EAST LANSING, Mich.-Michigan State University FCU here has launched its first-ever startUP Challenge, which will award $25,000 to a local entrepreneur.
EVP/COO April Clobes said entrepreneurial contests have been a big hit in its markets lately, and as a result the 168,000-member, $2.2-billion CU has been approached by various entrepreneurship incubator groups in the area, including the Lansing Economic Area Partnership (LEAP), the Technology Innovation Center (TIC) and MSU-related groups.
"Each of these entities approached us and wanted us to work with them, and we couldn't fund every program, so we decided to fund our own program and work with each group to funnel start-up applications to us," said Clobes.
All that's required to participate is that the applicant be an MSUFCU member, and that a business plan be submitted with each application.
All applications and business plans will be examined by a selection committee comprised of CU employees, representatives from local business groups and local start-up groups, and will be whittled down to five finalists. The winner will be selected from those five.
"We'll evaluate the plans, the viability, and then have everyone vote on what they think is the most viable candidate, what the plan and cash flow look like, and make sure that the ideas are marketable and not infringing on anyone else's ideas," said Clobes. MSUFCU will take applications until Oct. 5, announcing the winner on November 5. Clobes said MSUFCU has had "a variety of inquiries" about the competition, but has not yet received any completed applications.
Clobes did not know how many entrants the competition would receive, but predicted approximately 25. She noted that the $25,000 prize is larger than similar competitions in the region, and the CU hopes to see a higher quality of candidates as a result.
"For a $10,000 prize you might just get a web company," she said, adding that $25,000 may help bring in more ideas related to science or products that can be patented. "We set the price higher so that we could get somebody maybe who has something that needs to be manufactured, something that could cover anything from a design agency to medical equipment, et cetera."
$250,000 Loan Fund Available
For all the applicants that don't win the grand prize, Michigan State FCU has created the startUP Loan Fund, a $250,000 pool to help entrepreneurs cover gaps in their start-up funding.
"A lot of start-ups have opportunities for grants or SBA funding, but not usually100%, so we thought we could help complete a package for the individual," said Clobes. It will use that fund to make loans of up to $15,000, and while it hasn't priced those loans yet, Clobes expects the APR to be set at around 7%. "It's a little bit less than a consumer unsecured line of credit, but more than a real estate-secured business loan, due to the increased risk," she said.
In addition to the startUP Loan Fund, MSUFCU plans to refer those entrepreneurs to resources such as LEAP, the SBA and the Michigan Economic Development Corporation. "The goal would be to try to help them get started, even if they're not the winner."
Clobes said the credit union believes it might see some kind of increase in business loans as a result of the challenge, but said it was too soon to project any specific loan lift.
Reaching Gen Y
"What I really expect is that people will come and ask about the loan fund allocation and then a small increase in our current loan requests from the community, but not anything dramatic," she said.
The project is being promoted in local media and on the Michigan State campus. "A big portion of our membership is Gen Y, and a lot of the research shows that they are the most entrepreneurial-minded generation, and as they enter the work force, there aren't any jobs for them, so they have to create their own way," she said. "We want to make sure that we have the opportunities and products and services to meet the demands of those members."
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