Introduction: The Art of Pitching
Venture capitalists often use the quality of an elevator pitch to quickly assess both the viability of a business idea and the team behind it. The elevator pitch is not merely for investors; it’s a communication tool every entrepreneur needs. Let’s dig into what makes a pitch truly effective.
What a Pitch Is and What It Is Not
What a Pitch Is
- A Brief Investment Appeal: A short outline that succinctly encapsulates your business idea, ideally 60 seconds or less.
What a Pitch Is Not
- Not a Sales Pitch: This isn’t about showcasing your product or service. You’re selling the business and your vision, not just a product.
Essential Elements of a Great Pitch
- The Hook: Open your pitch with a statement or question designed to capture attention immediately.
- Brevity: Aim for 60 seconds or less. The shorter, the better.
- Passion: Show your enthusiasm; it’s infectious.
- A Request: Always end with a specific ask, whether it’s for a business card, a scheduled presentation, or a referral.
Questions to Guide Your Pitch Creation
To craft your pitch, start by answering these questions:
- Why does your venture exist?
- What sets you apart (your competitive advantage)?
- What does your company do, and for whom?
- What value do you bring to your customers?
- How will you generate revenue?
The Power of Examples: Dragon’s Den Pitch Analysis
Watch this Dragon’s Den Pitch for StoryCode.com (see video below) and consider if it’s a well-delivered pitch. You aim to dissect its structure, hook, and its ask.
Grading Pitches
There is a maximum of 40 points to score on this assignment as each of the areas below has a 10 point weight assigned. This assignment is worth 10% of your grade, so prepare adequately.
Delivery: Pitch is presented in clear, concise and logical form; Presenter conveyed confidence, enthusiasm, professionalism and stayed within the time frame.
Attractiveness: Elevator pitch demonstrates innovation and delivered a memorable message of why and market potential.
Product/Service: Product/service concept and customers benefits are clear and compelling.
Approach: Profit model, capacity and position in the value chain.
Grading Criteria
- Excellent: 10
- Good: 8
- Adequate: 6
- Fair: 4
- Poor: 2
Grading Storycode.com
Of course, a lot more information is delivered after the pitch. The initial pitch is successfully delivered and could earn a decent grade, but there were some problems with the business model.
Storycode.com Grade
Delivery: 9
The pitch was well delivered!
Attractiveness: 8
It did represent why the business was created.
Product/Service: 4
Here’s where it began to fall apart as it is unclear they can sustain their advantage over time. Selling your product for cheap is a bad strategy that a business has a hard time recover from – DO NOT DO THIS!!!
Approach: 2
OK, here is where this fails badly. He missed the key position in the market (avoiding Amazon – the market leader) and wants a lot of money to get a paid job. Sorry if you want a paycheck – get a job and don’t be an entrepreneur!
However, this was all revealed in the question period, but the flag was the amount asked at the beginning balanced against the amount paid by the one client and minimal growth potential (capacity). Profit model and capacity (one client) does not support the evaluation.
Score: 23/40 C-
Business Model Considerations
A thorough business model can be your North Star. It should address:
Value Proposition: Why does your business exist, and who are your target customers?
Revenue Generation: A rough estimation of costs vs. revenue.
Capabilities & Processes: How and at what scale you’ll produce your service or product.
Position in the Value Chain: Identify key partners, suppliers, and distributors.
Real-world Case: The Egg Roll Business
Analysis: Egg Roll Pitch Makeover
A significant failure for many businesses is not developing and articulating their business model. Often, stakeholders in industry will describe their business in terms of goods they sell, sales volume, profit, and competitive position. Unfortunately, these facts are useless in understanding a business’s model and its reason for existence.
First, describing a business through the goods being sold is a lazy approach and fails to answer the “why,” as mentioned in Opportunity from the video by Simon Sinek. Next, sales volume is a temporary phenomenon and is a brief reflection of the company’s current production. Profit is a fact for all ventures, including non-profits, as all businesses need to sustain their operations. Finally, the competitive position only reflects a company’s current ranking and not the business model.
Let me further explain through an egg roll example. I had a student whose family made delicious egg rolls in a past class. I was familiar with the egg rolls before the student had taken my course. Hence, for a venture pitch, he explained the business model as the following:
“My family has developed an egg roll recipe that many customers enjoyed and have sold successfully. One day, my mom made an extra batch of egg rolls, and we sold them in the neighbourhood market we owned. Customers loved the egg rolls and asked my mom to make more, so we started making them once a week. These were very popular, and we had many regular customers for the egg rolls. As this was a side venture, my mom could not continue as we owned several other businesses.
The egg rolls are an authentic Vietnamese recipe my mother has improved upon. We sold hundreds of egg rolls each week that customers agreed were the best in the market and took us 90 minutes to make. Our egg rolls sold for $1.50 a piece and are profitable at this price. My goal for this venture is to create an egg roll business. I have brought egg rolls for all of you to try so you can see they are delicious and why this is a significant venture.”
He provided hot samples, and of course, the class enjoyed it (and I did, too), but I needed help understanding the business model. Unfortunately, the student received a poor mark and approached me later to ask about the low grade.
The Original Pitch
The original pitch for the egg roll business provided a backstory and shared the product’s success. While the narrative was compelling, it missed the mark on a few key points.
Value Proposition: The original pitch focused primarily on the quality of the egg rolls. While product quality is important, it didn’t clearly explain why these egg rolls are different or better than alternatives.
Revenue Generation: The pitch mentioned that the egg rolls were profitable but lacked specifics. How will this profitability scale as the business grows?
Capabilities and Processes: Though it mentioned a 90-minute cooking time, it didn’t address how they’ll meet demand or handle operational complexities.
Position in the Value Chain: It was unclear who the key partners, suppliers, or customers would be.
Egg roll Pitch (Revised)
Tired of the usual fast-food fare that is too expensive. Students face rising tuition and rarely have time to cook but want an alternative to the burger or pizza. Our egg rolls are not your typically deep-fried, tasteless food bits but relatively lightly fried and full of crispy vegetables for vegan, chicken, pork, or shrimp.
Through our unique process, orders take only several minutes to prepare, so our food remains fresh and waste is reduced. We can cook hundreds of egg rolls per hour to handle large lunch crowds! Our lunch special of 2 egg rolls and rice is only $5. It even comes in a cool takeout box with a handle!
We enjoy reduced overhead costs as we are not a sit-down restaurant but can handle a lunchtime rush with only 2 staff members. Our lunch special of $5 costs us around $1 in materials, and our expenses are low. We source most of our products locally to maintain a small carbon footprint and freshness to our foods.
Want an egg roll?
The Revised Pitch
The revised pitch, on the other hand, offered a complete, succinct overview of the business model:
Value Proposition: The new pitch directly addresses the target market—students looking for a quick, affordable, and healthy alternative to fast food.
Revenue Generation: It not only mentions the cost structure but also alludes to low overheads, providing a clearer picture of potential profitability.
Capabilities and Processes: The revised pitch elaborates on the unique cooking process, indicating an ability to serve a large crowd efficiently.
Position in the Value Chain: Though not explicitly stated, the focus on sourcing local products suggests an understanding of the importance of suppliers in their business model.
By revising the pitch to include these elements, the entrepreneur transforms from someone with a good product into someone with a viable business idea. The pitch now sells the business vision, not just the product.
Conclusion and Next Steps
Now you have the framework for crafting a compelling venture pitch. Remember, a pitch is not set in stone; it evolves as your venture grows. Practice often, refine continuously, and always be prepared to pitch.
