Competitors try to turn widgets into wicked deal
By TOM FOWLER Houston Chronicle
There may be a song or two by pop band 'N Sync that University of Houston business student Derrick Hinton finds catchy, but the last thing he wants is to be caught in public buying a record by the boy band.
Those conflicting desires -- to own a certain song without paying for an entire album -- were the sparks behind WaveLength, the business plan Hinton and his fellow students presented this week at the third annual Southwest Business Plan Competition at Rice University.
The UH team's plan to place kiosks in music stores charging consumers to mix their own CDs one song at a time was just one of the 30 business plans presented by students from around the world, all of them trying to convince judges that their plans were worth investing in.
At stake is real cash, $15,000 for the first place team, and a chance to compete in the Moot Corp. business plan competition at the University of Texas in Austin later this month, where the top prize is a $100,000 investment.
None of the three local teams -- also including one from Rice and one from Texas Southern University -- made it to the finals.
But the chance to hone presentation skills and receive feedback from business executives and investors is a rare opportunity, said Steve Currall, director of the Rice Alliance.
"Putting these students before these judges, who are experienced early-stage investors, venture capitalists or entrepreneurs, is something you can't get in a classroom," Currall said.
"This is our third year as a qualifying event for Moot Corp., so we're pleased to get so much participation by such good teams and judges."
The student business plans come to the competition in different states of readiness, from previously incorporated companies -- such as the plan presented by Rice University's team -- to concepts that are still in the strategic planning phase, such as that from TSU.
Rice University's team, EDProtocol, is developing a Web-based software package to help hospital emergency departments manage the many regulatory demands of observation centers where patients are held for several hours to determine if they need to be admitted.
Brian Hoogendam, a second-year Rice MBA student, said he first heard about the idea last summer when a group of Memorial Hermann Hospital technicians approached local venture capital firm, Genesis Park. The firm passed on the idea, but Hoogendam later helped the technicians further develop the idea, along with teammates Peter Blach and Emily Seigle, who are refining a version of the system.
"We've bootstrapped this thing so far, using our own money, but we really want to keep working on this after we graduate," Hoogendam said.
The team from TSU, which has never participated in such a competition, presented their plan for the EZ Talk line of combination jewelry/cell phones late Friday.
Clad in conservative dark suits like most of their competitors, the four-person team stood nervously at the front of a lecture hall before more than a dozen judges.
Dominique Nelson, the team's chief technology officer, described the basic look of the planned product -- a bracelet with the cell phone receiver, matching earrings that will double as headphones and a necklace will be the microphone. The bracelet will have four speed-dial buttons, he explained, will hook up to a dial pad for programming and have a carrying case that doubles as a charger.
Veronica Lopez, a TSU MBA student who also works for the U.S. Customs Service, described the team's market research, namely a search for similar products and surveys of potential customers in the Houston area.
Johan Nel, a business professor from South Africa attending TSU, detailed the team's research methodology.
The team's chief executive officer, Regina Pyrtle, hit the judges with the numbers: a need for a $8.5 million investment, plans for 20,000 unit sales in the first year and cash flow of $120 million in five years.
After the 10-minute presentation, the judges wasted little time going for the jugular.
Rod Canion, the co-founder of Compaq Computer Corp., pressed the company to detail the technology to be used in the devices. Nelson said the team planned to use existing cell phone technology combined with short-range wireless devices using the Bluetooth standard, but he admitted that the team had not developed a prototype.
Benjamin Brochstein, a Houston entrepreneur, asked about the barriers the startup team would face bringing such a product to market, particularly how the team could compete if an established company like Armani were to develop a similar product.
"We would expect our patent to protect the idea from piracy," answered Pyrtle, but when she noted that IBM has plans for a similar device in the future, some judges seemed to immediately lose interest, sensing an unbeatable competitor to the young business.
Immediately after the presentation, the EZ Talk team was upbeat and almost giddy with relief at having the presentation behind them.
"That `barriers' question sort of caught us off guard a bit, but I think we did well," Nelson said.
Judges said this year's batch of competitors is the best they've seen at the annual event.
"They've been the best prepared group and have really great ideas that a lot of us would love to invest in," said David Archer, chief operating officer for Petrotechnical Open Software Corp.
Even without a win at Rice this week, the local teams are far from giving up. EZ Talk said they would consult with their advisers about where else to look for funding, while EDProtocol is still on schedule to deliver a product to its first customer this spring. And just a few weeks ago at another competition, the WaveLength team was approached by a representative from Kodak who proposed manufacturing the in-store CD-recording machines.
"We never would have thought of Kodak, but he pointed out that the company already has hundreds of machines in stores around the country capable of burning photos onto CDs," Hinton said. "We plan to meet with them soon. That's a real breakthrough for us."