People will do a lot for $1 million – even if it means entering a contest that would make them spend the next year in Buffalo.
And that makes Andrew Pulkrabek, who’s in charge of the state-backed 43North business plan contest, very happy.
The contest is one of the most intriguing – and potentially promising – parts of Gov. Andrew Cuomo’s Buffalo Billion initiative, offering up to $1 million in funding for the entrepreneur who submits the best plan for a new business that would get its start in Buffalo.
The contest got underway about a month ago, and organizers at the time said they’d be happy if they got 1,000 entries.
Well, they’re officially happy because the 1,000th entry landed on 43North’s doorstep on Thursday, and the applications are coming in at a steadily growing pace.
Over the past two weeks, 43North has been averaging about 40 entries a day, and the contest will be accepting applications for another two months, right up until the end of May. So far, Pulkrabek said the quality of the entries seems pretty good.
The applicants aren’t all locals, either. 43North has received entries from entrepreneurs in 43 of the 50 states, and from 40 different countries.
That’s not by accident. To bring in the best ideas for new businesses, 43North’s staff knew it would have to think globally, not locally, and they’ve been scrambling to get the word out, far and near.
Organizers have touted the contest at a technology conference in Texas. They’ve explained it at sessions in New York City and several southern Ontario cities. In the next few weeks, they’ll do the same in places like Boston, Chicago, San Francisco and Denver. Trips to India, Israel and, maybe, China are on the docket.
Social media is a big part of the effort, too. It’s relatively inexpensive. It’s instant, and it’s a preferred method of communication for the younger and more tech-savvy generations that probably are most likely to have an idea for a new business that needs a big chunk of cash to get started.
Posts on Twitter get retweeted. Friends of the 43North contest, such as venture capitalist Fred Wilson, have blogged about it, exposing the competition to the tens of thousands of people who follow his postings. It got further exposure when 43North tweeted about it and then used paid advertising on Twitter to promote it.
The organizers even directed a tweet Thursday afternoon at Syracuse University basketball fans, the school’s alumni and anyone else following events at the First Niagara Center. “Any entrepreneurs in #OrangeNation that could use $1mm? When @SyracuseU plays at 2:45 pm at @FirstNiagaraCtr, they’ll be 400 ft from us!,” referring to the 43North office in the Buffalo News building downtown.
“Social media is a fantastic space for us to be working in,” said Peter Burakowski, 43North’s senior marketing manager. “There are just different ways of hitting people and telling our story.”
The story is a compelling one. The state is putting up $5 million in prize money for a contest to pick the best ideas for a new business. The state will hand out 11 prizes, ranging from a grand prize of $1 million to runner-up prizes of $250,000, to entrepreneurs whom the contest’s judges deem to have the most promising plans for a new business. Early stage ideas and businesses just getting started qualify.
Winners will receive rent-free space in an incubator site that will be part of the state’s StartUpNY tax-free zone, which means those businesses won’t be subject to most state taxes and employees won’t have to pay state income taxes for 10 years. The winning firms also will be provided access to other resources and mentoring services to help them turn their ideas into viable businesses.
Oh, and did I mention that Forbes magazine this month rated Buffalo as the nation’s most affordable city?
“That’s a huge cost advantage,” Pulkrabek said. “Our challenge is not getting the applicants. Our challenge is getting to the applicants.”
When the contest comes to a close on Halloween, 11 different companies will have won prizes. The big winner will get the $1 million, but six others will come away with $500,000 and four others will get $250,000. One of the winners will be local.
In return, the winners have to move their venture to Buffalo for a year, and hand over a 5 percent stake in the business in exchange for the money.
“The 5 percent is really cheap money,” Pulkrabek said. Even with the smallest prize of $250,000, a 5 percent stake puts an implied value of $5 million on the winning venture. With the $1 million prize, the implied value of the grand prize winner is $20 million. It’s virtually certain that no other investor would offer the winners so much money on terms that generous for a business that’s just an idea or only getting started.
It’s also a silent investment, leaving the winners to run the venture as they see fit. “We’re not going to take control. We’re not looking for board seats or observer’s rights,” Pulkrabek said.
Is there a danger that the winners will take the money, come to Buffalo for a year and then run back home? Sure. But they’d sacrifice the StartUpNY tax benefits, and they’d have to pull up any of the roots and connections they’d established locally.
The first phase of the competition is fairly simple, merely asking entrepreneurs to provide a summary of their ideas that identifies their potential markets and customers and their visions for the ventures.
“We want something that describes the essence of what they are,” Pulkrabek said.
From there, the contest’s organizers will narrow the field to a group of 50 to 75 semifinalists that will be evaluated more intensely during a five-day session from Sept. 15 to 20 that will include 10-minute online presentations that will be able to be viewed by the public.
The final stage will take place from Oct. 27 to 31, when finalists will pitch their business to a panel of local judges through a 10-minute presentation, followed by 10 minutes of questions.
Jordan Levy, the local venture capitalist who is the chairman of the initiative’s steering committee, has described the contest’s first year as one where it gets seeded and starts to establish itself. He expects the competition to really take off next year, once all the initial legwork is done, the first group of winners take their money and start putting it to work and organizers have a base to build on.
“We are, in many ways, a start-up ourselves,” Burakowski said. “We’re building a network that we can go back to.”
Of course, there are no sure things, especially with start-up businesses. It’s inevitable that some of the winners will be flops. We should expect that.
But hopefully, the quality of the entries is strong enough that the combination of funding, mentoring and good ideas increases the odds of the winners turning out to be successful.
If that happens, the Buffalo Niagara region will be a winner, too, with a core of fast-growing companies and dozens, if not hundreds, of new jobs.
“We’re not going to see immediate results,” Pulkrabek said. “It’s about shaping the perception of this community as a great place for entrepreneurs.”