Writing a Business Plan? Better Talk to This Guy First

The Texas Venture Labs Investment Competition is one of the nation's best. Rob Adams, the competition's director and a member of our Board of Directors, shares lessons learned from this year's installment -- and a career spent catching companies on the rise.

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Winning: Rob Adams awards a check to TNG Pharmaceuticals, the winning team from this year's Texas Venture Labs Investment Competition.Rob Adams has spent most of his career catching companies on the rise. As an entrepreneur and institutional investor, he has founded or financed more than 40 companies, which have launched more than 100 products and have raised more than $1 billion in capital. These days, he still hands out big checks (literally -- see left) as the director of the Texas Venture Labs at the University of Texas, which hosts one of the nation's premier business plan competitions every May. The Texas Venture Labs Investment Competition brings together dozens of teams from universities across the United States and around the world, earning the nickname "the Super Bowl of investment competitions."

Adams, a member of our Board of Directors, has been instrumental in the evolution of the competition that was founded in 1984 as the Moot Corp Competition. As the entrepreneurial and investment landscape has changed, so too has the event -- most visibly the recent name change, to include the word "investment," which is intended to reflect the real-world nature of the competition. These kids aren't just vying for gold stars. This year's winner, TNG Pharmaceuticals from the University of Louisville, walked away with a prize package worth $135,000. (Editor's note: I have had the pleasure of serving as one of the competition's judges over the past several years.)

Sitting at the helm of the competition, Adams has a front-row seat to some of the proverbial next big things. So we asked him to share a little insight on the latest startup trends, what it takes to write an effective business plan and why the American Dream has gone viral.

What's the philosophy behind the Texas Venture Labs Investment Competition?

The whole idea is giving graduate students an opportunity to figure out a business from a standing start in graduate school. Reading about how to run a business is like reading about how to ski -- at some point, you have to go up the mountain and go down the mountain. So this starts in the classroom as that kind of opportunity. Some people come to business school thinking, "Hey, I absolutely want to do this deal and I'm going to base my education on getting this deal done," which is great. Basically, we give them all the tools to do that. What has emerged as a great way to continue sharpening the sword, pure level of competition, and that's how this investment competition got started, originally as a business plan competition. Originally, it was fairly academic, therefore the name 'Moot,' and over the last five years that I've been running it, we've been turning it more and more into an investment competition. The result is, companies that do well here typically go out and raise money. So it very much mimics the real world venture-raising process.

How many teams are we talking about? Where do they come from?

Usually averages right around 40 teams. Sixty percent of those will be domestic North America, 40 percent will be international. For instance, in the finals this year, we had four teams -- one of which was from Thailand, three of which were from the U.S. Teams come from all over the globe: South America, Latin America, Europe, China, all the major Asian countries, Australia, along with the Carnegie Melons, the University of Oregons, Winnipeg, MIT, University of Louisville, all the entrepreneurial-oriented schools in the U.S.

And how do they get here?

They have to have won a regional competition in order to get here. We've been called "the Super Bowl of investment competitions." The point is, it's a pretty good, pretty interesting learning experience here. There's a lot going on in the rooms where they are presenting, but there's just as much going on in the hallways.

How did you become involved in the competition?

I did software startups for about 18 years. I was in the early-stage venture business for about eight years. Anyone who is familiar with that from an institutional side, it's just not generating returns anymore, so I sort of moved along to angel investing and sort of by accident starting teaching at UT and that's just become a great platform. You don't know how much you know until you step away from it, so I've done a lot of startups. As I would say, I sign the front of the check to deposit the money in them and the back of the check to take money from investors. I've done a lot of that, and this is just a great platform to use that knowledge, help on the UT campus, get deals going. Actually, the UT deals have had a great performance track record. This investment competition helps it at the international level.

You've helped guide the evolution of the competition, not the least of which is the recent name change. How has the competition and the wider entrepreneurial and investment world changed over the years?

In the 21st century, anyone in business needs to understand entrepreneurship. Southwest Airlines, Google, General Electric -- they are just as savvy about startup-type tendencies as anyone. So, in business school, students know they have got to have those kind of chops. The question is, do they do that right when they get out of school or do they go get a corporate job? Some think of it as selling out, I don't think of it that way, but do they go get a corporate job and pay off their student loans and then go do the startup thing? So, I would say that in the last decade, we've seen a heavy trend of serious pursuit of startup opportunities by graduating MBAs. That is accelerating the last couple of years. Instead of it being job options number four, five or six 10 years ago, it's now job options number one, two or three.

That's an interesting point because a generation ago, "entrepreneur" was a dirty word. If you couldn't get a real job, you were an entrepreneur. It certainly didn't have a place in higher education. Fast-forward now, they're the rock stars of the business world as I call them, you've got hundreds and hundreds of courses across the country and here we are, at an esteemed academic institution with this esteemed contest. Is it funny now watching this be celebrated in the halls of academia?

Yeah, it's come on real strong and it's actually interesting because I'm used the private sector, the commercial world, where things move at light speed. And in relative terms, this stuff is moving at light speed in the halls of academia. This medieval business model is getting a good, hard kick in the you-know-what.

Over the course of the competition and during your career, I imagine you've seen a lot of different trends. In a given year, there's a hot industry, hot product. What are you seeing lately?

There are two macro trends. One is significant increase in life science, bio science kinds of deals. We have eight entering tracks and this year we've had three of those tracks be life or bio sciences at the expense of IT or Web-oriented deals. So, what you're seeing is a little shift of investment capital out of technology as technology actually begins to mature as a category and into life sciences, bio sciences kind of things. Another trend you see is away from institutional investors providing early rounds into angel investors providing early rounds. Anyone raising under a million bucks for their first round -- first of all, they have revenue these days, and second of all, they're typically getting that capital from an angel.

We've talked about this before -- we sometimes like to think of entrepreneurship as a uniquely American thing, but the reality is that it's very much a worldwide thing. With so many international teams competing here, what are some of the trends you see emerging abroad?

Usually, the international cultures are more conservative on the business front than the U.S. is. You look at Latin, South America, parts of Asia, it tends to be more wealthy families controlling the money flows inside countries. But you're seeing some of that loosen up. A lot of governments are aggressive about the unintended consequences of 9/11 and us sending people that get educated here back to their home countries -- those home countries realize they have got to do something to keep them there. So a lot of governments are getting fairly aggressive. I don't know if you want to call it venture capital, but economic development, to keep people in the country. The other thing is you see a lot of ordinary technologies doing real well in developing countries. Places like China, India, with their populations, you can make a ton of money investing in automobile manufacturing in those countries, because things are booming on that front. You can make a ton of money investing in television manufacturing, because the middle class is out buying television sets from a base of zero. So it's not uniquely American. The American Dream has become the world's dream, there's no question about it.

Many of our readers are in the process of starting and growing companies. As the maestro of this competition, seeing all these plans and presentations year after year, what's your biggest piece of advice to people out there who are toiling away with their business plans right now?

The biggest piece of advice is, "What's the problem that you are fixing?" You've got to figure out what that is. Too many people just rely on their own instincts or past experience, and there's nothing wrong with that, but usually your perception of what the problem is is off. It's not that there's not a problem there, and your instincts might be right -- that people will pay you money -- but number one, you've got to find a market problem and you've got to define that before you build it. Too many people gun jump and go ready, fire, fire, fire, aim, and miss a market opportunity. The second thing is, the new formula that I have is, "It's got to be an urgent problem, it's got to be a pervasive problem and people have got to be willing to pay."

Tags: angel investors, Board of Directors, business plans, business presentations, finding investors, investment competitions, investors, Moot Corp, Rob Adams, starting a business, Texas Venture Labs Investment Competition, University of Texas, venture capital

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