Startups and More Bubble Up from Governor's Cup


Startups and More Bubble Up from Governor's Cup
Douglas Hutchings, CEO of PicaSolar, a Fayetteville innovator in solar panel technology. PicaSolar took the top prize in the graduate division at the Governor’s Cup in 2013. The startup now has additional funding and nine employees. (Corey S. Krasko)

In the executive MBA program at the University of Arkansas in Fayetteville, Stan Zylowski was asked to create an idea to be entered into a statewide business plan competition.

Zylowski and three other students entered their plan for software to monitor remote workers in retail environments. The plan won second place in the graduate category of the Donald W. Reynolds Governor’s Cup competition in 2008, and the team walked away with $10,000 in prize money as well as valuable connections with potential investors.

“Continued interest by investors and potential clients” led Zylowski and teammate April Seggebruch to realize the idea two years later. The company, based in Bentonville, has been operating now for seven years and is profitable, its officers say. Now known as Movista, the company has around 30 employees and millions of dollars in revenue. Zylowski, president, and Seggebruch, vice president, said the business plan competition was pivotal to the founding of their company.

Over nearly two decades of the Donald W. Reynolds Governor’s Cup competition, just over $2 million in prize money has been given to teams of college students with entrepreneurship ideas deemed promising by competition judges.

In 17 years of competition, 96 teams have placed in the top three positions in the graduate and undergraduate divisions.

Most of the winning teams have not gone on to incorporate their planned businesses.

For some teams, the prize money has been used to start up companies. For others, it’s a nice paycheck to split a few ways among team members.

But perhaps the most enduring legacy of the Governor’s Cup — based on interviews with contestants, coaches and contest organizers — lies in the connections forged and the lessons learned about business and entrepreneurship.

‘Educational Program’
In the Governor’s Cup contest, students present business plans of their own creation.

Competition winners in both divisions have received, in recent years, $25,000 for first place, $15,000 for second place and $10,000 for a third-place finish. Smaller awards are given for innovation, agriculture and elevator pitch competition elements.

There’s no competition clause that says a business has to be started, and competition organizers say they don’t keep track of how the money is spent.

“I would say that starting actual businesses from the competition could be a byproduct of the success, but it’s not a driver of the success; it’s not a measure of the success,” said Rush Deacon, CEO of Arkansas Capital Corp., which organizes the competition. “We don’t have any conditions on where the money goes.”

Deacon said the goal of organizers and sponsors was to improve entrepreneurship education in the state, not necessarily to start companies.

“The Reynolds Foundation was very clear that this was not an economic development program that they were funding. It was an educational program. So we very intentionally have steered it towards an educational enterprise instead of a business-building enterprise,” Deacon said.

The program was successful enough in the eyes of the leadership team at the Donald W. Reynolds Foundation, which has funded the competition since 2004, that the team implemented similarly structured competitions in Nevada and Oklahoma, two other states in which the Donald W. Reynolds, founder of the Donrey Media Group, had done significant business in during his lifetime. A yearly championship competition was also started that featured winners from all three states.

The foundation is winding down operations this year, satisfied that it has accomplished the wishes of Reynolds in distributing his wealth. Arkansas Capital Corp. is currently in talks with new potential underwriters.

‘100 Percent Pivotal’
With multiple teams having award-winning entrepreneurial ideas yearly, it’s not surprising that some teams have taken their ideas further than the competition. Some are still making a go of their business plans, while some have become case studies in the difficulties of starting businesses.

Merchant Eyes, the team with the winning idea that would be the basis for Movista, disbanded after the competition. Two years later, Zylowski and Seggebruch launched the company after getting encouragement from potential clients and investors they had met during the competition.

Movista uses software to monitor and manage remote workforces. For example, a company may have difficulty tracking remote merchandisers who stock products in grocery stores. Movista’s software helps with that, with features including location-tracking, expense reporting, payroll and task management.

Zylowski declined to share revenue figures, saying only that it was “multimillions” of dollars and that the company makes a profit. It counts retailers, manufacturers and service organizations among its customers.

The company wouldn’t have existed without the Governor’s Cup, Zylowski said. “If you’re asking if it was pivotal, it was 100 percent pivotal. It certainly was not going to happen when it did and how it did without the Governor’s Cup,” he said.

Besides the obvious benefit of $10,000 in prize money, Zylowski said there were other benefits to competing.

“It’s not unlike if you’re a doctor or a scientist and you post your papers out for peer review,” Zylowski said. “It’s very similar to that in that your idea gets better, and if it has legs — merit — quite often you get people who want to invest in it.”

PicaSolar took the top prize in the graduate division at the Governor’s Cup in 2013. Now, the company has secured additional funding and employs nine, hoping to be able to deliver a solar panel cell product to its first customers later this year.

Douglas Hutchins, CEO of PicaSolar, was a doctoral student at the University of Arkansas when he enrolled in an entrepreneurship course. As he progressed through his coursework and the Governor’s Cup competition, Hutchins veered off the path he assumed he would take.

“My eventual career track, just like most of the folks here, was to get a degree and then go work for some large company for what could seem like an outrageous salary,” Hutchins said. PicaSolar, in its infancy during the Governor’s Cup competition, caused him to pivot to entrepreneurship.

Lawson Hembree was part of Agricultural Food Systems, a team from John Brown University in Siloam Springs that took first place in the undergraduate division at the competition in 2011. The team’s idea was to commercialize a technology created by a UA researcher. Using proprietary hardware and software, the aim was to power data analysis to improve livestock breeding.

The other members of the team moved on to other opportunities after the competition, but Hembree pursued the idea for several years, with Agricultural Food Systems eventually ceasing operations in November 2016.

“We got to the point where we couldn’t do any more testing without funding, and we couldn’t get anymore funding without testing,” Hembree said.

After closing up shop on the Agricultural Food Systems idea, Hembree got a job through a connection who had sat on the company’s board and now works as a strategic marketing manager at Safe Foods Corp. in North Little Rock. Hembree said he would give entrepreneurship another go if the right opportunity presented itself.

A five-person team — four people from the University of Arkansas and one from Hendrix College in Conway — used a concept created by a University of Arkansas for Medical Sciences researcher as the basis for its business plan at the 2014 competition, placing second in the undergraduate category as BioBotic Solutions. BioBotic Solutions is now BioBotic Systems and is planning to use robotics technology to automate a manual process in pathology labs that is often the source of lab error.

Michael Iseman, now an entrepreneur in residence at Startup Junkie Consulting in Fayetteville, said the team was able to raise more than $500,000 in funding. Instead of continuing to lead the company, the students instead recruited Tom Ryan, a Chicago executive, to be the CEO.

Now the team of students has backed out of day-to-day operations of BioBotic Solutions, retaining a “small” equity stake in the company they created, Iseman said.

With the technology still in the prototype stage, Ryan is the only paid employee. Success in business plan competitions was responsible for a “paradigm shift” that convinced the team that they could, in fact, make a successful business out of their plan, Iseman said.

Carol Reeves, associate vice provost for entrepreneurship at the University of Arkansas, has been involved with the competition since its beginnings.

Although she is the first to brag on the successfully launched UA-affiliated startups, she is adamant that a team that doesn’t launch an idea shouldn’t be considered a failure.

“Companies not starting, that’s not a failure,” Reeves cautioned. “The skill set that the students develop through this experience are really invaluable.”

The larger effect that the competition has had on the Arkansas startup ecosystem is hard to pin down. Arkansas Capital Corp. said it was one of the first entities to encourage startups in Arkansas when it began planning for the competition almost two decades ago.

Competition Seeks New Funding
After 17 years of operation and millions in prizes, organizers of the Donald W. Reynolds Governor’s Cup are in the process of finding new funding.

The competition has lost its namesake and lead underwriter as the foundation carrying the same name winds down operations this year, satisfied that it has met the wishes of the late media mogul Donald W. Reynolds in distributing his wealth.

Arkansas Capital Corp. is seeking new underwriters, hoping to secure the chance to give undergraduate and graduate students chances to compete in the coming years.

“In 1999, the word ‘entrepreneurialism’ was fairly rarely spoken and there weren’t the programs that there are now,” said Deacon, the Arkansas Capital CEO.

Many of the resources for today’s would-be startups weren’t yet founded when the competition was being conceived.

The Little Rock Technology Park opened its doors in downtown Little Rock earlier this year, offering low-cost co-working space that can grow along with a small business.

The NWA Venture Team, a public-private partnership in the state’s northwest corner, helps growing companies with consulting and locating funding and talent. “Hackathons” and pitch competitions have been held across the state.

In the early 2000s, few universities in Arkansas had entrepreneurship programs, Deacon said. Today, eight of the 10 largest Arkansas universities have a major, minor, or degree emphasis in entrepreneurship.

Reeves, who has coached many of the University of Arkansas teams through the competition, said the Governor’s Cup is an early driver of a startup-friendly attitude in the state. “You never know what would’ve happen without it, right?” Reeves said. “But as far as the University of Arkansas is concerned, and I’ve worked here since 1990, it was transformative. It has really made all the difference.”

Having the prize money focuses students on the idea of entrepreneurship, Reeves said. “It focuses the attention and the potential to win the prize money. It’s huge, and Arkansas Capital Corp. has done a fantastic job. I’m so grateful to them, and the state should be grateful to them for what they’ve done with this competition.”

Deacon welcomes the other organizations now working in the startup space.

“I’m pleased that now there are a whole lot of people that have run past us in entrepreneurialism,” Deacon said. “They’re doing more than we’ve dreamed of and we don’t take any credit for those specific ideas, but I think we do take credit for a lot of the spirit that built the ecosystem that we have today.”