How to stop the elevator
Last Thursday, Angel Challenge Health Tech 2017 was kicked off. 10 entrepreneurs had 3 minutes each to pitch their project in front of 20 investors. I came home feeling bewildered. I really wanted to hear what the entrepreneurs had to offer. I could see their passion for their idea and I heard them talk about their products. That works well with friends or family. But for me as an investor, most of the entrepreneurs weren’t even close to giving me what I need for an investment decision.
Three minutes may seem like a short time. It’s not if you know what the investors are looking for and how to present it in a short, succinct and engaging way. A pitch can be a daunting task. However, it’s also a great opportunity to get your message across.
My take on the elevator pitch
Imagine we meet in the elevator on the first floor in a 10 story building. I am going off on the 3rd floor. How are you going to intrigue me enough to abandon the 3rd floor and stay in the elevator? And for the remaining floors, how are you going to deliver your project in such a way that I cannot walk away, that I actually push the stop button before we get to the top?
There could be several ways you could accomplish this. However, telling me about all the amazing features of your product, list your resume or trying to oversell, is not the way.
3 floors, 3 sentences
According to Michael Seibel, CEO at Y Combinator, all that is needed for a 30 second pitch is 3 sentences.
I agree, if you get these sentences down, you have my attention:
1) What does your company do
2) How big is the market
3) How much traction do you have
What does your company do:
Y Combinator calls this the mom and dad test. If you, in one sentence cannot get your mom and dad to understand what you do, then rework the sentence. Make it simple, straight forward and in a way that requires no pre-information on their part.
This is the most important to nail. If I cannot understand what you are doing, the rest is not going to make much sense to me. Here is an example of the sentence: We are Airbnb, and we allow you to rent out your extra room in your house.
How big is the market:
For start ups, I take a significant risk. Revenue is normally low, or non existing. This means that there has to be a considerable market potential. I want to hear that your market is at least Europe and the US. If it’s global - awesome. How? Define your market - what general industry is your product in, do research. You can find a lot on Google. For example: The global hotel market in 2016 was 550 billion US dollars and the annual growth rate is 10 per cent.
When the product and market is in place, I need to believe that you are the team that is going to execute, that you will get your product to market and make success. Good traction could be proof of this.
To get my attention, I want to know when you started, preferably 1-3, max 5 years ago. Since the time line in developing health products could be longer than other industries, you have some leeway on the max 5 years. I want to hear that you have reached at least two important milestones, and if you have launched, that your revenue is growing rapidly. Future milestones are also great information.
Here is one example: We started in January last year, completed our pilot a couple of months ago, have our first large customer on board, and are ready to launch our MVP (Minimum Viable Product).
I didn’t leave the elevator, now what?
You have my attention. Next: how are you going to get me to push the stop button before we reach the top floor? What do I want to hear more about?
Here are my top four:
Why are your so passionate about this? What inspired you to start this business? A personal story/problem is a plus.
What is unique about your product and/or what do you understand about the market that no-one else does?
What is your business model, how are you going to make money, what is your three-year estimate of revenues and EBIT?
Who is on your team? A strong team would be: 2-3 co-founders that know each other well, have necessary team experts in place, and if not - that you have a network and recruiting skills.
Any of these would also strengthen your case:
What is the value proposition for the users, what real problem does your product solve in a way that will make your users love your product so much that they tell everyone they meet about it?
What is your “Go to market strategy”. Where do you start, what is your road map to the global market?
Do you have any patents?
Do you have any partners that can add value, and have committed their time?
Is this technology or product a platform that is easily scalable in terms of growth and/or other products?
Finish off with what you are asking for: How much capital, the valuation of your company and any future capital needs that will dilute my ownership.
If I still didn’t push the stop button
Lets say you get most of this down, and I still haven’t pushed the stop button. It could be about how well you were able to present your idea. Communication skills are vital for entrepreneurs. You are going to present your idea in different situations: attract investors, inspire and lead employees and possibly talk to media.
We are all more or less out of our comfort zone when speaking in public, or presenting our case when there is a lot at stake. But that doesn’t necessarily mean we have to be bad communicators.
For my part, I am so out of my comfort zone when presenting my case, especially when standing in front of an audience. I have had my share of avoidance, scary moments and incoherent sentences. Over the years, I have improved my communications skills by challenging myself and practice.
I am passionate about entrepreneurs and innovation, and I can’t wait until the next time I find myself pushing the stop button.
AC Guest Author
I call myself The Every Woman Investor. Beautifully ordinary. I dont have an extraordinary amount of money. And yet, I am willing to risk some of what I have on entrepreneurs and innovation.
First, because there is a potential for great return on capital. Then I find it so inspiring and rewarding to work with entrepreneurs and innovation. And last: we need innovation in today’s world. I am not a politician. So this is my way of voting, my way of contributing.
How can I contribute?
I have 15 years of experience as an auditor and consultant working in the large accounting firms. Now I have gone private and consult with start ups and small companies focusing on accounting, recruiting and project management. I have invested for 12+ years, in more than 60 projects and have experience from several boards. I have 7 years of coaching and facilitating people through stressful situations, specifically working with their fears that will limit them.