Last week I attended Graduation Day (aka “Demo Day”) for a local startup accelerator. Thirty aspiring entrepreneurs had started the 16-week program. Only eight made it to graduation. Each had six minutes to present their venture to the audience and, hopefully, score a follow up meeting with an investor.
Six minutes is not a lot of time to condense 16-weeks of lessons into a coherent and compelling story. In fact, not one of the eight presenters finished on time. The timer alarm was sounding in the background as each founder frantically tried to get through all of his or her slides. The audience empathized with the pressure they were all under.
Having sat through more than a thousand of these type pitches, I can honestly say that it is as stressful for the audience as it is for the presenters. We know this is someone’s dream. Their Demo Day pitch is the culmination of a lot of hard work. We want to see them crush it! Unfortunately, most fall flat because they try to accomplish too much in the time they have. Most don’t leave us wanting more.
In my view, a good six-minute pitch should only try to accomplish two things. It should communicate a good idea that is being executed well. If I see or hear that, I can envision traction and determine whether the venture might be fundable. I can determine whether or not I want to invest the time in a follow up meeting, to drill down on the opportunity.
Every pitch can be slotted into one of four quadrants on my mental score sheet:
Poor Idea / Poor Execution
These pitches are rare at Demo Day because the entrepreneur would not have made it through the program. Some squeak through on a wing and a prayer. They end up in the lower left quadrant on my mental score sheet. Typically, I do not understand the idea well enough. I don’t see an opportunity. In some cases, it is a “me-too” product. I’ve seen or heard the same idea a hundred times. The pitch includes rosy slides on problem/opportunity and market size, but no customers or validation for the startup’s idea. All too often, it is a product in search of a market. Nothing about the team or how they plan to develop the product and bring it to market, gives me any confidence that they can pull it off.
Poor Idea / Good Execution
These pitches are fairly common at Demo Day. The idea is either weak in the same manner as it is in the lower left quadrant, or it is not scalable and repeatable. These are often life-style businesses. They show a little traction among a relatively small group of customers. It may be a $1M business, but it is clear it will never be a $100M business. The team is good and they are doing everything right, but the opportunity is not large enough to merit equity financing.
Good Idea / Poor Execution
These pitches are the most common at Demo Day. The idea is novel and addresses a large market. It’s clear the entrepreneur is on to something. In most cases, the entrepreneur comes from the space and has garnered a unique insight. The idea is just a little ahead of its time…still in the development and testing phase. There is little or no traction, but there is an opening that could disrupt the industry, or perhaps create an entirely new industry.
The problem is usually that the entrepreneur is not the right person to run the business. The team is weak or non-existent. The business model and/or go-to-market strategy is highly questionable. Anyone with any business sense knows that the venture is not likely to succeed as currently structured.
These ideas are fundable, and some may have actually already received some seed funding, but the amount of work needed to turn a good idea into a viable business, is not insignificant. A good idea still needs a verifiable revenue model, a good team, strategy and plan. I may take a follow up meeting to see if the entrepreneur is willing to get out of his or her own way. With the right team and strategy – the right execution – it could be a winner.
Good Idea / Good Execution
These are the pitches we all hope to see at Demo Day. The upper right quadrant of my mental score sheet is my happy place. This is where I want to spend my time and money. The attributes of the idea are the same as those seen in the upper left quadrant, but without the execution baggage. The team is seasoned and well balanced. The business model is working…the venture already has traction and the customer base is growing steadily. The strategy and plan are well thought out and imminently doable with adequate funding. Where’s my check book?
In summary, if you are an entrepreneur with 6-minutes to pitch your idea, don’t try to boil the ocean. Just articulate a good idea and explain how your strategy and plan to execute on it will work. Leave the audience wanting more.
For a more detailed look at scoring startups, download THE FIVE STAR STARTUP: A System for Evaluating and Ranking Startups