Cornell Enterprise Online Magazine

Startups

The Cornell Venture Challenge

Finding and supporting tomorrow’s most promising new enterprises

By Irene Kim

It all started with drinks.

Back in the fall of 2008, Benjamin Rollins, MBA ’09, was helping set up happy-hour networking events between Johnson and School of Engineering students. He met biomedical engineering student Brian Lawrence, PhD ’11, who had helped set up the events on his end. Rollins was looking for a technology to launch a business; Lawrence had a promising technology.

“I had gone to Cornell to find a technology that was both interesting from an intellectual-property standpoint and that had big market potential,” says Rollins. He was intrigued by Lawrence’s proposition, a low-cost type of wound care for patients recovering from ophthalmic surgery or traumatic eye injury. “Let’s start a business,” Rollins said to Lawrence; Bombyx Technologies was born.

Since then, Bombyx Technologies has received grants from the Department of Defense and the National Science Foundation totaling more than $1 million, as well as serious interest from industry and the investment community. Getting to this point hasn’t been easy: Rollins packed up his family and moved back in with his parents to bootstrap the company.

What made Rollins decide the venture was worth the sacrifice? In the spring of 2009, he and Lawrence submitted their fledgling business plan to the Cornell Venture Challenge (CVC), an annual business-plan competition run by Johnson’s venture-capital fund, BR Venture Fund (BRV). After making to the final cut, Bombyx Technologies took first prize.

Prize money: $20,000. Winning the CVC: priceless.

Rollins and Lawrence were awarded $20,000 for winning ($10,000 from BRV, matched with $10,000 from the Cornell Center for Technology Enterprise and Commercialization, since Bombyx is based on a Cornell technology). But the real prize, says Rollins, was the recognition by BRV — a highly respected venture-capital fund, and the only one completely run by students. “What BRV did for us was to give us the validation, the confirmation that we could really run this business,” he says.

Evan Luxon of Johns Hopkins, whose firm, Cortical Concepts, won the CVC in April 2010, has similar high praise for BRV. “By winning the challenge, we were afforded with immediate validation in discussions with potential investors and licensees,” says Luxon. “Given the reputation of the Johnson School and its alumni, the win has allowed us to meet people we may not have had access to previously, and to have higher-level discussions than we would have otherwise.”

More than good ideas

Each winter, the CVC invites aspiring entrepreneurs, including Cornell-affiliated individuals and current students and faculty at other universities, to submit their business ideas, and receives dozens of short executive summaries of promising new ventures — from online shopping services to rainwater-collection devices for rural areas. The BRV managers, second-year MBA students selected by the previous year’s managers, carefully review all submissions and choose up to five to proceed to the final round. These finalists submit full-fledged business plans and present their ideas to the BRV managers and a panel of veteran venture capitalists for feedback and judging during the university-wide Entrepreneurship@Cornell week in April.

Danny Hest, MBA ’10,
COO of BRV in 2009-10

The competition, formerly known as the Business Idea Competition, changed its name in 2008-09 to reflect its emphasis on solid, viable ventures. “The reasoning was to shift just presenting a good business idea to finding real, high-growth, venture-fundable startup companies,” says Danny Hest, MBA ’10, who served as COO of BRV in 2009-10.

The whole process of screening the promising contest entries, and then watching selected entrepreneurs pitch their ideas to the panel, was a remarkable learning experience, says Hest. “Every business presents a different set of challenges, and it’s a great exercise to think through what can help a startup be successful in a particular market.”

Making VC connections

Arguably the CVC’s most valuable benefit, competitors and BRV managers agree, is the final round, in which a panel of professional venture capitalists critiques finalists’ business plans. “One of the primary benefits of competing was hearing feedback from established venture capitalists,” says Luxon. “Not only were we challenged to defend our technology and business model during the presentation, but the one-on-one sessions afterward allowed the judges to give us incredibly relevant advice.” As Hest points out, in addition to learning from the critique, the finalists have the opportunity to start a dialogue with the VCs for potential funding.

Marlon Nichols, BRV’s
president and COO for
2010-2011

The VCs, like the BRV managers, are looking for solid business propositions. Cortical Concepts, developer of a device for use in spinal surgery that increases the strength of fixation in osteoporotic bone, presented a compelling case, says Marlon Nichols, BRV’s president and COO for 2010-2011. “In general, they were a high-performing team that successfully addressed the typical venture-investor concerns of viability, strength of management team, intellectual property, realistic financial projections, grasp of the market potential, and feedback from potential customers.”

Replicating the VC experience

BR Venture Fund, annual sponsor of the CVC, is unique in the level of responsibility it confers on its student managers. “Most studentrun funds are set up such that the students make recommendations to an outside board of alumni, faculty, or others, who make the investment decisions,” says Steven Gal, associate professor of clinical entrepreneurship and one of the faculty advisors for the BR Venture Fund. “At BRV, the students make all the staffing and investment decisions, acting as partners of the fund.”

Nichols adds that some business schools have venture capital funds in which students perform only due diligence for possible investments, or are allowed to participate in only limited ways.

Gal explains that the BRV experience truly mirrors the actual environment in which venture capitalists work. “The BRV fund managers generate deal flow, conduct due diligence, make investments, and manage a portfolio,” he says. “The only difference is that the students don’t profit monetarily from the deals’ success. Adds Nichols: “We have the opportunity to learn all aspects of the venture business by doing it every day.”

Basically operating as real venture capitalists — albeit without pay — BRV managers are able to build important relationships in the venture-capital and entrepreneurial communities, says Nichols. “Such relationships are coveted in the VC space.” And plenty of other people take notice of the BRV, as well. During his tenure, says Hest, BRV managers received numerous requests for information from other schools about how the fund is run.

As a highlight at the end of the academic year, the CVC affords the BRV fund managers an invaluable opportunity to see their investment decisions evaluated by top venture capitalists. “The single most valuable lesson came when we participated in the judges’ deliberation session,” says Nichols. “This was a crash course in how to evaluate entrepreneurs and their ideas. Today, as we review potential investments, we practice many of the principles that we learned in the deliberation room on that day.”