November 21, 2008

The future is already here - it is just unevenly distributed. —William Gibson

The Elevator Pitch Fetish

Hank Williams has a great post over at Why Does Everything Suck about why VCs might want to reconsider the conventional wisdom that the best fundable ideas are expressed as an elevator pitch. In addition to the great points Hank makes in his post, there are a few reasons the traditional elevator pitch is at least a little outmoded.

  • Incrementalism. Every VC wants to have at least one or two ideas in a portfolio of investments that will ‘hit it out of the park’ and return 10x or more of invested capital upon exit. The problem is a lot of the low-hanging fruit in this case–the sort of idea that can be expressed in a crisp elevator pitch–has already been picked. A lot of today’s Internet startups are either me-too companies or build upon other ideas (Yelp = ‘user-generated Zagat’, or Qik = ‘YouTube marries cellphones’). In these cases, crisp 30-second descriptions may not always capture the essence of the idea like it did with prior successes (PayPal = ’send and get money over email’). It is often necessary to sit down and understand beyond an elevator pitch how exactly the idea builds upon others.
  • Or, non-incrementalism. In the case of non-Internet startups–specifically in areas like biotech, cleantech and pharma/medical tech–the problems being solved are significant enough, and fraught enough with policy complications, that they often won’t fit in an elevator pitch.
  • Ubiquity of communication. Time was when access to VCs was really limited and the elevator pitch was pretty much the only way to get them interested. To be sure, it’s not that VCs have not gotten any more time, but several of them (especially the smartest ones) blog and serendipitous relationships and investment opportunities may surface from these media. This sort of sustained relationship building may often prove more prudent than chance encounters.
  • The emerging cult of ’show not tell’. Things have changed a lot in the world of Internet startups. It’s a lot more prudent to get a prototype out that users or potential investors can just take for a test run. A crisp elevator pitch is essential when that’s all you have to lure an investor with, but when you have a functioning service and a user community, it’s hard to argue with success.

    • All this is not to say entrepreneurs shouldn’t bother with an elevator pitch. The discipline you need to come up with a compelling elevator pitch is essential in distilling an idea down to its barest essence. Another reason is plain pragmatism. It took some time before a non-technical entrepreneur I am informally advising was able to distill his idea down to a manageable set of features. Working against an elevator pitch improves the likelihood that you’ll get something out there (not doing this is perhaps the biggest reason startups fail).

    Elevator pitches are certainly not outmoded for the next big areas in which smart money is investing these days. For Internet and mobile startups, elevator pitches are not outmoded at all for emerging markets, which will have vastly different characteristics than the North American techno-cultural situation. But Hank is spot in advising VCs to open their minds a little and re-examine their fetish of the elevator pitch.

July 23, 2008 | Filed Under Investment 

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