In meeting with entrepreneurs, especially those that I haven’t met or heard about before, I often ask them to give me the 5 min overview of the business before we dive into any details or the formal presentation deck. I typically ask for this before I ask for the entrepreneurs backgrounds – for reasons which I’ll get into shortly.
The commonly heard 30 sec or 1 min elevator pitch is ok when an entrepreneur is pitching a customer or for PR or other audience that isn’t looking at the business holistically but is only interested in 1 or 2 aspects of the business. For a VC though, it is just not enough time to cover the information to get me interested. In the 30 sec or 1 min pitch, there is barely enough time to cover the market and product let alone competitive differentiation, business model, industry trends, financing plans. and key metrics such as customer acquisition and average revenue per user. The entrepreneurs’ ability to convey the business concisely in a compelling manner is a huge indicator of their understanding of the business as well as how they will think and act when running the business. What surprises me is how many entrepreneurs are so bad at this.
In a startup, one of my favorite sayings is “you can do anything, but you can’t do everything.” With limited time and resources, entrepreneurs must cut through the clutter and focus their time and attention on the most critical issues. A founder or CEO who can’t explain the key aspects of his business concisely and rambles on about un-important details worry me that he will behave similarly when running the business.
The 5 min overview should be a mini version of the entire pitch but forces the entrepreneur to really hone in on the most critical aspects of the business that will influence its success or failure. Like Mark Twain’s famous quote, “I would have written a shorter letter, but I did not have the time,” the ability to quickly and concisely explain the business indicates to me that the entrepreneur has really thought about and understands his business.
The reason I ask for the 5 min pitch before the entrepreneurs’ bio is that I actually like to judge the attractiveness of the business independent of the team. When I hear the bios of the founders first, it obviously sways me (which it should) as I hear the rest of the business. While the fit/capability of the team is paramount to my decision, I find it is better left until after I understand the basic premise of the business so that I can really assess the business purely on its own merits. After this, hearing the entrepreneurs’ backgrounds allow me to then assess their ability (and hopefully their clear advantage) in executing on the business.
In VC, when I am assessing the “fundability” of a company, I find that out of the many many factors that can influence the business, it generally boils down to 2 or 3 critical issues that make the decision. If these 2 or 3 issues are negative and all of the other issues are positive, it still kills the deal for me. The best 5 min elevator pitch is the one that has done this work for me.
Now…once you have me hooked on the business and then the team, we can have a productive meeting getting into the presentation deck and questions about the details of business.