How can you get noticed? Don't expect to tell the whole story, just enough to get them curious and wanting to know more. You need several different pitches. The demo pit / exhibit area pitch is 1 minute. The on stage pitch to the audience is 6 minutes. The investor meeting pitch is about 30 minutes.
Do VCs really make investment decisions on a new startup in 5 minutes? Yes. They can decide to say NO in 5 minutes, but saying YES takes longer. The key to an “elevator pitch” is to get them interested, answer the basic questions, and get a promise to have a next meeting. Next week at TechCrunch Disrupt, startups will have 6 minutes to do an “elevator pitch” to a panel of experts and 1,500 investors, tech execs, and press. It is called the “elevator pitch” because you should be able to explain your new company idea to a prospective investor in the time it takes to ride an elevator up to their floor.
Don't waste time with people who aren't interested - At a conference like Techcrunch Disrupt or DEMO you will see hundreds and hundreds of people. The goal should be to connect with five people who can help you. Be clear about what you need; customers, investors, partners, introductions, or maybe new employees. Focus most of your time on the people who can hep you the most. Don't spend time on people who aren't interested, or can't help you get what you need.
How do investors decide who they want to engage with at a conference? They look for ideas that align with their investment thesis. The secret to success in the VC business is to spend a little time with a lot of companies, and a LOT of time with a few companies. They want a quick overview of everything to make sure they don't miss anything and to see macro trends. But, they only want to spend a lot of time with a few companies that align with their investment thesis. So, if you are in a demo area with hundreds of people walking by, don't waste time with someone who isn't really interested. The one person you really need to see might walk by because you are too busy with someone else who isn't interested. Be available when the right person comes along.
How do I know if they are interested? They self select. They nod their head as you are talking. They ask a question. If you don't see any of this, or just a blank stare...move on. If the name of your company doesn't describe what you do, then make sure you have a great tag-line or "bumper sticker quote" that does. As people stroll down the aisles of an exhibit area they are looking for key words that capture their attention. I try to talk to every single company, but sometimes I don't have enough time. So, I try to find companies that are in the areas I am focused on. For me it is things like; search, cloud computing, mobile infrastructure apps, location based services, or social applications that combine many of these things together. Help people decide if your company aligns with their interests.
Who is your Customer? - The first question I ask a startup is "who is your customer?" or "who pays you money?". This helps me understand where the company is positioned in the ecosystem or "value chain". You would think this would be intuitively obvious...but it isn't. Many companies use the same buzz words and technologies so they all start to sound the same. They aren't. Knowing who your potential customer is helps me understand if I am a potential customer, or if my customers might need your product to build a complete solution.
What Problem do you solve? – Start with the problem you are solving or the need you are filling. A real life story about a person who needs or wants your product helps the investor understand the problem or need in personal terms, and agree that it is an interesting problem that needs fixing. Too many entrepreneurs start by talking about their solution and whiz bang technology. How they do it, versus what problem they solve. If the investor is not interested in the problem…there is no way they will be interested in your solution. Once they are nodding their head in agreement about the problem, then move on to the solution. If they don't nod in agreement cut it off right there. Don't waste your time, or theirs.
What is your Solution? – Explain why your solution solves the problem, and why it is better than other solutions. We do X for Y, or we are the X (well known product) for the Y market. For example, "we are Twitter for the enterprise market". Or, we do "enterprise level security for mobile handsets". Once they understand what problem you solve, they might listen to why your solution is better. It might be cheaper, faster, smaller, easier, more enjoyable, or whatever. Don’t waste time explaining the technology, or flowcharting the process or value chain. Just explain why your solution solves the problem better than anything else.
Who is the Competition? – If there is no competition there probably isn’t a market. Naming competitors help the investor understand the problem, existing solutions, and potential size of the market. Even if you think you are inventing a new market, the problem has been there a long time. People have figured out some way to solve it. That is your competition. Acknowledge that there are existing ways to partially solve the problem, and companies that have part of the solution. Then explain why yours is better. Investors will be very nervous if there is no competition.
What is your Business Model? - Who will pay? Is your solution a vitamin or a painkiller? Vitamins are nice to have, painkillers are a must have. There are some problems that no one will pay to solve. There are other problems where the one getting the benefit is not the party that pays the money. Sometimes there are multiple players in a value chain. Be very clear about where you are in the value chain, who will pay for your solution, and how much they will pay.
The Team – What experience do you and your team have starting companies or specific experience in this market segment? Are there any well known advisors or financial backers helping you? Do you have connections to people who can help you get your first customers? This is important because in the end it is all about the team. The best ideas will fail if there isn't a team with domain experience that can execute. For example, I could have a great idea about making the best Whoopie Pie you ever tasted. But, I don't have any experience in running a bakery, or getting wholesale distribution, or Consumer Packaged Goods, so I would most likely fail to execute on the idea.
The Close – We are solving a big problem, in a growing market, with a model that works, and a team that can execute. We need X dollars to reach Y milestone. We need investor partners to help us achieve this success. Show passion and confidence. Ask them to join the crusade. This is going to be The Next Big Thing.
Spend one minute on the problem, three minutes on the solution and demo, and 30 seconds each on the competition, model, team, and close. That is 6 minutes. Practice it 20 or 30 times. Every founder and early employee should be able to do the elevator pitch. Practice in front of friends, then practice in front of strangers that know nothing about your idea. Quiz them after to see if you message got through.
The pitch is critically important to the success of your company. Every potential new hire needs to buy into the story just like investors do. Customers need to buy into the story too, before they purchase your product or service. This is important. Get it right and life will be much easier. Get it wrong…and you will get a NO in 5 minutes or less.