VCs Have It Wrong: No Elevator Pitch? No Problem!

The accepted wisdom is that every great idea — or every fundable idea —  has to have a good elevator pitch. In order for an idea to be great, it needs to fit neatly into a one-minute description that knocks people’s socks off. Or at least makes them extremely curious.


The truth is that for some ideas, an elevator pitch works great. For others, not so much. And there is no direct correlation between ease of explanation and appeal or value in the marketplace. The reason for this is simple: Some things are better seen and experienced than explained. And I suspect many of the best ideas fit this description.

For instance, I’m not a huge Facebook fan. But that doesn’t mean it is not a great idea. And I don’t think anyone could understand Facebook without seeing it. I don’t think Mark Zuckerberg could have sat a VC down who hadn’t seen the site and said, “This is my idea, (or this is the idea I stole from the Winkelvoss brothers, or whatever). Please invest in me.” I don’t think it would fly.

This is pretty straightforward. With consumer-facing products, whether we want to use something is tied to such things as utility, ease of understanding, and social context. And so much of the first two can only come from actually experiencing the product. The Nintendo Wii is a great example of this. You needed to experience the Wii to really get why how fun it is. Even the iPhone fits this description. Most of the features of the iPhone existed in other phones. It’s the design that makes it work.

But “seeing is believing” also applies to data-driven products. visualising data in one’s head is very hard if you have never done it before. People have varying degrees of capacity for spatial visualisation, but few of us are good enough to take an abstract description of a data model and to actually imagine what that means. For most people, the significance of the model won’t mean much if they’re only hearing about it.

But when people are allowed to explore real data in real time, things become much more clear. FriendFeed is a good example of this: It’s almost impossible to explain because it is, in essence, a new data model.  You need to experience FriendFeed to get it. And once people do get it, they tend to love it.

This means there are great ideas out there with bad elevator pitches. And that means investors must either trust the entrepreneur based on reputation or blind faith, or they must take the time to really try to understand more complicated product concepts. Or worse, they can just avoid any new ideas until they have been developed and tested enough to prove the demand. This is the most common strategy right now in the venture community, but it leaves lots of the best ideas undeveloped — because there is not enough early stage money to help these ideas out. Paradoxically, I think these are some of the best ideas.

This leads me to an idea that Paul Graham from the YCombinator incubator put forth:

I’ve tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don’t sit on their boards. Would that mean too much due diligence? Do less. If you’re investing at a tenth the valuation, you only have to be a tenth as sure.

It seems obvious. But I’ve proposed to several VC firms that they set aside some money and designate one partner to make more, smaller bets, and they react as if I’d proposed the partners all get nose rings. It’s remarkable how wedded they are to their standard m.o.

We need more money going into more abstract and less obvious ideas, and Paul’s idea is the right way to do it. It doesn’t take that much money to prove a good idea is a good idea. But often it takes more than an entrepreneur has or can raise. This is particularly true for those ideas that take more insight and time to explain than an elevator pitch affords. Only a relative, or someone who knew the FriendFeed guys were from Google, would have been willing to put money into that. But not every great idea doesn’t come from someone with a brand name. Some might say the opposite is true.

So here’s my unsolicited advice for VCs. Potentially profitable ideas sometimes take time to really understand, and they may take resources to prove. Spend less time and resources on the obvious and more time and resources nurturing ideas that may take more than an elevator pitch to really appreciate. It should be worth your while.

SAI Contributor Hank Williams is a New York-based entrepreneur. He writes Why Does Everything Suck? Exploring the tech marketplace from 10,000 feet.

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