, entrants were paired with mentors who have experience in a similar field. These mentors not only reviewed the business plans in progress, but also coached the finalists in the crafting of their investor pitches. The participants had just over a month to prepare their plans and turn them in. Final submissions will be sorted into several equal groups based on the industry targeted, as organizers are hoping to choose the finalists from a variety of industries, depending on participation. A total of three to six finalists will be announced on May 16.
The finalists will present their business plans and investor pitches to an audience of investors, community leaders and SSU faculty and students at a special event held June 1 on the SSU campus. Planners of the competition hope the gathering will draw a wide cross-section of investors, students and members of the business community interested in promoting the innovative ideas on display. The winner currently stands to win a prize package valued at $40,000. The package includes $5,000 cash and free business services to help the startup, such as 12 months of office rental space within SMBC and targeted legal, accounting and marketing services.
Vicki DeArmon, director of Neo Marketing Alliance, is a SMBC member who’s offering $4,000 worth of free marketing consulting to the winner of the competition. She says her own experience starting companies makes her excited to be a part of the process. “I understand what it’s like to start a company, and I really enjoy that part of business,” says DeArmon. “It’s a time when marketing assistance is needed, but often isn’t affordable, so we’re excited to help.” She’s most excited to see what innovation and creativity can come from the challenge of competing.
“It’s like the ‘American Idol’ of business,” she says, smiling.
Engaging the community
The Seed Round is not a competition solely for students, but it is being promoted throughout SSU, particularly to MBA and executive MBA students in the School of Business and Economics and to students in the School of Science and Technology. These disciplines are seen as the most likely to produce the types of businesses the competition is looking to highlight—but no good idea will be turned away.
Student concepts may be aimed at any number of industries. Current MBA and executive MBA students come from a wide range of business backgrounds. Students in the School of Science and Technology may target a variety of markets, as well, such as medical, biochemical, engineering and computer science. Austin hopes students from the two schools see this as an opportunity to work together. “They need to learn that it takes a team to make a business,” he says.
Dr. Robert Eyler, chair of the economics department at SSU, hopes students will see this as a chance to engage with the business community and put their academic training to the test. Depending on where they are in their program, students in the MBA and executive MBA programs will benefit from having already been schooled in drafting business plans as part of their curriculum. The competition, however, takes this academic training to its next level. Forming an original commercial concept, honing it with mentors in the business community and learning to pitch it to actual investors will give them the real-world experience that hopefully translates to credibility in the future.
Developing a regional reach
In the last few years, SSU has actively sought to strengthen its position as a leader in regional economic development. It’s been involved with the iHub since its inception, so the two could work together to support business ideas from both on- and off-campus. “Working with the iHub has been a way to guide resources, minimize legwork and engage with potential funders,” says Eyler, who also heads SSU’s Center for Regional Economic Analysis. He believes the university can act as both a source of creative ideas going into the iHub and as a conduit for the iHub and its resources moving out into the larger community.
One of the goals is for the university to develop its “regional reach,” suggesting that SSU can be seen as a resource for mentoring, ideas and a highly trained workforce not only in Sonoma County, but throughout the Bay Area. Eyler believes the farther afield SSU’s academic programs are recognized, the easier it will be to generate donors, attract high-quality undergraduate and graduate students, and move on-campus intellectual property. He’s hoping student participation in the Seed Round will translate to an affirmation of the university’s caliber, advertising the strength of its students and academic programs.
An equally important goal, says Eyler, is the creation of local, sustainable jobs for the university’s graduates and the community as a whole. Universities already play an important role in training and bringing marketable skills to an existing local workforce through continuing education. This latest effort can also increase opportunities for those skilled workers if it helps new business ventures to find funding and begin hiring. “One of the issues Sonoma State faces is that a large proportion of its students aren’t around after graduation because there just aren’t enough opportunities here,” adds Austin. “We’re attempting to engage them, to help them create opportunities for themselves.”
Building critical mass
Simon Inman is a partner at Carle, Mackie, Power & Ross LLP (CMPR), a Santa Rosa law firm donating $7,500 worth of legal services to the winner of the competition. Inman, who specializes in advising startups in all phases of their development, has also been a board member at SMBC since 2009. He believes the Seed Round stands to benefit the North Bay business community as a whole. “The competition is a vitally important part of helping encourage new startup technology businesses in our region. Anything we [at CMPR] can do to help support that activity, we’re happy to do,” he says.
Inman is encouraged by the cooperation among business, academic and nonprofit community leaders in bringing the Seed Round to life. “What we need to do in the North Bay is build a critical mass of technology startup companies that can be self-sustaining and provide more opportunities for skilled workers to remain here,” he asserts. “Part of the business community’s obligation is to try to encourage that development.”
For many North Bay businesses, recruiting is one of the toughest challenges because of the shortage of qualified local employees. Even when companies are able to bring in workers from other areas, those workers often leave the North Bay following their employment, because there are few other opportunities here for highly trained workers. “If we can build a bigger infrastructure, then we’ll get more people with talent coming. And if there are more business opportunities here, they’ll stay,” says Inman.
Eyler believes the competition’s effects will extend far beyond winners and losers. In the short term, he’s hoping the contest brings job leads and added marketability to his students. In the long term, he sees events like this as a way to send a signal that the North Bay is friendly to business growth and entrepreneurship. Inman feels a business plan competition like the Seed Round, common in other parts of California, is long overdue in the North Bay. He considers the contest a good opportunity for anyone ready to take their business concept to the next level. “It doesn’t matter if you’re doing it as a third career or starting out of college,” says Inman. “You need resources and things to encourage you and focus your efforts. I think this contest is a good first step in the right direction.”
The start of something big
The winner of the first Seed Round Competition stands to gain not only the prize package, but also the positive exposure and credibility that will come from having been vetted by experienced investors. Organizers hope every participant benefits by getting his or her idea out in front of the investment community. “Not everyone will have the capacity to win,” acknowledges Austin, “but hopefully their participation will help them find motivation, work through the complete process of writing a business plan, and receive training and feedback.” He’s optimistic that the competition will continue as a yearly event, drawing new ideas and investor interest to the area.
All those involved are hoping the competition will be the start of something big for the North Bay. Pointing to the explosion of Silicon Valley and our own Telecom Valley experience as examples, they hope the Seed Round, born of cooperation and competition, can act as a spark for the local economy. Launching one successful business may be enough to encourage others to come here to hatch their own entrepreneurial dreams or to find the next new technology to invest in. “The greatest draw is a success story,” says Austin.
