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Elevator Pitch at Boston ENET
Last Tuesday I had the chance to give an elevator pitch for ArtistBomb at Boston ENET. (The pitch was recorded, so I can post a link if it gets uploaded somewhere.) I’d like to share the formula I used so that you can adapt it for your own work.
What’s the Goal of an Elevator Pitch?
You want to convince someone in a very short amount of time to do something helpful to your business. At last week’s ENET meeting, I had 90 seconds. If I were actually in an elevator with someone, I’d have between 5 and 30 seconds.
I know the pitch I gave was effective because the three investors in the room, who got to make one comment or question after I spoke, didn’t use their moment to ask for clarification or to suggest a refinement. Rather, they each asked a logical follow-on question, indicating that they had understood all that I had said. If the format of the meeting had allowed for me to answer them, I would have engaged them all in meaningful conversation. What more can you ask for at a first meeting?
Generic Outline of an Elevator Pitch for Investors
ArtistBomb exists in the live music universe and does this great thing for these specific people. Unlike all of our competitors, ArtistBomb is different in this one significant way. This matters because those other companies are missing something.
For $30/mo, our customers can use our service, which solves their problem. We solve their problem by doing X, Y, and Z. This helps them make more money with less risk.
ArtistBomb just recently hit a significant milestone. We want to raise $X in the next couple of months so that we can hit the next milestones B and C.
If the investor to whom you’re speaking is interested, that’s all you need to say. If they have money and like the idea, they’ll express an interest. If not, they may ask a question. Or if they really don’t like you or the idea, they’ll say, “Well, good luck!” and that’s your answer.
What’s so Special about that Formula?
Imagine I started my pitch with paragraph three. The investors would have been distracted by their own internal interrogation, “What’s ArtistBomb? Should I already know what this is? Why don’t I know what he’s talking about?” That’s why you lead off instead with a broad statement about your company’s space.
What if you didn’t include a differentiator early on? Now your investors are distracted by a different internal monolog, “Oh great, another XYZ company. Just like that other one I don’t like.” You want to let your audience know why you’re different and better.
What if you didn’t include a firm price? Now you leave your audience wondering whether you have any monetization strategy. Most investors prefer to invest in businesses that make money. Otherwise, finding any net profit is going to be pretty tough.
The rest of the pitch adds to your credibility by providing details and indicating recent progress.
What do you think? Let me know in the comments below.
Two Must-Join Networking Groups for New or Aspiring Boston Entrepreneurs
About a year ago I left Terrafugia and launched myself solo into Boston’s entrepreneurship scene. The advice given to me by a distant mentor was “find some local entrepreneurship resources and get involved.” I started by Googling. I was amazed by how much exists in Boston. Two groups in particular have earned a lot of my attention on account of their polished and varied programming:
IEEE Boston Entrepreneur’s Network
(Visit Boston ENET.)
The format of the meeting provides “as you like it” networking time way before, before, and after a set of three carefully screened and rehearsed presentations. Way before the meeting you can pay your own way to dinner at Bertucci’s. This is how I ended up meeting two of my eventual co-founders. At the meeting location itself there’s time to mix and mingle over sodas and snacks. After the meeting you can swarm the speakers or, even better, go introduce yourself to someone who asked an interesting question in front of the group.
The presentations are moderated, well timed, complementary perspectives on a single theme. For instance, this month’s meeting was “How do you know you’re ready to start a company?” The first speaker, Greg Skloot of Attendware, talked about the difference between tinkering on a project and really knowing that you have a business. The second speaker, Joe Baz of Above the Fold, gave insights into the personal aspects of entrepreneurship. Third we had Vicki Donlan, an impressively experienced consultant able to speak to a wide variety of startup success and dysfunction. We closed with Bill Seibel, whose resume slide made you turn to the person next to you and whisper “Wow.”
Every time I go to ENET:
- I meet someone helpful to my startup.
- I’m entertained by at least one charismatic and engaging speaker.
- I find a new role model of entrepreneurial success.
The Capital Network
(Visit TCN.)
This is like getting a laser-focused entrepreneur’s MBA for $400. Before I joined, I knew more than the average entrepreneur about debt and equity, about investment, and about business valuation. But the rules and norms for startups are usually a little different, and often they’re quite esoteric. For instance, when you buy $50,000 worth of stock of a publicly traded company worth $5,000,000, you get 1% of the company. When you buy the same amount from a startup worth the same thing, you get 0.99%. The reason is because of this difference: buying publicly traded stock gives you existing shares; buying startup stock causes new shares to be issued. If you’re thinking about taking investor money, this consideration and others must enter into your calculations, because the dilution effect on you means your share of the company will shrink with each investment round.
Unlike ENET, TCN often has a single speaker go for the full 90 minutes. In this format, the topics are meandering overviews of narrow subjects driven partly by slides and partly by audience questions. It’s a real good chance to ask about your specific startup. For instance, at the “founder issues” talk given by Paul Sweeney at Foley Hoag, we had a good audience-driven discussion about setting the strike price of stock options given to employees. (See my previous article here.) They also experiment with panels and roundtable discussions, which are helpful for giving diverse perspectives or more time in smaller groups.
Every time I go to a TCN lunch:
- I get delicious, healthy food.
- I can ask detailed questions of a knowledgeable speaker.
- I meet someone new starting an exciting business.
Summary
If you’re in Boston, you get access to lots of good Internet resources just the same as anyone else anywhere in the world. But these two groups are fun and, if you’re really going to do this for the first time, absolutely essential.
Washington Post Sells to Amazon Founder. Now What?
By now you’ve heard that the iconic Washington Post, the newspaper that toppled Richard Nixon from the presidency in 1974, was sold at a pittance (relative to what it would have been 15 years ago) to the very wealthy and very capable founder of Amazon, Jeff Bezos. I can’t tell you what will happen, but I can give you some food for thought.
- This is not the first time Bezos has made big personal investments. He bought huge pieces of Pets.com and Kozmo.com. Both of those went bankrupt.
- The Post, according to Don Graham, has suffered declining revenue seven years running. In the first quarter of this year, the paper lost $34 million from operations.
- Bezos paid $250 million in cash to buy the paper. As a percentage of his personal net worth, that’s equivalent to the median American family paying $2,000 for a car. It’s a very manageable amount of money for him. If the paper runs losses for a long time, he can keep re-upping.
- At the current subscription price of roughly $180/yr, Bezos needs another 750,000 subscribers to break even.
Why should anyone subscribe?
What can a subscriber to the Washington Post get that they can’t get anywhere else?
Warren Buffett has taken an interest in local newspapers as the only source of local information. He said (p. 17):
A reader’s eyes may glaze over after they take in a couple of paragraphs about Canadian tariffs or political developments in Pakistan; a story about the reader himself or his neighbors will be read to the end.That’s one of two directions I think Bezos and the Post will settle on. The Washington Post can still be the source for local news in DC.
Can it maintain national readership?
I think so. Bezos said he’s going to pay close attention to what readers want: “Our touchstone will be readers, understanding what they care about – government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports – and working backwards from there.” Just look at how much of that is local, how little of that is Watergate-esque!
But if he can afford to wait a while and to keep really good government journalism going at the Post, he may be able to bankroll a level of government journalism above anything being done by anyone else. That would be a differentiator, and with a subscription model for digital or Amazon’s distribution system for print, that might be a story worth paying for.
Do you agree? Let me know in the comments below, or share this food for thought with a friend.
Busier than a one-legged man at a butt-kicking contest
Yes, I guess I am, but I don’t feel that way. Below are some fun statistics from my personal task list, and one big surprise at the end.
(For those of you that don’t know, I follow David Allen’s Getting Things Done to stay in control and Making it All Work to keep perspective. The gist of the first book is simply that you should write down everything that occurs to you and keep this all in one place. That way you never panic that you’re forgetting something. The gist of the second book is that you should keep a separate, shorter list of bigger things that matter.
I also follow Andrew Grove’s High Output Management, which is what inspired me to start taking data on this stuff.)
This first graph shows task completion since I started tracking data last winter:
My collection habit means I go through phases, like May to early June, where I add much more to my list than I can remove. If the blue line stays above the red line indefinitely, my task list will expand forever, and that’s bad. So I want that red line up high. Overall, the red line makes it looks like I only do five things a day. I guess most of what I do is so spontaneous and isn’t on the list.
This second graph shows the quality of my tasks. One of the things David Allen goes on about is making sure that your tasks have a context. So I want that green line down near zero. Most folks would also want that purple line down near zero, too, because that would mean they could retire (nothing left to do). But for me, always thinking about what could be better, I’m okay with letting it pile up until I get some help.
You can see the effect of tracking metrics in these first two graphs. When I first started back in December, I saw literally hundreds of task list items that had no context and appeared undone. I reviewed these all until they had moved to wherever they belonged. Some of them were given contexts and/or set status = “complete.” Others were set status = “maybe someday,” which means I still might get to them. For instance, some day, maybe, I want to dedicate a statue in a park. Doesn’t need to be on next week’s “to do” list.
This final graph speaks to my ability to follow-up. David Allen defines a “tickler” as a reminder to do something. As of yesterday, there were about ten ticklers overdue. The red line indicates that I’m waiting for something and I haven’t set a tickler date. That’s not helpful, so I want that down near zero.
So what’s the big surprise? Since I started tracking data in December, I’ve completed 937 tasks and 23 major projects. That’s about one project a week. Here’s a sampling:
- Win my first freelance consulting job.
- Prove that some physics we were testing in one program works.
- Rent out one apartment. And then another.
- Help Team #1 launch a consumer product (Hands Free Groceries).
- Write a business plan for XYZ (didn’t start).
- Help Team #2 launch a tech startup (ArtistBomb).
- Help Team #3 rewrite the bylaws for a non-profit (had some help on this one).
And I’m not breaking a sweat. Thank you, David Allen and Andrew Grove.
Five Reasons why Entrepreneurship Isn’t Quite Business
Good entrepreneurship eventually leads to good business. But here are five reasons why the two start out different:
1. Framework
Startups may be inventing either a new product or a new service, but quite often they’re also reinventing a business model. Good businesses, on the other hand, already know how they’re going to make money. Good businesses therefore always have this framework in which they can adapt to changing circumstances, but startups usually search for a bit before they figure out what it is that they’re doing.
2. Customers
Startups have no customers. Businesses focus on the omni-present “voice of the customer,” but startups have to go to extraordinary lengths to find this. They have to develop a product, get it in front of possible customers, and get their feedback. Sometimes, the first “customers” you talk to turn out not to be your customers at all.
This “lack of customer” means many startups have under-developed or non-existent sales and marketing teams. Many high tech startups bet the farm on a single big product unsupported by secondary revenue. If this is the case (and that’s a capital-intensive strategy), you’re much better off thinking about the “company” as a product development team than as a business.
3. Processes
Startups have no established ways of doing things. Good businesses have written processes and procedures AND, less commonly but even more importantly, built-in rules for changing the process. This is at the heart of why so many startup investors place so much stock in “the team.” Good businesses make it possible for ordinary folks to do extraordinary things. Good startups almost always rely on extraordinary folks.
4. Resources
Startups have what seems like too little time and usually no money. Good businesses operate on long timescales with the ability to forecast, budget, and invest. If you’re at a startup, you have to be extremely adept at balancing long-term goals with immediate needs. Many of the building blocks of a real business will seem unaffordable at a time when maybe you should be paying for them.
5. Independence
When you start something new, no one tells you what needs to be done. If you fail to do what matters, your venture fails. In good businesses, there are mechanisms whereby individual accountability is reinforced from the outside. Customers call you back to find out why you haven’t finished their project, your boss tells you what your goal is this week, the manufacturing floor tells you what you need to fix, etc. But when you’re in a startup, you really don’t have a lot of buttressing. Everyone must be highly accountable to themselves with good follow-up techniques and task list management.
Millionaire to Entrepreneur: Death by Climate Change
Last night I saw Robin Chase, Co-Founder and former CEO of zipcar, speak at the Merrimack Valley Sandbox Summit. She told some very engaging stories of the ups and downs of startups. She said that the number one thing was to be intellectually honest with yourself and with your customers, especially if your business wasn’t working. She used two minutes toward the end of her speech to ask us entrepreneurs to remember climate change in our list of things to fix.
At the end of her speech, I found myself first in the line of audience members who pounced on the chance to talk to her in person. I asked, “I’m sure most folks didn’t expect you to talk about climate change tonight. Is there any legislation in particular you want us to support? What do you want us to do?” She said, in a nutshell, “Tell your legislators it’s first on your priority list because it’s so dire. I could tell you all kinds of horrible things but I won’t. Well actually, you and my daughter won’t live to your natural lifespan.”
I raised my eyebrows as if to ask, “Climate change will kill me?” but I was speechless and said nothing.
She answered my eyebrows and confirmed that it was true. I didn’t know whether to laugh or to cry.
Here was a multimillionaire businessperson — the kind of person who, if they said, “You’re doing everything wrong” I would take seriously — telling me, as a mild non sequitur, that she had foreseen my death by climate change. I vaguely recall there being some quick follow-on questions from the others who had by that time gathered around, but I was so wrapped up in my own impending demise that I didn’t pay attention to what was said. In the next pause I looked at Robin and said, “Well, it sounds like my days are numbered, so I’d better get going. Thank you for your time.” I shook her hand and left.
An Entrepreneur Neither Loved nor Savvy
After leaving my corporate job last fall, I joined up with elance.com, a site designed to help freelancers find work. I submitted 29 bids and got selected once, the one time I offered to work for less than minimum wage. The economics are tough: elance is a global marketplace, so I was bidding with my high hourly rate against folks in parts of the world with much lower hourly rates. Many of those folks have similar skillsets to what I’m able to offer via elance’s framework.
So I stopped bidding as an attempt to make money and I left my profile up as an invitation. I want to meet and work with aspiring new businesses and stay engaged with companies of various shapes and descriptions. Anyone on elance can invite me to bid their job along with all the many others around the world scanning the site regularly.
Here is an actual request (client’s name replaced with the word “Client”).
Now right away, having done one or two sets of startup financials, I can see that it isn’t going to happen for $50. I’ve found that when folks give a very narrow range like this, they know very well what they want to spend. I have two choices:
- Decline the bid with one of elance’s woefully inadequate, unchangeable stock messages, like, “The budget is too low”; or
- Bid something that will fit within budget.
I pick option two, because for me, on elance, it’s all about meeting great new businesses, not making money, not yet anyway. So here is what I bid:
That’s my bid. Pretty tidy and friendly, if you ask me. (Note: I use the word “we” because part of my advertising is, “If I can’t do the job myself, I can find the expert to do it for you.” Also, I’m doing this somewhat like a realtor does it, with a mix of personal trust and business officialdom: my personal image is featured prominently but I’m working under a separate company set up for this purpose. If they want to know more, they can view my profile on the site or reply to that message.)
Here is the first part of a short, increasingly unpleasant conversation that ensued before the client blocked me (yes, they blocked me):
For the record, when I submitted my bid, 19 other bids had been proposed at an average price of $90, a high price of $548, and a low price of $22. It would have been enough for this client to decline or ignore my bid and take one of the several that likely fell within her budget. Instead, she accused me of wasting her time. You’ll recall that she invited me to bid.
(As an aside, let me say that elance could do about ten times better than it does at screening and coaching clients.)
I wish I knew what business she was starting so we could track it, but here’s my prediction: it will fail. In business, you want to be both loved and savvy. If you can’t have both, you need at least one. People who are loved will attract others who will make up for their deficiencies. People who are very savvy make it work even if they’re loathed. So you need one or the other.
I’m going to go out on a limb here and say that maybe this isn’t the first time she’s flown off the handle. So who can she attract to work with her? And it’s not the savviest thing for her to give her financial worksheets – the most important part of her startup planning – over to the low bidder.
Why I Wouldn’t Bet the Farm
How many times have you heard an entrepreneurial success story where the founder took huge risks and won big? It usually goes like this: they took out a home equity loan, maxed out their credit cards, and pitched violently forward into the ditch of debt only to be saved at the last minute by a business miracle. It seems like that’s the way folks become successful.
I was at Boston ENET a while back and I heard a story just like this. The speaker talked about all that debt she had taken on, and all the cost-cutting she had done personally to squeak by. She offered as an aside the tidbit that she had taken a ZipCar to get to ENET that night because her own car had been repossessed.
I think I’ve heard about similar “all in” bets from Elon Musk for Tesla, and Marla Beck for bluemercury.
Some folks don’t quite subscribe to this approach, and I’m wondering whether that will forever consign them to the realm of the mediocre. The alternative looks like this: work a corporate job earning more than you need and save a big cash cushion. Buy one of the zillions of decent businesses out there with established models and relatively straightforward ways to make money from your cushion. Now you’re in some measure financially independent, forever, and you haven’t bet the farm. If you’re going to start a totally new business entity, you can continue this cautious approach and sprinkle in some professional services or other “easy & early” products to keep the lights on while you spool up.
That’s called bootstrapping, and I can’t say it makes for the sexiest story. But then, it’s not very sexy to close up shop, declare personal bankruptcy, and go back to your old job, either.
How to Tackle Someone in an Elevator
I’ve been going to meetings for the Boston Entrepreneur’s Network for a while now. I like the group a lot and have found the meetings to be very well moderated and timed. (This is a big deal for me; it means I know the guest speakers have had a chance to say what they wanted to say. Hearing them is the primary reason I attend.)
Last night they had three real VIP’s: two partners at venture capital funds and one director of an angel fund.
I laughed at Art Fox’s presentation. He gave a formal introduction about the kinds of things he looks for at a startup (passion and enthusiasm, intelligence and expertise, honesty and integrity, people skills and likeability). He summarized this introduction by saying startups were about three things:
- Management
- Management
- Management
Later on he plugged Toastmasters. He said they had helped him get over a stutter. His slide said, “Practice, practice, practice.” To which he added, “I still like saying things three times.”
After the meeting, the speakers were swarmed, as always happens. There was no chance I was going to fight my way in, and I think it’s rude, anyway, especially when they just gave two hours of their evening to the audience. So I talked with a few folks I had known from previous meetings, then headed for the elevator.
One of the speakers had escaped the throng and was hurrying — smiling, professional that he is, talking to everyone who assailed him — in a harried way towards the elevator. He got in, dragging the crowd with him. I got in after the speaker and plugged the entrance, which closed on the crowd, the speaker, and me in the elevator. I handed him my card, on which I had scrawled “business plan/exec summary,” and offered that if he wanted to give me feedback on the one-pager, I’d greatly appreciate it. He asked what I did and I gave him — wait for it! — the 10 second elevator pitch.
Smiling and waving, he sprinted out the doors and into the night.
Usually this “write on the card, let them escape” tactic works decently, because you haven’t been too pushy. I’ll let you know how it goes.
The Surprising Math Behind Startup Dilution
This recently blew my mind, so I thought I’d share some simple math with you.
Imagine an investor wants to invest in your startup. He says it’s worth $1 million and he wants to invest $500,000. He’s going to take half your company, right? Wrong. He’s going to take one third. At least, that’s the usual math.
In publicly traded stocks, it works the way I’d expect. If I buy $500,000 worth of stock in a company with a capitalization of $1 million, I’ll own half the company. That’s because my stock came from other stockholders. My money went to pay out existing owners.
In the startup world, that’s very unusual. All the old money has to stay to keep the business alive. There’s no “capitalization” yet, not in the sense of capital sitting there doing its job. So when someone invests in your startup, they don’t buy shares from existing owners. They add to its value.
So in the example above,
Don’t believe me? Think about it in terms of share price. Say you have 1 million shares. A $1 million valuation divided by 1 million shares = $1/share. The new investor buys 500,000 shares in your company at $1/share, equaling his $500,000 investment. You create those shares by issuing new shares, rather than by selling him existing shares. Now there are 1.5 million shares out there, and he owns 500,000. So what does the investor own? One third.
