Your Elevator Pitch

By Bill Tucker, CEO, TheElevator.comcopyright 2000 all rights reserved worldwide.

Do you have questions about your Elevator Pitch, post then to the Discussion board

Venture capital is now exploding at a rate that even those of us who encourage it in the past few years find astounding.

According to the latest figures - well let's to back a bit. In 1992, the National Venture Capital Association reported venture investment across the country to be $2.1 billion. Since then it has increased steadily each year with no particular sign of acceleration. The figure climbed to $6.5 billion in 1996, $11.1 billion in 1997 and astonished everyone by almost breaking $20 billion ($19.5 billion) in 1998. Following this upward sweep, we could have expected $28 or $29 billion in 1999.

Instead, the figures released by NVCA in February showed 1999 investment was $48.6 billion - an incredible 153 percent increase in one year. Hopeful entrepreneurs always talk about the "hockey stick" their projected revenues will trace. The figures on venture capital are following those projections.

Moreover, venture investing is still less than half the story. Those elusive "angel investors" are putting money into startups at two to five times the VC rate. No one has a real handle on it - except to say it is also increasing geometrically. As early as 1996, some estimates ran as high as $100 million.

Yet despite this whirlwind of activity, venture and angel investing on the ground remains surprisingly primitive. It is still an "old boy" network. Private placements can only be made by SEC-"accredited" investors, which means having a million dollars in the bank or an annual income of $200,000. These people tend to move in small, clubby circles. As Upside put it in "A New Face for Venture Capitalism?" (October 1999), "The world of private financing is far more closed and clubby than the stock markets and far more reliant on the old axiom, `It's all who you know.'"

For a group of people romancing high tech, venture capitalists remain strangely wedded to the tedious process of reviewing business plans. Suggest to any VC that they look at plans online and they'll tell you, "The last thing I want to see is more business plans. I've already got a two-foot pile on my desk."

In order to break this logjam, TheElevator.com has been working with the idea of the "Elevator Pitch (TM)." The concept, of course, is nothing new. The old story said that the best way to get your idea in front of a VC was to trap them on the elevator. In the time it took to climb to the eighteenth floor, you had a brief one minute to present your business idea. If you weren't quick and precise, the opportunity was gone forever.

We have made the "Elevator Pitch" the centerpiece of our Internet matchmaking site, TheElevator.com. In wrestling with the concept over the past year, we've come up with a few rules:

First, the Elevator Pitch should take no longer than a minute. We clocked it and found that came to 150 words. Any more and you're overstating you case - any less and you're not taking advantage of your time.

Second, the Elevator Pitch should answer five questions:

1) What is your product?
2) What is your market?
3) What is your revenue model?
4) What are your personal qualifications?
5) What will you do with the money if you get it?

Amazingly, we've found that a good Elevator Pitch always comes to almost exactly 150 words.

One important thing to remember is that an Elevator Pitch is not a sales pitch. A lot of applicants use 125 words telling how great their product is and forget to tell how they're going to run their business. When describing your market, include both customers and competitors. Remember what the venture capitalists say - when they ask, "Who are your competitors?" if you reply, "We don't have any," then you don't understand your business.

Personal qualifications matter only to the extent that they reflect on your ability to do the job. We often tell applicants, "Don't be afraid to tell us you're a college freshman - that's a big plus these days." What's important is that you're pursuing something you love. When someone tells us. "The market for selling dog food on the Internet is $2 billion and if we get only .001 percent of that revenue we'll be making $2 million," we're immediately turned off. But if they say, "I love Airedales, I've bred them all my life, and I'm going to put all I know on the Internet," we know we've got a business.

Finally, we encourage people to do all they can WITHOUT money. Anyone can create some kind of business with $1 million. It's the people who can work with $5,000 in the bank who are the real entrepreneurs.

As traffic between entrepreneurs and investors accelerates on the Internet, there isn't going to be enough time for venture capitalists to review all those business plans. Instead, we believe the review process will eventually foucs around something much more brief and precise - An Executive Summary or the Elevator Pitch (tm)

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