Winning the prize funding in startup competitions is irrelevant for success, as such victories do not always mean a marketable plan, which is why its networking and publicity opportunities are more valuable.
Entrepreneur Douglas Gan never entered competitions to get funding for his two startups. "I didn't want to waste time preparing for competitions. I wanted to focus on the business," said the CEO and co-founder of Web site Vanity Trove. He previously founded location-based service (LBS) company ShowNearby.
Gan explained that the pressure to show their best at competition sometimes makes startups overpromise what they can do and sell, which will eventually "backfire big time". This issue affects the investor judges as well because they have to decide on a winner to award the funding, regardless of how much or little they know about a startup based on what was presented at the event, he added.
Any business plan and funding must always be well thought out and strategic, Gan said. But at competitions, the combination of a hopeful atmosphere and unavoidable adrenaline rush among startups and investors may not always accurately reflect market reality, he noted.
That is why the biggest downside of competitions is that the business plans that win are not necessarily the ones that also win in the marketplace, said Eric Tachibana, adjunct associate professor of strategy and policy at National University of Singapore (NUS) Business School.
Competitions are essentially a platform for investors to meet with teams "who look interesting to them and are aligned with their investment strategy", added Jeffrey Paine, founding partner of Golden Gate Ventures and director of startup accelerator Founder Institute Singapore.
What marks a startup success is product market fit, not winning funds in a contest, he emphasized. "Cash prizes are good really only for publicity. I rather startups focus more of their time on their products and customers."
Startups should join a competition only if it brings "enough publicity mileage for potential investors to notice you, otherwise it'd be a waste of time", Paine said. Whether it is to win money, network, get feedback or raise press coverage, entrepreneurs have to weigh the cost and objective of attending the event, and be selective of which ones to join, he advised.
Networking is the prize
Tachibana, who guest-judged on entrepreneurship reality TV show Angel's Gate, argued that no one best way to raise funds exists. As long as there are various channels available to entrepreneurs in Singapore, he is in favor of having competitions as a part of an entrepreneurship ecosystem and community.
Tachibana also pointed out that there is more to winning funds in joining contests--where the prize money at stake isn't always a big amount to begin with.
"Besides schmoozing with hundreds of poachable peers, competitions are a great way to hone your pitch. How often do you get the chance to have the focused attention of hundreds of industry experts and get their direct feedback?"
Additionally, the external pressure and deadline created by joining a competition is a great motivator for startups to come up with a thorough and defensible business plan, he said.
Founders of startups also agreed that the main advantage of joining competitions is building and leveraging networks, and to focus on the prize of funding is simply missing the point.
Alvin Yap, CEO and founder of Singapore-based The Mobile Gamer (TMGamer), said competitions are generally irrelevant for securing funding, but "great for generating PR heat that could lead to funding". This is especially the case for founders who are inexperienced or don't have a strong network at the beginning.
Furthermore, the overheads of joining competitions are high and the prizes usually do not justify the costs, so startups have to assess the expected publicity and calculate returns based on that, Yap pointed out.
TMGamer, a developer of mobile games for emerging markets, won StartUp@Singapore's under-26 category in 2008. It received S$5,000 (US$3,989) which was little at the time, Yap said, but the accolade later led to more funding support from government agencies, the Media Development Authority (MDA) and Spring Singapore.
Vanity Trove's Gan, said the right approach in joining competitions is if a startup knows how to "fully milk the immediate media publicity associated with the competition and correctly leverage on that, by following up with a real business and fast track its growth".
Only then is it possible to achieve "wild success" within a very short time period, but this requires a lot of effort and careful planning, which most startups neglect, he said.
"Many see participating and winning in competitions as their end goal, instead of the beginning of their journey," he noted.