In addition to $1 million in growth funding available annually, the Entrepreneurs' Challenge provides mentoring and support from the university and wider business community to the winning companies.
"More failures will lead to more learning and more successes," Lark said.
"The objective when setting out isn't to fail but rather to succeed.
"We need to encourage entrepreneurship by removing the stigma associated with failure."
Lark had seen this theory in action at a conference organised by the CBA for women entrepreneurs, a forum he said was in contrast to the typical male-dominated conferences.
Women were quite happy to talk about failures and what went wrong, he said.
Small businesses and entrepreneurs often failed because they don't get the fundamentals right, either running out of money, failing to sell enough products or failing to get paid for the product sold, Lark said.
He said it was important not to confuse innovation with entrepreneurship.
"One suggests we search for the big breakthrough innovation and monetise it," he said.
"The other says we leverage our core capabilities against market needs and apply innovation."
He said he was amazed at the number of not particularly original products that succeed purely because someone took the time to get the fundamentals right.
Lark pointed to the success of Trade Me and 42 Below vodka, which had been "executed brilliantly". "The bottom line is there are no shortcuts."
And he said too many entrepreneurs did not call it a day when they should.
"They keep going in order to avoid the stigma of failure. As a result capital and opportunities are squandered."
CHALLENGE
Entries to the Entrepreneurs Challenge close 5pm, July 30.
www.entrepreneurschallenge.co.nz
