Imagine an old growth forest, except that each tree is one of the thousands of technology companies out there today. Now imagine a fire raging in that forest of vulnerable dot-coms and over-funded startups, burning them down to a fine layer of fertile ashes, out of which a new generation of entrepreneurial businesses grows from the seeds of fresh ideas.

That is the world we live in, as Vivek Wadhwa, chief executive officer of Relativity Technologies, puts it. Wadhwa is the keynote speaker Saturday at the Third Annual Duke Startup Challenge, where these seeds are being laid for new businesses to grow, replacing the old growth forest of tech companies.

“Generally speaking, the entire landscape is littered with dead and dying companies,” Wadhwa says of the old growth. “A forest fire is clearing them out, and a new fertile environment is emerging, where new seeds can prosper.”

The new seeds are the ideas. Beginning last October, as many as 50 teams applied to the Duke Startup Challenge, a three-phase competition held annually on its Durham campus to foster entrepreneurship and startup companies. Students could enter individually or form teams that included faculty, alumni, researchers, staff members, students from other universities and others outside the Duke community. However, at least one Duke student must be an active member of the team during all phases of the competition.

Based on a series of educational classes and seminars about starting a business, these teams submitted an executive summary. From that initial round of applications (Phase I), some 20 teams were chosen in late November to move on to Phase II. After further instruction, the teams wrote a formal business plan due in late February for consideration to make it to Phase III, the final round of five, where the winner will receive $50,000, and very likely go on to become a full-fledged startup. Two runner-up teams will receive $20,000 each and a “People’s Choice” selection made by the audience well get $5,000.

“The bottom line is for all these to become profitable, successful companies moving forward,” says Bradley Zimmer, director of media relations for the Duke Start-Up Challenge, adding that “some companies are further along than others.” Regardless, Zimmer says, no money is awarded until they get their “corporate papers,” and previous aid “has been minimal…through research grants and Duke funding.”

Range of tech specialties

This year, the five teams, which are essentially companies by this point, will gather at Duke University’s Fuqua School of Business. Fuqua sponsors the event along with several other departments and offices on campus, from the Pratt School of Engineering and the School of Medicine to the Provost’s Office and the Global Capital Markets Center.

The companies are:

  • Alchemy, which helps employees protect stock options against future drops
  • Peregrine PowerKraft, which is seeking to create more efficient and safe power sport equipment through fuel cells and wireless speed governors
  • SunDance Genetics, which is using corn varieties to benefit human health and environmental safety
  • TheraNova, developing Pulsed Electromagnetic Induction Therapy technologies to relieve arthritis and musculoskeletal pain
  • Visual Data Systems, which allows for complex data to be presented and manipulated through images

Each team will each make a 30-minute presentation five times to five different groups of three judges. The judges, composed of entrepreneurs, corporate executives and venture capitalists from the area, will read on the companies’ business plans, listen to their presentations and question them on their strategies, eventually deciding on a winner.

One of those judges is Garry Snook, chairman and CEO of Performance Inc., a national bicycle mail order and retail company he started in Chapel Hill. Not only will Snook help decide who wins, but he will personally supply the winning team with its loot.

Among those joining him (and Wadhwa) on the judge’s panel will be:

Norvell Miller, managing director of Southeast Interactive Technology Funds in RTP

Simon Rich, CEO of Louis Dreyfus Holding Companies

Sallie Shuping-Russell, general partner with Durham venture firm Intersouth

Max Wallace, president and CEO of Cogent Neuroscience, also in Durham

John Yates, partner with Morris Manning & Martin, LLP, a technology practice in Atlanta.

Wadhwa says from his initial impressions, many of the companies participating in the Duke Startup Challenge seem more promising than most real startups he comes across today.

“They look better to me than the business plans from many mature companies,” he says. “I see it all the time, from entrepreneurs wanting to start companies, and they lack what I see in these business plans. At first glance, I was very surprised at this material. These kids are showing a lot of creativity.”

Chance to network

Outside of the judging, the prospective entrepreneurs from all stages of the competition will get a chance go mingle with investors.

“There is lots of money, and the appetite for investing hasn’t gone away; it’s just more cautious and looking for good ideas,” says Wadhwa, who also is president of The IndUS Entrepreneurs (TiE) Carolinas chapter. “Venture capitalists keep saying that what’s missing is good ideas…that’s what they don’t have. They have money. There’s not enough good business plans…not worth investing in. There’s been so many tech companies over past few years, it’s ridiculous the number of companies being formed and funded. Here are teams that learned the hard way,” referring to those at Duke.

In the past, many finalists from the Startup Challenge have gone on to gain funding from other competitions and become legitimate, functioning companies.

NovOculi, which took research about incision-less refractive surgery for laser eye correction from Duke Eye Center and patented it, is now in clinical trials and hopes to have a product by 2003. Winners of last year’s challenge and award money, as well as funding from three other similar events, NovOculi has been able to use its winnings to start a viable business.

OmnipreSense, winner of the 2000 challenge, designs, develops, and markets human-computer interface devices to enable the computer to non-intrusively interact with humans and become a more natural part of the environment. The company has presented its plan to many venture capital firms and spoken with several angels investors. Currently, the team is reviewing potential funding options while developing its product. Using its prize money, OmnipreSense expects to develop a prototype to be ready this fall.

The Duke Startup Challenge has only been around for three years, but Wadhwa likes what he sees developing in part through the competition.

“This is where the next generation of ideas is coming from,” says Wadhwa. “The university is coming up with ideas, and this is the seed that will become the next generation of tech companies. The environment is very fertile for these types of companies.”

Duke Startup Challenge: