- Short Description
- Running a contest where you “give” away investment as a prize can attract attention. The contest approach works best at the earliest stages of company formation. If you do not want to take full responsibility for the logistics of the contest, you can sponsor or judge for someone else’s contest. You can also achieve a contest-like sense of urgency by promising to fund a certain number of companies or all companies that meet certain criteria.
- Benefits
- Press Worthy: Contests are easy stories to pitch to the press.
- Egalitarian: Contests can signal openness to a broader range of founders and can seem more egalitarian or objective.
- Trade-Offs
- Artificial Timeline: The deadline of a contest can serve as a deadline to pull a team together. But it may not match the organic rhythm of the business. So, you may miss out on quality companies that are off-cycle.
- Selection Bias: You may have some participating in the contest for the short-term winning rather than the long-term goal of building a business. Also, if the founders have many alternatives, they may not take part as the opportunity cost may be high. Contests are best for connecting with first-time founders who do not have other resources or connections. If you are not prepared to fund that type of founder, it may be frustrating for both parties.
- Examples
- MIT $100K Launch
- Revolution Ventures
- Valor Ventures: Startup Runway
- NFX Fast Seed (some of the flavor)
- Many accelerator programs have this flavor (like MassChallenge)
- Pioneer (not quite a VC but evolving in that direction)
