Choosing a "Stanford quality" startup idea–part 3
Congratulations, if your idea has made it through the first basic set of tests then it must be excellent. Now on to the next set of tests, remember we are trying to eliminate bad ideas fast and through a logical and non-emotional process.
Just to be controversial…who cares about the idea?
Having just gone through a process to choose an idea, many people would say that this is not the key issue to success – it’s all about the market.
Just to be clear then – I agree, you absolutely should choose a MASSIVE market – if you have a great idea and a restricted market you are much more likely to fail in my experience, you have to do everything perfectly and that’s a practical impossibility.
In reality the key to success is a combination of the best idea you can develop married to a team’s ability to execute, to build, market, and sell a product or service that’s better, faster, or cheaper, and to do so to near-superhuman perfection.
Choosing a "Stanford quality" startup idea–part 2
After having thought long and hard the usual response I get back from the team in the first instance is a variation on the first few ideas with a slight improvement on the stated criteria, why?
First, often the team is built around the first idea or two and is therefore “wed” to the original thesis and often has acquired some folks that have skills relevant to the idea. Therefore there is a circular idea-team skills loop, in some cases this is all fine as the idea makes the cut but in most of them the idea doesn’t make the cut and therefore the whole team dynamic can get out of whack.
This is where the mentor has to try and encourage “deeper” thinking and understanding of the core criteria for what makes a good “Stanford quality” startup idea”. This isn’t just any business idea, this is the pinnacle of ideas…something by it’s very nature that is extremely hard to produce!
Choosing a "Stanford quality" startup idea
On each of my Stanford courses (Engineering and GSB) we start the entrepreneurship element of the course by selecting ideas to base the mentoring around. The process of selecting a viable team and startup business idea are the backbone of these courses in my opinion. If you can get good at finding the right type of idea and team to make it a success you will have learned some of the fundamentals to the startup world.
Criteria for a great startup idea
As with most Startup ideas there are a large range of criteria for picking the best one to develop. In this case we are going to focus on the very basics for simplicity. This course is about pitching a VC at the end and much of the course mark is based on doing a good job in that endeavor! Therefore the idea is controlled by this requirement i.e. it must be a VC scale idea.
- Is the idea an ADVIL? (and not a Vitamin) Does your idea address a visceral and highly painful problem that needs to be solved right NOW vs. a long term annoyance that the customer can ignore or put off solving.
- Is the scope of the addressable market large enough? Can the idea build a business of scale ($100M+ per year revenues) ? If you are raising VC funding you need to find an idea in a big potential market. You then need to address a large slice of that market and show how your business model will create a business of scale. VCs fund ideas that can generate big revenue and exit value.
- Is the idea “defensible” and “sustainable” ? Is your idea “solid” i.e. is it something tangible based on some hard science vs. a copycat internet play. Is it new and innovative, and can that innovation be protected for the long term with both legal and execution options.
These are the very basics to get started.
When to write your business plan (vs. customer development)
Well most people would start the painful process of writing a business plan right away as they have their first idea for their startup, often taking months, just getting ready because that’s what they are trained to do – polish up word and PowerPoint and hone the idea in their minds and those of their friends.
NOT ME! Not any more…
In my view before you do anything you need to do lots and lots and lots of market research with target customers (customer development) – no business plan, excel or slides – just get a sample of whatever your idea is in as visual a form as possible ( a picture, mock-up, diagram…something potential customers can see, feel, smell, play with…even if it’s a service).
Spend a little time and money on the basic idea and then hit the streets – in my case I am prepared to go anywhere to get market data, for my last idea I travelled to 10 cities across the UK and the USA meeting competitors, potential customers, suppliers, consultants and anyone who could give me useful market data that was ‘visceral’ and ‘meaningful’.
On collation of all of this data, over 3 months, I started a business plan – after I had got many of my assumptions either thrown out, modified or proven – only then did I feel ‘comfortable’ to write something that was realistic.
How to write a winning elevator pitch
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:
- pain
- premise
- people
- proof
- purpose
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?
- Concise
- Clear
- Compelling
- Credible
- Conceptual
- Concrete
- Consistent
- Customized
- Conversational
1. Concise
An effective elevator pitch contains as few words as possible, but no fewer.
2. Clear
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.
3. Compelling
An effective elevator pitch explains the problem your Solution solves.
4. Credible
An effective elevator pitch explains why you are qualified to see the problem and to build your Solution.
5. Conceptual
An effective elevator pitch stays at a fairly high level and does not go into too much unnecessary detail.
6. Concrete
As much as is possible, an effective elevator pitch is also specific and tangible.
7. Consistent
Every version of an effective elevator pitch conveys the same basic message.
8. Customized
An effective elevator pitch addresses the specific interests and concerns of the audience.
9. Conversational
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.
