Inside Northwestern University’s startup machine

May 6, 2014, 11:38 PM UTC

This is the third year in a row teams from Northwestern took home big money at the world’s most prestigious business plan competition. Here’s how they’re doing it.


FORTUNE — There are some things you can’t prepare for in a classroom. The night before the semifinals at the Rice Business Plan Competition in April, judges told breast cancer treatment company Innoblative they should wear pink neckties. But after trips to four different suiting stores, the team figured out the only store in Houston that could help was on the other side of town and closing in 10 minutes.

They called the store, had the ties put on hold, and convinced an UberX driver to go pick them up. After some finagling, he showed up a few minutes later in a red Ford F-150 pickup truck with five matching bubblegum-colored ties.

Besides bribing drivers for last-minute wardrobe add-ons, there’s little that’s scrappy about the hyper-polished Northwestern University team. Innoblative is the latest in a streak of Evanston, Ill.-based competitors at Rice University’s competition, the world’s largest such contest, to land a spot in the elite final found. (There’s less than a 10% acceptance rate to get to compete at Rice at all). Since 2012, Northwestern has sent four teams to the finals at Rice. The only other school that has sent more than one finalist over the last three years has been Purdue University, with two.

MORE: Tesla to simultaneously develop multiple sites for Gigafactory

Last year’s Northwestern team, SiNode Systems, won first place for their plan to improve lithium-ion batteries, and took home $911,400 in cash and in-kind prizes. Also last year, medical device company Briteseed came in second and won $273,000. The year before that, gas storage company NuMat won first place and $874,000. NuMat went on to raise $2 million in a funding round led by Houston-area investors.

Why the winning streak? The school credits its success to a suite of entrepreneurship programs and initiatives, many launched within the last few years. But they’re not alone in the startup push. Witness the last few years’ proliferation of entrepreneurship centers, faculty, and dedicated courses all over the country.

The student demand for such programs is there. Since 2010, some 45% of MBA graduates started their own business after graduation, according to a recent study by Graduate Management Admission Council. Between 2000 and 2009, just 24% of graduates did the same.

Historically, Northwestern isn’t known for entrepreneurship. That title goes to Stanford, where some 25% of courses are geared toward startups, and virtually every student takes at least one course in the discipline. At Harvard, where the school is pouring more and more resources into it, 34 successful HBS-born companies brought the school to the top of the Poets&Quants’ recent ranking. Northwestern’s Kellogg School of Management didn’t make the list. The university did, however, top PandoDaily’s recent entrepreneurship ranking. The publication’s response was, “What?”

Yet in Evanston, calls to entrepreneurship are everywhere. “They’ve been pushing us since freshman year,” says Curtis Wang, a Northwestern electrical engineering Ph.D. student and Innoblative team member. There are incubators, entrepreneurship centers, student groups, specialized faculty, contests, and conferences — such as April’s Next Frontiers Conference. Of the startup inundation, recent engineering masters graduate Brian Robillard says, “Every cliché you will hear it, but it works.”

At the core of the startup training is the NUvention class series. The courses draw students from all over the university to develop and launch businesses, often working with the university’s tech transfer office. For help with ideas, there’s a B-school course called New Venture Discover, which brainstorms ways to tackle big problems. Students can then take that idea (though it’s not required) to the university’s NUvention classes, which are specialized entrepreneurship crash courses, broken up into the fields of nanotechnology, medicine, energy, the Internet, and social enterprise.

Students in the classes are assigned mentors, build prototypes, and talk to prospective partners. (Such outreach actually gets graded.) “It’s essentially an incubator accelerator within a class,” says Mike Marasco, an engineering professor and director of the Farley Center for Entrepreneurship and Innovation at Northwestern.

The courses have spawned some standouts at the Rice Business Plan Competition. The 2013 winner, SiNode Systems, got its start there, as did the BriteSeed team. The teams drew their members from various schools, including business, engineering, medicine, and law. As they tried to figure out what kind of company to create, the BriteSeed group made the rounds at hospitals to see what surgeons needed but didn’t have. The product they eventually created, SafeSnips, is a technology that can be built into surgical tools to detect blood vessels that surgeons can’t see with the naked eye. The company, which is still developing the product, was the third group in the class to try to license the technology from Northwestern labs.

MORE: Fiat Chrysler unveils its five-year plan

As students develop businesses, the university encourages them to go out and compete in competitions nationally and internationally, as well as at the internal NU Venture Challenge.

Why business plan competitions? In some ways, the competition route seems to have fallen partially out of favor with some of the best student startups, which are heading instead to accelerators. But the business plan competition has had its share of blockbusters: Rent the Runway, Grubhub, and the Rickshaw Dumpling Company are just a few. For competing teams, face time with hundreds of industry experts and VCs helps, as does the time spent obsessing about the product. The prize money doesn’t hurt, either.

“In many cases, it’s non-diluted capital, you can’t beat that with a stick,” jokes Linda Darragh, a Kellogg school professor and executive director of the Kellogg Innovation and Entrepreneurship Initiative. “They’re really looking to get some significant money in the competitions so they can pay for developers and prototypes.”

Innoblative worked the competition circuit to raise $75,000 in grants and prizes (including their winnings at Rice), which required zero equity. In the startup world, that’s as close as you can get to free money.

It’s a pretty sweet deal, and it’s only available on campus. More companies, investors, and alumni will take your calls when you’re a student, says Tyler Wanke, Innoblative’s CEO, who eventually plans to join his other team members full-time at the company after finishing his MBA and master’s in engineering management. (His medical school training is on hold indefinitely.) In school, Wanke says the team also has access to more grants, prizes, advice, and other services than they would on their own. “We’re taking advantage of our student status,” he says. “But, we’re a real company.”

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.