Cisco Pays Big for New Ideas

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The big challenge in some innovation competitions is making the prize difficult enough that real innovation can be achieved, but not so difficult that the prize can't be won. The larger the challenge, the more likely people will try and fail. Northrop Grumman (NOC) has sponsored the Lunar Lander Challenge, a $2 million competition put on by the X Prize Foundation, requiring a vehicle to simulate trips between the moon's surface and lunar orbit. John Carmack, co-founder of id Software and a creator of popular video games Doom and Quake, came agonizingly close to winning the competition in 2006 and 2007 but was foiled by technical difficulties. Contest organizers have decided to create another competition later this year.

Spawning Businesses

The group assembled by Karr overcame its challenges through collaboration—and much coffee. They learned they had made it to the semifinals in late February, and a week later, on Mar. 6, the foursome found themselves again huddled at the Bean Cup. Karr came brimming with ideas and giant Post-It notes. Dawson brought his expertise in product management and Web-based software distribution. Ybarra-Dawson is a graphic artist skilled in user interface design. Karr also decided to pull in Carr for a restaurateur's perspective. They mapped out their own strategy but also pored over information on competitors culled from the I-Prize site.

San Jose (Calif.)-based Cisco equipped semifinalists with online collaboration tools, a business plan template, and regular in-person advice. The company wants to make sure would-be entrepreneurs get something out of the deal even if their plans aren't chosen.

Many people with good ideas have no idea how to write a business plan or get a business off the ground, Hsieh says. "In Silicon Valley we have this great built-up infrastructure of venture capital," he says. "You can go to Sand Hill Road, raise a bunch of money, and be off to the races. But there are huge swatches of the world where you can't do that." Brown, the steamfitter, reckons that "Cisco is going to make one team really happy and they're going to make 11 others develop competing businesses." He adds confidently, "Cisco could buy our idea for $250,000 now, or they can buy it 5 years from now for $20 billion."

Angels in the Wings

By May 6, Karr & Co. were ready for their final presentation, 150 miles to the East, in Cincinnati. At first, the Cisco judges didn't seem all that enthusiastic, Karr recalls. "But as we started explaining the industry, the problem, and the opportunity, we could see people get more excited, and at the end they gave us a round of applause," he says.

Hsieh won't let on who's in final contention for the prize, though he says, "Karr did a good job of putting together a team with domain knowledge; they understand their business and they have an interesting concept."

Karr knows his team faces stiff competition and says the contest has left them in good stead even if they don't win. "We've done all the legwork for putting together a presentation for venture capitalists and we've pursued that a little bit, we've met with some angel investors," he says. The team is prepared to approach venture capitalists if it doesn't win.

Karr and pals were nonetheless ebullient as they left the early May meeting. They high-fived one another and cranked up Queensryche as they drove back to Indianapolis, to the Bean Cup, where they eagerly await Cisco's verdict.

King is a writer for BusinessWeek.com in San Francisco.