Cisco Hopefuls Keep Eyes on the iPrize

SAN JOSE, Calif. (TheStreet) -- Cisco (CISC), the network-equipment maker that's acquired 48 venture-backed firms in the past decade, also gives entrepreneurs a direct route: the $250,000 iPrize.

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The iPrize is a way for Cisco to identify its next big business opportunity by linking up with potential geniuses around the world. The strategy, which complements Cisco's close relationships with venture-capital firms, bore fruit the first time around. The idea that won the first iPrize, awarded in 2008, led to the creation of Cisco's Smart Grid unit, a market that Cisco expects to rise to $20 billion annually in the next five years.

"I am very happy about the fact that the idea has found its way into reality," says Anna Gossen, a computer science student at Karlsruhe University in Karlsruhe, Germany, who won the first iPrize with a three-person team that included her husband and brother. "If it were not for this contest, I wouldn't have come to the idea and I wouldn't have found the means to lead it on to a patent level."

The second iPrize competition is accepting initial entrants until April 30. Cisco will then choose up to 32 semifinalists, who will have the chance to work with Cisco employees to hone their technology and business plans. Eight finalists will pitch their ideas to a judging panel via a video conference in late summer.

Regarding the initial free-for-all part of the competition: "It's a bit like watching the first rounds of 'American Idol,' " says Guido Jouret, chief technology officer for the company's Emerging Technologies division. "You do get your fair amount of kooks." One applicant pitched a plan for nuclear-powered socks, he says.

Many applicants knock themselves out of the running by failing to be original. "Probably more than the kooky ideas, the ones we get a lot more of are ideas that aren't breakthrough enough," Jouret says. "They tend to be variations of products that already exist."

Applicants have a chance to comment on and rate others' ideas online. Pitches garnering positive peer attention in the current competition include: "EmoTransmission," a means of transmitting emotions over the Web and sharing them with fellow online video-game players, using biofeedback technology; a system for ordering fast food from a touch screen (instead of a teenage cashier), which, a la Netflix ( NFLX), would make recommendations based on your previous orders; and a "nanofinancing" model, which would enable impoverished individuals to finance mobile phones without incurring debt.

Multiple entries are welcome. Gossen, the computer science student at Karlsruhe University, is entering iPrize 2 with several ideas, including "a new generation first-aid box" and "a digital pocket."

Unlike the first contest, which gave Cisco exclusive rights to the winner's project, the second iPrize competition is more lenient to attract the ideas of established startups who might want relationships with other companies. In the current contest, the winners grant Cisco a perpetual-use license, meaning Cisco can use the technology forever, but the entrepreneurs can license the same technology to other companies if they wish.

"We see a lot of entrepreneurs, and some of them have a fear of coming to talk to us; they worry that they're giving their idea away simply by opening their mouth," says Jouret, who adds that the fear is unfounded. "We don't want a reputation as a big company that scams little companies and rips off their intellectual property."

Regarding entrepreneurs who want to pitch ideas to Cisco outside of the iPrize, Jouret says one of the biggest mistakes they can make is neglecting to figure out which business units would make the best use of the idea.

"You have to do a bit of research and realize that this isn't a single monolithic organization," he says. "Often people come in and give a long pitch without a frame of reference. The one thing that's important to remember is that large companies are federations -- multiple business units of product families. And a 'no' from one unit doesn't mean a 'no' from the whole company."

-- Reported by Carmen Nobel in Boston.

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