Marketplace Business Simulation in the Bottom Line


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MPA Students Raise $ 20 Million in Mock Venture Capital Fair

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From August 2000 issue of the Bottom Line, a newsletter for alumni and friends of the College of Business and Economics, West Virginia University.

by Dick Riley

"As part of the Masters of Professional Accountancy degree program, graduate students harnessed the power of technology in the form of Marketplace, a comprehensive/complex business simulation for the development of well-rounded business skills in the classroom. The business simulation required student teams, with an infusion of their personal wealth, to start and manage personal computer manufacturing companies in competition with four or five other student teams. Each team was expected to make all startup, product, marketing, production, operational, financial and other strategic decisions required to manage the business. The teams faced a financial conundrum approximately halfway through the exercise: The companies were starting to generate sales and a customer base, but desperately needed operational and, more importantly, expansion capital. Therefore, each student team had to develop a business plan and solicit and negotiate with'venture capitalists for much needed growth capital.

On March 23, Jay Coats, associate dean for Academic Affairs, Barry Eden, Ernst & Young senior manager, John Mastalerz, senior manager with PriceWaterhouseCooper, Jason Ross, Arthur Andersen experienced senior, and Tom Witt, associate dean for Research and Outreach acted as venture capitalists with $4 million each to invest through an intense presentation and negotiation process. As a capstone exercise at the completion of the simulation, each student team reported the results of its company's performance, including return on investment, customer satisfaction, and market share to the venture capitalist investors.

As a result of the venture capital fair, student teams negotiated deals for venture capital ranging from $1.8 million to $5 million dollars, and generated millions in return for their investors. According to Dick Riley, assistant professor of accounting and course instructor, "The MPA Venture Capital Fair 2000 was a wild success. I don't think the students understood the nature of venture capital and the arduous negotiation process until they had to defend their business plans and operational strategies to members of the venture capital group. A sophisticated simulation, such as Marketplace, parallels the business world as much as possible. As a result, venture capitalists were able to leverage their considerable experience to focus the students' learning experience."

Barry Eden of Ernst & Young had the following observations: "The Marketplace experience reflects how things happen in the business world. Business is not easy to conduct, and its participants will frequently encounter situations that are very different from what they were either told or perceived. The students experienced this especially on the day of the Venture Capital Fair. Each student team thought that its company was worth much more than venture capitalists were willing to pay. The students were forced to explain and defend their "story" and were all asked some very tough questions. They did not like all of the questions; however, this is business.

"Another thing the students received from this course was some of the entrepreneurial experience that they would have never gotten in traditional schooling. Many of the groups showed their entrepreneurial skills in raising capital and executing business plans. I really liked this component of the class. Last, but not least, I believe that the students did a wonderful job of running the companies and doing the best with various resource constraints. It is sometimes hard for those of us in public accounting to help clients run their businesses when we have not run a similar one. This class helps give the students some feel for what it takes to 'make a buck' early on in their careers and how to learn from hard knocks." Roy Clemons, an MPA student, agreed. "The game provided us with an opportunity to apply the theories that we have learned throughout our college careers (i.e., to show our stuff). I believe my fellow students would agree that the class was definitely outside of our class format "comfort zone" (i.e., read, learn, test), but this was the best part of the course.

Though the business simulation's decisions were challenging, sometimes arriving at those decisions was even more challenging. "For our team's strategic decisions, most of the time was spent in attempting 20 prove to the other group members that our individual ideas were the best decisions for our business," explained MPA student Bret Carr. "For us, the greatest challenge was coming to a consensus as a group and having every member feel good about the next strategic move to be made as a business. I feel that I learned just as much about group dynamics, teamwork, consensus building, and leadership as I did about markets."

Dick Riley is the Assistant Professor, Department of Accounting. He may be reached by contacting the College of Business & Economics at West Virginia University, or email to rriley@be.wvu.edu.

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