This is one of the best videos I have ever watched to help startups see what makes sense in coming up with an idea and other great lessons, how to avoid building something no one cares about, what angels want…esp. minute 4-7 if you only have a sort amount of time.
Especially useful for Internet Startups.
It’s all good…watch it!
Matt founded LowerMyBills back in 1999 (full details about his inspiration come during the first part of his interview) and later sold it to Experian for over $300M. Since then he’s become an angel investor and advisor to startups around the world (including Mahalo).
Saw this on the excellent “This week in startups” with Jason Calacanis.
This topic is always a hot one for founders when they are considering VC money!
Or indeed when they are talking with private equity companies.
I wanted to write about it as a very talented friend of mine was just “fired” after navigating the recession and raising a $30M round in this climate!
They fired him after he had worked his butt off for years and got his startup setup in a good position and then they replaced him with someone with less expertise and experience. All because of what sounds like VC politics…
I should say he has a great deal of experience, is mature and has worked in senior positions for the likes of fortune 100 companies– so this isn’t the situation where the founder is too young, dumb or lacking core expertise at all.
So what’s so dumb about this other than the obvious then?
Well in my personal experience (where I fired myself and brought in the “grey hairs” to replace me as CEO) is that the “heart and sole” of a startup is the founder(s) and their energy, determination and culture.
If you rip that out at the wrong time, as I did with myself, then you cause chaos, people leave, you “get execution lag” where the new person has to come on stream and you also lose credibility with customers…in many cases!
Most importantly, many of the core people in a startup are there because they are following the founder and they believe in that “person”, if the founder is killed then all those folks will get very nervous and will consider leaving. That’s the case in my friends startup, core technical expertise essential to the Company joined because of him and now they are seriously considering their options.
In my case, I convinced staff to stay but the new guy went on a bunch of ego trips from overspending, to not reacting to market conditions and reducing costs (i.e. their salary) for example – why not? – it’s not their baby and not their money!! The founders will do anything and everything to keep the baby alive: if it means 6 months no pay then so be it, ramen soup 3 meals a day, then OK…anything to win. You will never get that with outside talent as they will not have “founder fever”.
When I ran the startup we had a great company culture but we had holes in the carpet as I didn’t waste the money on replacing it. I preferred to run “lean” and only spent where the funds were most need like technology in this case.
Now, as with any example, there can be good reasons to replace the CEO/founder at the right time. Often if the founder is very technical and needs the expertise of a CEO and they can work that out and accept it then great. But in that case you have positive agreement and you keep the goodwill in the company as it grows, all very sensible.
So to finish my rant, one: be careful when you take VC money they can and will fire you if they feel like it; two: try and make yourself replaceable over time anyway then you will be able to scale and move on if you so wish; three: be very careful both legally and in the culture to make sure you don’t get killed if you value your Company’s future!
In my opinion you are taking the very lifeblood of a startup out of it when you mess with the founders unless you are very, very careful and make the whole process positive. Startups are already fragile “babies” early in their lives and it doesn’t take much to kill one, firing the founding CEO is like dropping the baby (startup) on it’s head…not a great idea.
I don’t know the stats on what happened to companies where the founder was forced out but I am guessing they don’t look very good at all…(a bit like most VCs returns that do this sort of thing!)
Here’s a great video that covers some of this topic and explains why Facebook CEO Mark Zuckerberg does not step down even though he is young and inexperienced!
Adeo at TheFunded has come up with some time and cost saving free legal docs that look good if you are US based and starting up. They are written to be less “VC-sided” and if you can use them then I would – I certainly plan too with my next startup!
TheFunded has produced founder-friendly versions of every legal document necessary to launch a new startup. These documents were carefully written from scratch to keep founders in control of the companies that they create.
– http://www.docstoc.com/docs/12233422 – Bylaws
– http://www.docstoc.com/docs/12233427 – Certificate of Incorporation
– http://www.docstoc.com/docs/12233434 – Initial Stockholder Consent
– http://www.docstoc.com/docs/12233436 – Invention Assignment Agreement
– http://www.docstoc.com/docs/12233437 – Restricted Stock Purchase Agreement
– http://www.docstoc.com/docs/12233430 – Indemnification Agreement
– http://www.docstoc.com/docs/12233432 – Initial Board Consent
– http://www.docstoc.com/docs/12233420 – Action by Incorporator
– http://www.docstoc.com/docs/10303638 – Plain Preferred Term Sheet
You may also want to check out Pitch Silicon Valley on October 6th
On the evening of October 6th, over 200 CEOs, reporters, and investors from Silicon Valley will have an evening of food, drinks, socializing and talks. You’ll hear pitches from ten new early-stage companies. Aaron Patzer, CEO of Mint.com, will speak about how he built a $170 MM company in just three years, and Munjal Shah, CEO of Like.com, will talk about the best practices and steps to earning revenue.
* Please sign-up to join the event on October 6th:
I met Eric through a friend Steve Blank and these two have formed a partnership of sorts both in teaching great lessons on startups which grew from working together at IMVU where Eric was a founder and Steve a board member and investor.
Eric is a seasoned tech. startup entrepreneur and Steve is an “uber” version of the same so it pays to listen to their advice.
Eric’s presentation takes a lot from Steve’s thinking on the topic of paying very close attention to your customers – he calls this his “Customer Development Model”…something we all need to do a great deal more of IMHO.
This is a long but worthwhile video if you are building a tech company and a software startup in particular.
See more on each of their blogs:
Eric’s blog Lessons Learned
Steve’s blog http://steveblank.com/
Writing a good and punchy “elevator pitch” is way harder than most people think. Plus I find that I really need to teach this skill a lot with my Stanford and UC Berkeley MBA’s to help them both with distilling their ideas, perfecting their business plans and finally pitching VCs – so this skill turns out to be very important and useful!
The reason is that most people don’t produce winning elevator pitches is that they don’t have the combination of good copywriting skills, the ability to be brief and finally the focus to just choose the most important “USP’s” (Unique selling points).
Frankly I find it very hard myself as I generally have a very complex software product to “sell”, I even find it hard to summarize myself in a few words that are compelling as I also get involved in many things! So if you are like me and want to try and distill the essence of you, your product or company read on.
First, what is an elevator pitch?
Well depending on the personal asking it could be a few things i.e. if it’s an investor then its a punchy summary of why your company is an interesting investment, whereas if it’s a casual inquiry like “What kind of work do you do?” you need to give them a brief answer – and each reply in roughly the time span of an elevator (lift) ride.
Elevator Pitch Essentials Author, Chris O’Leary, says:
“An elevator pitch is an overview of an idea, product, service, project, person, or other Solution and is designed to just get a conversation started.”
So this is a 60 second or less summary about the topic at hand, usually you or your company.
While the term “Elevator Pitch” is generally used in the context of entrepreneurship, and in particular in selling ideas for new businesses to Venture Capitalists, the truth is that the idea can be used to help sell a wide variety of things.
As you can see then, having a “canned” but punchy response can help you in many ways from networking events, to chance meetings with people to stand up pitches about your company – in each case you have a very short time to impress and then get some form of positive action – like “tell me more…”
“Summarize the company’s business on the back of a business card.” — Sequoia Capital
My favorite elevator opportunity I have seen was in a movie called “in pursuit of happiness” where Will Smith has a potential employer in a taxi and he has to try and convince him to give him a chance…in this case a Rubik’s cube came to his rescue but he really could have done with an elevator pitch! On the other hand Meg Ryan in working Girl did a great elevator pitch (literally) and got the job.
What is a compelling elevator pitch?
Most people totally screw up their elevator pitch, this is generally because they haven’t taken the time to craft one right for the circumstances and the one they have lacks power and focus on the desired outcome.
So we need a tightly focused mini sales and marketing message, right for the person or people you are delivering too and on the right topic. It also needs to lead to some form of action or outcome you desire.
The ideal length is in the order of 10-12 words or in that range for a personal intro and about 150-225 words for a business pitch.
Like any sales message it needs to offer some form of interesting “benefit” to the recipient – A "hook" (Open your pitch by getting the Investor’s attention with a "hook." A statement or question that piques their interest to want to hear more.)
Depending on your outcome, the message wants to be strong and unique enough to get people to actually “care” about who you are or what you do. Plus you want them to want to go on to learn more so it’s important not to be boring, trite or offer up the same old message.
Ideally the message will also be memorable either in it’s content or with the passion (Investors expect energy and dedication from entrepreneurs) with which you deliver the message, preferably both. A memorable pitch also enables others to spread the word about you effectively.
Finally, as i said you want some “action” to follow so don’t be afraid to ask for what you need, is it more time to tell the investor more – or maybe a quiet corner at a networking event for a longer chat, a business card or a referral – whatever it is, close the pitch by asking for something.
How to create a compelling elevator pitch?
One of my favorite people on this topic is Mike Southon and he is a world famous entrepreneur and author of the The Beermat Entrepreneur series. He says of an elevator pitch:
In sales, there is the concept of "golden nuggets", where as many as 50 amazing features of your product are crammed into literature by your marketing team. The problem is that most customers have very short attention spans and can only remember three things about your product. As soon as you mention the fourth golden nugget, the first, and probably most important one, drops out of their memory.
By the time you get to nugget number 50, all the most compelling ones have long since gone, and the prospective customer has also lost the will to live.
Rather than being to close the deal, the goal of an elevator pitch is to just get the ball rolling; to start a conversation, or dialogue, with the audience.
The five P’s:
So the methodology for a good elevator pitch is simple, and centers around five ‘P’s:
1. So this process is like creating your value proposition, you need to start off by looking at the nasty horrible immediate problem – or ADVIL – that people wish to solve when considering you or your business. So we start by looking for the pain? You should also ask: What is the pain or problem that you plan to solve?
The larger the pain, the more likely people are to give you money to take it away. Pain can come in many forms, but if your product or service saves time and money, that is a good start. In reality you also need to need a pain that needs in instant solution (like a headache that needs an Advil to stop it right now) as opposed to a pain that needs a vitamin to slowly get rid of it. Immediacy is very important.
2. You have to explain in simple terms the premise of your business. Exactly what is it you do? For this, you need to be literal and to the point. It’s amazing how many people can’t articulate what they do in a single sentence. Keep it punchy, pithy and potent (yes more Ps).
3. You need to talk about your people because entrepreneurship is a team game. Every investor says they look for a credible team rather than a good idea, and every customer says they buy from people not companies.
4. Proof is the hardest element to provide. Why should anyone buy from you and not your competitors? The best proof is examples of your happy customers, in the form of relevant case studies.
5. Finally, you must provide your purpose, and the most important purpose of any business is to make money.
Potential investors will be looking for a return on their investment, and prospective customers will only want to know that you run a sensible and profitable business, to ensure reliable and consistent delivery of your products and services.
Or may its the 9 C’s:
The book “Elevator Pitch Essentials” uses a longer version of the above to craft the elevator pitch?
An effective elevator pitch contains as few words as possible, but no fewer.
Rather than being filled with acronyms, MBA-speak, and ten-dollar words, an effective elevator pitch can be understood by your grandparents, your spouse, and your children.
An effective elevator pitch explains the problem your Solution solves.
An effective elevator pitch explains why you are qualified to see the problem and to build your Solution.
An effective elevator pitch stays at a fairly high level and does not go into too much unnecessary detail.
As much as is possible, an effective elevator pitch is also specific and tangible.
Every version of an effective elevator pitch conveys the same basic message.
An effective elevator pitch addresses the specific interests and concerns of the audience.
Rather than being to close the deal, the goal of an elevator pitch is to just get the ball rolling; to start a conversation, or dialogue, with the audience.
Finally, Avoid mistakes:
- Stick to hard facts and numbers! Avoid assumption or BS’ing; you’ve got to instill integrity in your message.
- Make the pitch easy to understand; avoid acronyms or any jargon that your intended audience won’t comprehend.
Examples of pitches:
TechCrunch Elevator Pitches is a community video project that allows entrepreneurs to pitch their business idea to the general public and have it voted and commented on by viewers. Please note that this particular project allows one minute pitches, yet there are lots of submissions and examples so be sure to check it out.
Vator.tv is a video site featuring a rather non-traditional spin on the elevator pitch. There are plenty of video pitches by numerous companies and entrepreneurs.
This should provide the basics for delivering a good elevator pitch.