Knowledge@Wharton

Eight Great Ideas - Where are they now? Catching up with the Wharton Business Plan Competition Winners, one year later

The assignment: track down the top finalists – dubbed the Great Eight – from last year’s Wharton Business Plan Competition. The goal: find out what actually happened to the cream of the crop of student start-up ideas. Did any become viable businesses? Did they make money? Lots of money? Did any drop off the face of the Internet?

We found the Great Eight scattered all over the country, eager to share tales of venture capital highs and lows, intellectual property snags, site launch glitches, cash flow problems, employee frustrations, and in several notable cases, success beyond their wildest dreams.

But before we get to those stories, some background on the Business Plan Competition: the three-phase, year-long contest started in late 1998 as a way to give Wharton’s start-up minded students access to financial and intellectual capital. Sponsored by Wharton’s Goergen Entrepreneurial Management Program, the competition is attended and sponsored by venture capital, corporate and entrepreneurial heavyweights from across the country who judge, mentor and put up more than $40,000 in prize monies. Last year’s contest drew 128 student teams comprised of more than 300 participants. This year, the competition attracted 226 entries, or more than 430 participants, as well as an impressive line-up of lead sponsors: E*Entity, an e-commerce accelerator; Booz Allen & Hamilton; Safeguard Scientifics Inc., a Pennsylvania-based venture capital firm that funded last year’s $25,000 top prize; and Innovation Factory, an Internet incubator. The competition attracts both undergraduate and graduate contestants from across Penn and culminates with a final round Venture Fair held in the spring. Over the course of months, contestants are whittled down to 25 semi-finalists, then eight finalists, and finally one winner, who collects the $25,000 top prize.

As this year’s Business Plan Competition enters its final phase, we catch up with the imaginative, ambitious young men and women of last year’s Great Eight. Their stories follow.

Kevin Spain and RadioXchange

Kevin Spain is proof that what you start out with might not be what you end up with.

His idea, the Business Plan Competition’s top winner, began as RadioXchange, an e-market-place to the radio industry that would create an Internet-based auction to sell remnant radio advertising inventory. It was a bold, entirely new idea with seemingly limitless potential, and the Business Plan Competition judges loved it. But few would have predicted its outcome.

After winning the business plan competition and graduating from Wharton, Spain, WG’99, moved to San Francisco, where he had accepted a job at a San Francisco investment-banking firm. Energized and emboldened by his win at the Business Plan Competition and his start date still a couple months away, Spain teamed up with former colleague Andrew Donner to seriously explore the possibility of a start-up. The pair ramped up the RadioXchange idea a bit to assist with raising capital, creating an entity called waveXchange, which expanded the initial concept to include remnant advertising space from all air waves, including television. Spain began searching for seed capital, and quickly pieced together some initial funding. Feeling confident that they had a sure thing in the making, the pair decided to abandon their corporate jobs and pursue waveXchange full time. Donner quit his investment- banking post and Spain declined his offer. The pair rented office space, incorporated, and recruited some senior level managers – a vice president of marketing and a vice president of sales. “It was a very exciting time,” Spain says.

But the bubble was about to burst. When Spain finally hit the streets to sell waveXchange to the broadcast industry, he quickly hit a wall. Radio and television stations, he found, were not willing to sell advertising air time at discounted prices because they believed it would stymie their ability to negotiate with full-price buyers. Spain also learned that most advertisers don’t buy advertising at the last minute. Rather, they plan many months in advance so they are able to secure exactly the airtime they want. The boom economy also meant radio and television stations had less remnant space available and were so fat and happy that incremental revenue opportunities really didn’t pique their interest. Spain’s once-heady outlook began to teeter.

His final blow came in August 1999, at the National Association of Broadcasters convention in Orlando. That day, described by Spain as “the most depressing experience I’ve ever had,” Spain and Donner pitched waveXchange to the CEOs of every major radio group in the country. Universally, they panned the idea and said they would never support it.

“We were devastated. And the worst of it was that we had just hired these two people. We were down in Orlando sitting in a hotel room feeling destroyed. I had turned down this job, and Andrew had quit his job, we had these employees coming on, and it seemed ludicrous what was happening to us,” Spain says.

Spain returned to San Francisco scrambling to regroup. In what he describes as a “very haphazard fashion,” he and his new team spent many late nights brainstorming, trying to decide whether to start over with an entirely new concept, and if so, which one. All the while, they were running out of money. In the end, some two months later, Spain decided on a business called AtMadison.com – an online advertising agency that focuses on a traditionally under served market segment – the small-to-medium sized business. The new business would capitalize on the many years of advertising industry experience of Spain’s new hires. Once again, Spain and Donner hit the streets in search of funding. And within a week, the two had raised more money than they had for waveXchange.

How has Spain raised funds with such apparent ease? He credits his prior work experience in corporate finance and mergers and acquisitions, as well as the reality that many investors today seeking dot-com investment opportunities. “People are willing to fund concepts at this point,” he says.

As for AtMadison.com, Spain anticipates a full site launch in June. The dot-com will feature an online expert system to walk clients through the process of planning a media and marketing campaign, thus streamlining the traditional, human-intensive advertising agency experience. The campaigns will then be executed via advertising powerhouse Leo Burnett, which recently signed an exclusive agreement with AtMadision.com. “We deliver the same resources – research, knowledge, and buying power – that large advertisers have and we deliver it via the Web and at a much lower cost,” says Spain, who foresees an IPO in the near future.