Businesses That Profit the World
Tuesday, October 11, 2005
By Vivek Wadhwa
I’m mentoring a team aiming to enter Duke University’s contest for startups that improve life in poor nations while generating earnings
In Hollywood, it seems that everyone wants to be a star or has a script for the next great blockbuster. Tech entrepreneurs, similarly, dream of launching the next eBay. In universities, business-plan competitions are the rage. Contest winners earn big prizes, yet few ever achieve business success or leave a mark on the world.
Duke University is trying something different — a competition that teaches valuable lessons in entrepreneurship while trying to solve real problems for the developing world. Maybe the school will miss the chance to incubate a hot startup. But it may prove that doing good can actually lead to the most worthwhile and profitable ventures of all.
BEST FICTION. During the dot-com days, there was a frantic rush to start new companies. Entrepreneurs would create professional-looking, buzzword-laden business plans, which venture capitalists would trip over each other to fund. The prevailing theory was that if you had a good business idea and enough money, you could create the next hot startup. B-schools readily jumped on the bandwagon. After all, creativity and fresh ideas are in abundance in academia.
With the bursting of the dot-com bubble, the tech world was reminded that even a great idea funded by venture capital didn’t necessarily produce business success. It took a thorough understanding of the market, excellent management, and the ability to navigate rough waters to build a thriving enterprise. Ask any seasoned entrepreneur, and he will likely tell you that his first business plan was probably the best work of fiction he ever created.
Venture capitalists and entrepreneurs quickly adapted to the new reality and went back to basics. But no one told the B-schools. From Silicon Valley to Research Triangle Park to New Delhi and Shanghai, new contests are still sprouting. Only now, the prizes have gotten bigger.
Relatively few successes have emerged from the thousands of ideas submitted to university business-plan contests. MIT initiated one of the first contests in 1990. It claims to have launched 60 companies and created thousands of jobs. But few of these date past the dot-com era. And MIT’s poster child, Akamai Technologies, actually lost the contest in 1998.
GLOBAL CITIZEN. The problem is, without a solid understanding of market needs and real-world validation, few entrepreneurs can achieve their business-plan projections. And the spirit of entrepreneurship that is commonly fostered by B-schools usually lacks a social purpose.
Duke University’s Startup Challenge is one of the better known and more successful contests. Over the five years of its existence, 700 participants have competed for more than $500,000 in prizes. Contest organizers Mike Pisetsky and Abram Becker tout a handful of promising startups. They agree, however, that the real success has not been in the number or size of spin-offs but in the valuable education participants received.
Duke takes great pride in its track record on issues of social responsibility. Its medical and engineering schools are world renowned. To increase its social focus, it established the Duke-Engineering World Health Center (EWH) under the direction of Professor Robert Malkin. The goal is to apply Duke’s engineering and medical research to improve the health of the world’s neediest.
LIFE-ALTERING COURSE. EWH runs a program that allows engineering students to spend a semester working in some of the most remote parts of the globe. The center teams students with scientists and physicians to install and repair old medical equipment, teach modern techniques, and learn about problems unique to the developing world.
Students always come back with new perspectives on life and a better understanding of the needs of the people in these communities. Most describe the program as a life-changing experience. Over time, students have created a laundry list of projects and basic technologies that can make a real impact on the health of billions. Very often, the simplest solutions save lives.
In conjunction with a new Center for Entrepreneurship & Research Commercialization, headed by Professor Barry Myers, the school is launching a very different contest this year. They believe that by combining entrepreneurship with social purpose and engineering innovation, they can get the best of both worlds.
STRIPPED-DOWN DEVICE. Instead of rewarding students for planning yet another tech startup, applicants are asked to develop plans and solutions for real problems in the developing world. Students are assigned experienced mentors and given access to university labs and research. The prize money — $50,000 — is provided as startup capital along with ongoing assistance from the entrepreneurship center.
In my last column, I wrote about joining academia (see BW Online, 9/14/05, “Degrees of Achievement”). After having served as a judge and adviser for many business-plan contests over the years, I was grateful to be involved with something so meaningful as Duke’s contest.
The team I’m mentoring is led by undergraduate biomedical engineer Zach Jones. The group is building an instrument that combines electrocardiography, noninvasive blood pressure and pulse oximetry, and capnography into a single bedside monitoring device. These are all the basic measurements found in hospital critical and intensive-care suites.
Such a device is nothing revolutionary — it’s based on existing technologies. But rather than having a sophisticated LCD display, advanced networking capabilities, high-powered diagnostic features, and a printer for each monitor, the team has stripped the machine down to its most basic functions. It will connect to any old TV set or CRT display.
DEVELOPING MARKET. Where’s the magic? The team believes that they can sell such a device for about $50, rather than the $5,000 that such instruments would normally cost. This product wouldn’t have a market anywhere in the industrialized world. But it could afford hospitals in the developing world a tool they desperately need to save lives.
Zach and his team expect to have prototypes ready by the competition’s deadline. But they may bypass the contest and move directly to startup status if they can perfect the technology and obtain funding. With a market of billions that few entrepreneurs are targeting, they may even find a way to make big profits and fund other such ventures.
Professor C.K. Prahalad of the University of Michigan says there’s a fortune to be made in the developing world. He believes that when entrepreneurs start to look at the approximately 5 billion people living in countries at the bottom of the economic pyramid as potential consumers, they will see immense economic opportunity. It may be that the most rewarding business prospects lie where you least expect.