Confessions of an Arizona Innovation Challenge (AIC) Winner
One of the premier showcases for regional startups is the Arizona Commerce Authority’s bi-annual business plan competition, the Arizona Innovation Challenge (AIC). The AIC is self described as a “$3 million reality check” for technology-based companies to advance the development and commercialization of their innovations, with each winner earning up to $250,000 in non-dilutive, milestone-based funding. What does it take to win one of these prized grants? Whether your company has applied previously or is thinking about it, here are some of the lessons learned from fall 2015 winner and CEI business incubator client: Paraffin International, Inc.
First, a little background on Paraffin. Founded by salon owner Deanna Montrose, the startup has disrupted the beauty industry with its flagship product, gLOVE Treat. gLOVE Treat is a more efficient, effective and sanitary alternative to traditional paraffin wax treatments; with its glove and boot enclosures, users can easily heat it at home or in the salon in minutes and enjoy a relaxing paraffin treatment that helps moisturize dry skin. It recently was featured in O-The Oprah Magazine’s January 2016 O-List, which has served to accelerate the company’s sales output. Moreover, Paraffin is seeking expansion into medical applications as the product has potential therapeutic benefits for common conditions such as psoriasis and arthritis, among others. With that framework in mind, Paraffin took its first foray into the AIC competition.
It is certainly a rarity for a first-time applicant to win the AIC challenge, but Montrose and CEO Kevin Weber did just about everything right in order to win. Here is what they believe ultimately gave them the edge:
Never underestimate the power of having paying customers. Many entrepreneurs often cite the feedback of users or potential customers - which is important - but also leaves us with the question: will they actually pay for it? Paraffin has paying customers, further boosted by the Oprah effect, which establishes a track record of product-market fit. The company did not have to theorize that gLOVE Treat would successfully penetrate the marketplace because it has direct consumer behavior that proves it. This fact also strengthened a key scoring criteria: funding readiness. The more promising its early success, the better chances it had to acquire sizable investment in the near future - a big plus for its application. Additionally, AIC history - CampusLogic, eVisit, and ClearVoice for example - also suggests that the majority of winners are post commercialization and indeed growth stage companies.
Clearly-articulated strategy for growth
A current record of revenue and success is only half the story. As Weber put it: “There a number of founders who fall in love with their idea but wonder why the world doesn’t love it too. That is primarily due to the lack of a clear path toward meaningful growth.” In Paraffin’s case, they highlighted the aggressive revenue targets and how it would achieve them as well as focused on the expansion opportunity within the medical market. Importantly, the application also honestly addressed gaps it would need to overcome such as internal skill set needs, operational scale concerns and industry challenges. One of the best examples in Paraffin’s submission details the challenges they faced with its manufacturing. In order to confront the problems of slow turnaround and inventory issues due to overseas manufacturing, the company stated it would use competition funds to reshore it. As Weber suggests, this helped their prospects because they approached the AIC less as a competition and more an effort to demonstrate the potential return on the investment for the state.
Round over round improvement
Those familiar with the innovation challenge know that there are multiple judging rounds; from the initial pool down to 25 semifinalists to 10 finalists and ultimately 6 winners. After each round, Weber and the team internalized the detailed feedback from the judges, without pretension, and strengthened its subsequent submission. Too often, entrepreneurs ignore or overlook valuable insight from outside leaders, instead adopting a “they just don’t get it” belief that can be detrimental to their personal and professional growth. It is thus not surprising that pretty much every list of successful entrepreneurial traits includes some mention of adaptability or willingness to learn. Another tip to improve with every round from Weber: “Have your closest business advisors review your application after each round. There are always a few pearls to be taken from that feedback.”
No startup company - or even large corporation - is perfect. But fine tuning the details of your overall presentation is critical to drawing a favorable impression from judges. This includes the final round pitch but also the overall written content of your application. Checking for grammatical errors and presenting clear and concise answers only enhance your overall polish. The AIC application also includes an optional 5-minute video submission, and it is important to include something that reflects your business both in terms of content and finesse. They do not have to be works of art worthy of broadcast television, but they should not be afterthoughts either. I have personally witnessed numerous entrepreneurs wait until the final hour before hastily throwing it together. In addition to the multiple reviewers of the application, Weber personally sought coaching for his finalist presentation and took advantage of CEI internal marketing services for a simple, well-produced AIC video submission. All of these factors influenced the successful outcome of their competition journey.