43North officials are convinced that less can be better.
Targeted, personal outreach to a select group of startup companies and entrepreneurs has produced a higher-quality pool of applicants for this year’s 43North business plan competition, officials said Monday.
Competition organizers say they spent more time reaching out to prospective applicants, by phone or in person, and mining data, from industry sources and from previous years of the competition, to help them find the companies that have the best chance of success.
The three-month application period ended May 31, and organizers said they received 542 submissions after making several changes to the process to ensure that they received a smaller number of applications from a more serious group of contest participants.
“We’re extremely pleased with how it turned out,” said John T. Gavigan, 43North’s executive director. “For us, it was a real strategic decision to move into a program that we could really identify the highest density of quality companies.”
The 43North business plan competition awards $5 million in prizes annually to promising startups. It was launched in 2014 as a small piece of Gov. Andrew M. Cuomo’s Buffalo Billion economic-development initiative, financed largely through the New York Power Authority.
Winning companies receive funding, mentor support and free rent; in exchange, they must move to Buffalo for a year and turn over a 5 percent ownership stake in their firms to 43North.
Of the first 11 winners, six stayed in Buffalo after their one-year commitment ended.
Organizers in March said they planned to shift their approach away from one that emphasized drawing in as many applications as possible.
Last year’s contest drew 11,350 submissions, but most of the entries – 74 percent – were thrown out immediately because they didn’t meet the competition’s eligibility requirements.
Gavigan said that it took more than 3,000 work hours to sort through and judge the initial batch of applications before they were whittled down to 100 semifinalists.
For this year’s competition, organizers made several changes: Instead of an initial, eight-question application, companies filled out the intensive, 60-question application that previously came during the second stage of the contest; they asked for financial information from the companies in the first round instead of the second round; they charged an application fee for the first time, of either $50 or $100; and they doubled the minimum prize to $500,000, from $250,000.
They also set aside $400,000 that the winners can access in 2017.
And the organization is open to diluting its 5 percent equity stake in the companies in certain circumstances.
The thinking was, said Peter V. Burakowski, the contest’s marketing director, “Let’s not just raise the bar on what we’re asking of people, let’s raise the bar on what we’re offering people, too.”
How did 43North draw its 542 submissions? Burakow- ski said that a key was tapping into data on the common qualities of the strongest applicants from the 2014 and 2015 competitions, and targeting outreach to find similar startups.
That meant seeking out companies in business sectors that are a natural fit for the region, such as life sciences, clean energy and information technology. They also targeted firms with a valuation of less than $10 million because if they’re worth more than $10 million, the equity stake taken by 43North would devalue the company.
“We knew where to find the type of companies that we seek to enter this competition,” Gavigan said.
Organizers also mined the PitchBook industry database for potential leads and spent more time on face-to-face and phone interactions with the start-ups, with Gavigan traveling extensively to meet with company founders and with investors and operators of high-tech incubators, who made their own recommendations.
The application pool includes a number of companies that already have raised money from investors and hired workers, though 43North organizers would not provide specifics. They said that 39 percent identified themselves as people of color and that 21 percent were women. Last year, 61 percent of the 3,000 or so eligible applicants identified as people of color – the percentage shrank in later rounds – and 1 in 5 was a woman.
Judges are reviewing the written submissions and by mid-July will narrow the pool to about 100 semifinalists. The semifinalists then will make video pitches through mid-August, and a last group of between 16 and 20 companies will be picked to come to Buffalo in October for the final round of the competition.
On the evening of Oct. 26, the companies will make pitches, and that group will be narrowed to a final pool of 10 for the last day of the contest. On the morning of Oct. 27, all 10 will face off, with the judges selecting the eight prize winners and two alternates.
All eight will be assured of winning at least $500,000, but a group of three top finishers will be picked to pitch live in front of an audience, on the stage at Shea’s Performing Arts Center, that evening.
The winner will take home $1 million, the runner-up will get $600,000, and the third-place finisher will fall back to the $500,000 that the five other prize-winners receive. It’s a change to the format to bring a little “Shark Tank”-like excitement to the process, organizers said.