Having likely raised much more equity from angel investors than anyone else in the Pittsburgh region, Mel Pirchesky, President of Eagle Ventures, is a long-time Pittsburgh entrepreneur. He’s raised over $60 million of equity for more than 30 deals from individuals located mostly in the Pittsburgh region. He completed a $9 million financing for a medical device last year, with all of it raised after the stock market fall of late-2008.
He is the ‘go-to’ guy for coaching on Elevator Pitches and angel fund raising; I know – I have seen him in action on many panels discussing The Fine Art of The Elevator Pitch!
Thank you, Mel, for writing a guest post on Pittsburgh Ventures.
In the real world, there are more ‘good’ deals than there is money. However, there is much, much more money than ‘great’ deals.
A great deal is one that has:
- A sustainable competitive edge, usually a patent but not always;
- A large, validated market (e.g., one that’s greater than $500M in size);
- A great, not a good CEO;A great business model (e.g., where gross margins exceed 50% and where revenue is repetitive); and
- A reasonable valuation.
A great CEO is someone who has:
- Excellent judgment in the front lines of the trenches where it counts; and
- Very good people skills (i.e., a person you work with and not for).
Great does not necessarily mean experienced. Every CEO is a CEO for the first time at some point.
A reasonable valuation is:
- Not based on sweat equity or capital already invested;
- Not based on a discounted present value of a projection;
- It’s based on a willing buyer/willing seller, eyeball to eyeball negotiation, after you’ve done the best job you can of educating the prospective investor about the significance of your opportunity to the depths of their bones.
If you have a great deal and if you are not able to raise capital for it, it’s not due to a lack of available funds among investors (remember, there’s way more money than great deals), nor is it necessarily because your deal isn’t a great opportunity (unless you are deluding yourself!)
The only thing left is how you articulate your opportunity. That’s where the art and science of fundraising converge, resulting in either (1) merely a challenging fundraising experience (just about all fundraising is challenging because the investors have to separate the wheat from the chaff), or (2) a near-impossible one.
The key for all fundraising is not just saying something and having your prospective investors hear what you say. The key to effective, successful fundraising is to have your prospective investors hear what you say and understand the significance of what you say to depths of their bones.
A well-articulated Elevator Pitch is ultimately more important than a well-written business plan. Your sale occurs when you are presenting your opportunity to your prospective investors, not later when they read your plan.
If your prospective investors are not mentally sold in your oral presentation, they will never read your business plan! A good business plan merely becomes part of their due diligence after the mental sale.
Effectively articulating an Elevator Pitch is a challenge when all you’ve got are sixty or so short seconds (like in an elevator ride that may last a minute where you are alone with a stranger who asks you what you do).
Elevator Pitches have two components – the first ten or fifteen seconds and the remaining forty-five or fifty. The objective of the first ten or fifteen seconds is to have your prospective investors want to listen to the next forty-five or fifty seconds differently, more intently than they would have otherwise.
The first ten or fifteen seconds of your Elevator Pitch has two components. It should contain what you do or what your niche is. Secondly, and very importantly, it should also contain a something that independently validates your value-proposition. For example, if I said: “I work with entrepreneurs to help them dramatically improve how they articulate their value proposition”, your first thought would likely be something less than enthusiasm (e.g., “Oh boy, just what I need-another consultant that wants money I don’t have!”).
If, on the other hand, I told you, “Having raised and deployed more than $60 million of equity solely from high-net worth individuals in the Pittsburgh area, I work with entrepreneurs to help them dramatically improve how they articulate their value proposition,” your mental reaction will more likely be “Tell me more!” (At least I hope so.)
Avoid buzzwords and jargon in your Pitch. If you don’t, your elevator companion will stop listening and direct their thoughts to what your jargon or buzzwords mean. Once you lose their attention, the opportunity has past. Focus on telling the listener exactly, and in plain language, how your opportunity addresses a pain or need and how it brings value to your customers in the form of the benefits (not the features) and the cost.
Don’t try to cram too many details into your Elevator Pitch. Your goal is to have your prospective investor want to know more. You can’t sell the whole opportunity in sixty seconds. You can, however, sell its essence with the goal of having them want to learn more.
Treat the articulation of your Elevator Pitch as an iterative process. Continually modify it based on feedback from your listeners. Try it out on friends who know nothing about your deal. See if they really understand the significance of what you are saying to the depths of their bones. Get candid feedback and keep trying it out whenever possible.
You’re not done revising your Pitch until the last dollar you are raising is in the bank. Bobby Knight, a very winning basketball coach, said “Everybody loves to play in a championship game; and nobody likes to practice.”
You’ll want to be able to articulate your Elevator Pitch anywhere anytime. It’s likely that at one point in time, somebody mentioned to Columbus, “Did you ever think of asking Queen Isabella?” and the world changed for Columbus and for all of us right at that point in time! So…Be Prepared!!