Fred had a good post yesterday about why he considers Y-Combinator the “Best Deal in Startup Land." I believe that also and want to add a key reason for it: An intense focus on making versus planning. By entering Y-Combinator, teams commit themselves to a mad sprint to get something built. Ideally something that works well enough or is far enough along to actually launch before or shortly after demo day.
That is a completely different approach from that taken by business plan competitions. Most of those put all the emphasis on planning. I recently met with a team from ITP that is entering an NYU business plan competition. The team consists of folks who all know how to design and program. Yet the emphasis of the business plan competition was all about pairing them with an MBA and working on such things as market size and go to market strategy.
I told them that if I were in their position I would spend as little time as possible on the planning and focus instead of turning their prototype into a working system and getting that out into the real world. They will learn more about the viability of what they are working on (and more about business) then any amount of planning could tell them.