For the past ten years marketing experts and the finance community have stressed the importance and benefit of having an “elevator pitch”. This is the term, originating from the US, used to describe very clearly and concisely your proposition or offering. The elevator pitch is commonly used in selling situations, increasingly it has become one of the key tools entrepreneurs use to raise finance.
The Dragons Den format has dominated investments forums in recent years and it seems to be these events where the elevator pitch has greatest application. Just how effective is this pitching environment? – on TV we have seen many individuals face humiliation in front of millions. Makes great TV (not for me, as I personally can’t stand the programme). These TV styled events have got boring, local entrepreneurs (business angels, devils more like) with ego’s the size of planets, sit there in judgement of nervous individuals struggling to get their message out in three minutes.
Well in my view anyone who can make a financial judgement based on a three-minute elevator pitch must be a genius. The sensible and ethical investors I have come across avoid TV style pitching formats and spend time trying to understand the idea, the proposition, the person, the market, and the numbers. It’s a considered response based on a least a couple of hours of discussion. How many ideas get lost or fail to see the light of day because an individual can’t get their message over within 30 seconds to 3 minutes. Does that make them a bad entrepreneur?
Two serious and successful VC’s I have spoken to (one in the UK and the other from North America) have started to do away with pitching type events – instead they want to get under the skin of the ideas and the people. How refreshing!
Recent press reports would suggest that our gazelles are finding it harder than other European Countries to raise cash. More than a fifth of companies (many from information and communications technology sectors) failed to get the loan applications approved in recent years. The report which I have yet to find, claims that it provides further evidence of the damaging effects the credit shortage is having on the economy.
Whilst I understand attitudes to funding have changed and the banks have had a severe kicking, I do think we need to look further into the detail. My experience (we have worked with over 3,000 potential high growths!) is that lots of these businesses are just not investment ready and it would be ludicrous to give them cash and indeed subject the founders to PG’s – its for their own good in many instances.
Poorly thought through applications, business models just not viable and inexperienced management teams are also part of the reason for the lack of funds being pushed into the market. Whilst funding is harder to extract, there is cash for well thought through propositions, period. Many of the high growth potential (gazelle types) companies need to be nurtured, mentored and supported – we must look at the quality of the business plans falling onto the desks of VCs and funders, maybe then we would get a better view of the world. My advice to anyone seeking funding is:
1. Can you evidence a viable business model with customers that want to buy what you are offering?
2.Have you got the team in place – thinkers, doers, sellers and controllers
3. Do you have the resources to make it happen and do the financials stack up? More importantly would they stand scrutiny.
4. Can you articulate 1-3 clearly, concisely and convincingly.
If you can’t then dont blame the banks!