From GrubHub to Braintree, a look back at the Polsky Center’s legacy of supporting startupsStartups weren’t so sexy 25 years ago. It was pre-Google, pre-dot-com bubble, pre-unicorn. The University of Chicago’s business school, renowned for finance, didn’t offer an entrepreneurship concentration.
Steven Kaplan, a newly tenured professor in 1996, had just started teaching a class in entrepreneurial finance when a student, Jeff Meyers, MBA’97, popped his head into his office and suggested they hold a business plan competition. Kaplan told him to go ahead and organize it.
"I knew nothing about startups. Zero," Kaplan recalled.
Kaplan rustled up a few judges and $25,000 in prize money, and the New Venture Challenge was born.
This year marks the 25th anniversary of what is now the Edward L. Kaplan ’71 New Venture Challenge (NVC), a pioneering startup accelerator whose annual investment pool has grown to more than $1 million and whose alumni companies-including household names like Grubhub and Simple Mills-have raised about $1.2 billion in capital and achieved more than $8.5 billion in mergers and exits.
The program has expanded to include five separate tracks that seed and support not only Chicago Booth students in their startup ventures, but also UChicago undergrads, alumni, executive MBA students, and those launching nonprofits and social enterprises.
Entrepreneurship, meanwhile, surpassed finance as the most popular concentration among Chicago Booth full-time MBAs in the 2013-2014 academic year and has remained so ever since.
On June 3, the 25th annual NVC competition will host 12 finalists competing for an investment pool of at least $1 million, on track to be the largest prize pool in contest history.
To celebrate the anniversary, the Polsky Center for Entrepreneurship and Innovation --which runs the program-also invited several NVC alums to share their startup stories in a podcast series. Launched this spring, the interviews include Grubhub’s Matt Maloney, MBA’10; Braintree’s Bryan Johnson, MBA’07; ExplORer’s Jennifer Fried, MBA’15; and Simple Mills’ Katlin Smith, who tied for first in the NVC when she was a Booth student in 2014.
The podcast series began a conversation among three key leaders responsible for the success and the evolution of the New Venture Challenge: Steve Kaplan, Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance at Booth and Kessenich E.P. Faculty Director at the Polsky Center; Ellen Rudnick, the first executive director of the Polsky Center and currently a professor of entrepreneurship at Booth; and Mark Tebbe, who served as an NVC judge and mentor for years before joining the Booth faculty and Polsky Center as an entrepreneur-in-residence.
"We’ve gotten better at it over time," Kaplan said of the NVC. "To the point where it’s really magical."
The magic of the NVCWhile university-based accelerators have become more commonplace, Chicago Booth’s New Venture Challenge consistently ranks as the best in the nation, according to the Seed Accelerator Rankings Project. That’s because it combines experiential education with the resources and know-how to actually build successful companies, said Yael Hochberg, managing director of the Seed Accelerator Rankings Project, which led the research project to evaluate programs based on numerous factors including startup financing and exit activity, survival rate, alumni network and a survey of graduates.
"You have academics, practitioners who are in the industry who are teaching alongside those academics, mentors who are coming from all over the place who can be matched really well to the startups," Hochberg said. "It brings together so many perspectives and skillsets and that’s really distinguishing."
Hochberg observed the NVC course while serving as a visiting professor at Booth in the 2017-2018 academic year, and said she was impressed how valuable the experience was even for students whose companies don’t win any funding.
"Until I sat through it and saw the process I don’t think I had the realization of how much went into the teams that didn’t make it into the finals and how powerful an experience it was," Hochberg said.
The traditional MBA track of the NVC, which is open to all UChicago graduate students, runs the duration of the academic year. In the fall students explore ideas and build teams, and in January the teams submit applications for the credit-bearing NVC class.
The approximately 30 teams accepted into the spring course participate in a rigorous learn-by-doing curriculum, which includes presenting their business plans to classroom judges, coaches and mentors who offer feedback, allowing them to adjust along the way.
The intense criticism brings some students to tears, but it allows them to fix weaknesses early on.
"It gets them more to the essence of who they are," Tebbe said.
Meanwhile, professors and coaches tap into their networks and introduce students to investors and industry leaders who they think may be of help. Rudnick recalls introducing a student to Ulta CEO Mary Dillon, who was happy to take the meeting.
"It has a reputation," Rudnick said of the NVC. "Amazing people will answer the phone call."
By the end of the 10-week class, about 10 teams are selected to advance to the NVC finals to compete for funding during an all-day pitch event, set this year for June 3. Last year, the prize pool reached a record $1 million, with the first-place winner, Pippin Title, a real estate tech startup for nationwide title searches, securing $450,000.
Participants also have access to resources such as discounted legal and design services and free Amazon Web Services.
The NVC process is rooted in The Chicago Approach , the educational philosophy that underpins teaching at Booth. It provides a framework for how to think about problems, evaluate evidence and organize thoughts that can be applied across industries and remains relevant as the marketplace evolves.
"They ask you questions that cut to the core of whether your proposition and assumptions are valid and whether you’ve proven them out," said Seyi Fabode, MBA’10, who sold his company Power2Switch, which helped consumers reduce energy costs by comparing electricity rates, to Choose Energy in 2013. He has since launched a new venture, Varuna , which monitors water quality for municipal systems and commercial buildings to protect against contamination.
Though Fabode didn’t make it to the NVC finals, he said the experience-as well as the network of alumni eager to help-put him on a path to success.
"By the time I finished at Booth I had this foundation that had been bolstered by having to answer a ton of questions about the viability of the business," Fabode said.
Ashish Rangnekar, MBA’11, Rangnekar, whose company BenchPrep offers cloud-based standardized test prep, said the NVC was a "gamechanger" for him because it forced him to think big and strategically. He remembers Waverly Deutsch, a clinical professor of entrepreneurship at Booth and one of the coaches, pushing him to think about a B2B strategy.
"We were thinking one to two years ahead of us, not five to 10 years, and that is what NVC really did for us," said Rangnekar, whose team won the NVC in 2010. BenchPrep has since raised $28 million and has 130 employees.
A vital feature of the NVC is that it only accepts teams that have a chance of becoming a successful business, Kaplan said. Otherwise the process is demotivating to all involved - students, mentors and judges.
"It is super important... you only take in businesses that are real because that is super motivating," Kaplan said.
It can be difficult to know which businesses have legs. And the NVC’s leaders acknowledge they don’t always have a crystal ball.
A favorite story is that Grubhub was initially not accepted into the course. Based on its application, "it was just another Web delivery business, nothing new here," Kaplan recalls. Maloney, cofounder and CEO of Grubhub, went to Kaplan’s office and lobbied to be accepted, explaining how his model of helping consumers find restaurants that deliver to them was different. Kaplan agreed, but told him he needed to improve his pitch.
"It tells you it is really important if you are running a company that you have to explain what you’re doing and sell it," Kaplan said. Grubhub ended up tying for first place, and got $25,000, in the 2006 NVC.
Grubhub’s announced sale to Just Eat Takeaway, valued at $7.3 billion, is by far the biggest exit among NVC alumni companies.
The next largest was Braintree , a mobile payments platform, which went through the NVC in 2007, at the dawn of the smartphone, and in 2013 sold to PayPal for $800 million.
Last year, Cubii , a compact elliptical for exercising while sitting at your desk, sold to Gridiron Capital for $100 million. Cubii came out of the College New Venture Challenge, the undergraduate track of the program.
"The businesses students have created later create a huge amount of consumer surplus, they create jobs, in some cases they save lives," Kaplan said.
He is eager to see more deep technology and science-based startups go through the NVC. One finalist this year, Phlaxis, is endeavoring to create a vaccine for allergies.
A virtuous circleThe NVC began a startup itself, scrapping for cash and iterating as it learned what worked. It became a class after its first year because students said they wished they’d had more time to work on their businesses.
"The first year we did it as a class, it was unbelievable. I was just shocked," Kaplan said. "It was just amazing how much progress the teams made."
Then-Booth dean Bob Hamada tapped Kaplan to start an entrepreneurship center at Booth, and in 1999, with a $1 million grant from the Kauffman Foundation, he hired Rudnick, a health care executive with corporate and entrepreneurial experience, to serve as executive director.
"I said [to Kaplan], I don’t know how to teach," Rudnick recalled. "He said, you’ll get the hang of it."
Amid the dot-com frenzy, applications to the NVC soared, so the program added a second section of the class to meet the demand of the students.
In need of money to support growing interest in entrepreneurship, Rudnick worked with the university’s alumni development team to develop a list of Booth alums who were successful entrepreneurs. She found a champion in Michael Polsky, MBA’87, founder of Invenergy, who in 2002 provided $7 million to hire staff and broaden the center that now bears his name.
Meanwhile, the early prize money for the NVC was being supplied by Booth alum Edward Kaplan , MBA ’71, cofounder of Zebra Technologies, and after more than a decade in annual gifts he endowed the program in 2012.
Later, Booth alum Rattan Khosa , MBA ’79, cofounder of AMSYSCO, committed $150,000 annually to significantly boost the first-place prize.
"That was transformational," Tebbe said of the Rattan L. Khosa First-Place Prize.
A key evolution of the NVC was the development of four additional tracks focused on supporting distinct audiences.
The Global New Venture Challenge , launched in 2008 for students in Booth’s Executive MBA program, offers a condensed curriculum and contests in each of Booth’s global campuses in Chicago, London and Hong Kong.
The John Edwardson, ’72, Social New Venture Challenge , started in 2011, is run in partnership with the Rustandy Center for Social Sector Innovation at Booth to seed ventures with a social mission, and helped launch solar-powered light company LuminAID as well as online voter guide BallotReady.
The College New Venture Challenge , which launched in 2012, follows a similar model as the traditional MBA track, allowing University of Chicago undergrads to enroll in a winter quarter course through Booth. For the past two years, the CNVC has welcomed students from the Grainger School of Engineering at the University of Illinois Urbana-Champaign to partner on teams to help supply tech talent.
The newest track is the Alumni New Venture Challenge , begun in 2018, which helps University of Chicago alumni worldwide develop their startups. Semi-finals are held in several regions across the globe and the top finalists from each region vie for $100,000 in investment.
As the program matures, it feeds on its own success. Some students choose Booth for the NVC, raising the caliber of entrepreneurial talent.
"There was enough social proof in the program that I felt it warranted all of that excitement and attention and was the No. 1 reason I wanted to go to Booth," said Coco Meers, MBA’14, whose company PrettyQuick, an online marketplace for spa services, placed third in the 2011 NVC and sold to Groupon in 2015. She has since launched a new business, Equilibria , which sells premium CBD products for women, and an angel fund, Rebel Collective, to invest in women-led startups. She still taps into the NVC network.
"There is not a year that’s gone by that I haven’t reached out to one or dozens of my Booth or NVC or Polsky community members for help," Meers said.
NVC alumni who found success are returning to the program as judges, mentors, coaches and investors. Many whose own startups went nowhere pursued paths in venture capital and are major supporters.
This year, for the first time, some of the NVC’s biggest success stories-Grubhub’s Maloney, Simple Mills’ Smith and Jake Crampton, MBA ’98, co-founder and CEO of MedSpeed, a same-day transportation service for the healthcare industry and one of the early NVC success stories-will participate as finals judges. More than half of the 25 judges voting in the finals have committed to also investing in the companies, Kaplan said.
"It’s all a virtuous circle," he said.
--This story was first published but the Polsky Center for Entrepreneurship and Innovation.
- To learn more about the Polsky Center’s impact, listen to the new "Where Are They Now?" podcast series.