Ditch the Pitch? Contests and the Search for Social Venture Capital

Every social enterprise startup knows the drill:  pitch + plan + powerpoint = profit.

But what if that's just a mirage?

That's the question raised by this must-read TechCrunch post by Vivek Wadhwa.  As Wadhwa observes, in the real world of mainstream commercial funding relatively few startups get funding from venture capital firms or even angel investors--most successful startups attract substantial outside support only after building a workable product and "selling for survival."  Instead of encouraging people to focus on elevator pitches and five-year plans, Wadhwa offers essential advice for bootstrapping a venture to the point that it might attract funders' attention.

However, there's another important lesson here for budding social entrepreneurs:  pitch contests and business plan competitions do not accurately model the most likely path to profit.  Rather, they are a relic of the dot-com boom, which fostered the myth of venture capital as a veritable ATM for people with an idea and a slide deck.  It's an alluring myth to be sure, but despite recent efforts to develop a vibrant social venture capital markets, the brutal reality is that outside investment for budding social entrepreneurs--especially the seven-to-nine figure deals that make headlines in the business world--is even less available for social ventures than it is for wholly commercial tech startups.

As I've discussed elsewhere, social enterprise is itself an echo of the dot-com and Web 2.0 bubbles, and one irony of the movement's rhetoric of best practices is that it has all too often unthinkingly copied the worst.  By replicating the pitch contest and other startup venture capital memes, we may very well be diverting startups away from more effective business strategies.  Instead of focusing attention on ways to harness scarce resources, to turn innovative ideas into workable products and to adapt to the complexities of a crowded and ever-changing marketplace, our contests reward speculative planning and aspirational spin.  In effect, we lure people into the startup's answer to chasing the dragon, with business plans and powerpoints replacing heroin as the drug of choice in a futile quest to recapture the pitch contest's dreamworld of outside support.

Sure, it makes us feel good to say that we've anointed the next great worldchanging innovators, but for all the talk of measurement and metrics there's precious little proof that our annual rituals of self-affirmation have actually fostered systemic change.  No doubt social venture pitch contests provide small amounts of financial assistance for those who win, but we are in desperate need of rigorous analysis of their substantive impact as well as the degree to which they reflect funding norms.  Where do most social entrepreneurs find their funding?  How many contest winners survive?  How many go on to gain private investor support apart from government or charitable grants?  And what happens to finalists and even early stage applicants who fail to win?

This isn't to say that we have to suspend pitch contests until we have the answers--far from it.  For all the talk of radical newness, the social enterprise pitch contest and its analogues also embody practices that have long been embedded within so-called traditional grantmaking, with the added advantage that participants can learn far more from a public forum than closed-door review.  Perhaps one way to add value to contests is to expand their role as an educational medium--namely, by teaching participants to look beyond the VC model for success.

Photo Credit: estoril