The Elevator Pitch

Last Thursday, November 4, I attended an event organized by Ultra Light Start Ups (Twitter @ULS). This was actually one of the monthly meet ups that take place in various locations around New York City. On Thursday, Microsoft hosted the event and welcomed approximately 150 entrepreneurs who were in the company (via Skype) of another sizable group in Boston. The moderator, Graham Lawlor of Ultra Light Start Ups, assembled “The Email Mafia” (Jason Baptiste, OnStartups.com; Greg Cangialosi, Blue Sky Factory; Chris McCann, StartUp Digest; Peter Shankman, HARO) to discuss what makes an email-based media startup profitable.  

To get to the point where one uses a distribution platform effectively, grows the email list consistently, and is able to sell the startup within two years for $20 million without external capital, one needs to perfect the elevator pitch. This became obvious on Thursday because the evening began with pitches from about ten startups. But what’s important about the elevator pitch, which lasts exactly for one minute, is that it serves many more purposes than what most people imagine.

First, the pitch describes the company and the people behind it: Who are you? What are you working on? Why is it important? How are you doing it? What is the value you bring compared to your competitors? What is your revenue model? Or else how do you make money? Finally, and once again, why is it that you are doing something important? As simple as these questions are the answers need to be finely crafted. The goal is to outline the aforementioned questions within 60 seconds and to do it effectively one needs to write, re-write, and re-write the pitch to perfection. Is that it?

No. An elevator pitch should be a live document. It should change in time to reflect how the company is growing and in which direction. This became obvious on Thursday when a couple of the presenters had been in business for a few years but still had difficulty expressing and clearly explaining to the audience what is it they do. Not only is the pitch addressed to the non-expert (and therefore you should forget and eliminate any jargon and acronyms from it) but it is also a means for the entrepreneur to check whether he/she has deviated from the original plan and to determine why. In other words, the pitch is a road map to remind you what you set out to accomplish. It is an outline of the original strategy. If the strategy has changed so should the pitch. Leaving it aside among the many items on the to-do list and checking it off once completed for the first time does not help anyone. It certainly does not help the entrepreneur in defining what works and what does not and in charting new directions for the future.

What became evident last Thursday during the pitch segment of the Ultra Light Start Ups evening was that the elevator pitch has been incorrectly associated with start ups exclusively. Imagine running a large fund and trying to convince new investors to join you. If their decision is based solely on the fund manager’s reputation, they are most probably making a mistake. But if it is based on a clearly articulated investment strategy (elevator pitch) chances are the fund manager is constantly refining the fund’s strategy and pursuing projects that fall within its purview.

Fidelity vs. Convenience: The Trade-Off

It is time to revisit my post of October 29. Tonight, I learned of a new model that explains exactly what I outlined in my earlier entry.

I attended a lecture by Kevin Maney, best selling author and journalist, who writes for Fortune, The Atlantic, and Fast Company. He was recruited by Condé Nast Portfolio magazine and remained contributing editor there until the magazine’s demise. Prior to that he had been a senior technology reporter at USA Today. Maney is the author of The Maverick and His Machine: Thomas Watson Sr. and the Making of IBM (John Wiley & Sons, 2003) but his lecture tonight at Alliance Bernstein was on his most recent book, Trade-off: Why Some Things Catch On and Others Don’t.

            In his book, Maney elaborates a theory according to which successful products accomplish one of two things: either fidelity or convenience. Fidelity is a term that refers to the customer’s willingness to pay a premium for an experience even if that experience involves unpleasant events along the way. For example, a Bono fan will pay a high price for a ticket to a Bono concert, even if it is very hard to find parking, the space is really crowded, and getting back home after the concert takes for ever. The other end of the spectrum would be listening to Bono singing on one’s MP3 player. That would be highly convenient. Unfortunately, the sound does not compare to that of a concert and Bono does not come run errands with the listener. Both products, the extremely expensive and highly inconvenient as well as the inexpensive and highly convenient have a steady and specific following and generate substantial revenues in their category. In addition, both can grow. To illustrate how, one may place fidelity on the y (vertical) axis and convenience on the x (horizontal) axis and picture the two growing either up (higher fidelity can bring larger margins) or to the right (higher convenience can bring greater market share and greater returns).

Problems arise when companies want to achieve both at the same time. They want to have a large following of loyal customers who recognize the coolness of the brand and are willing to pay the price for it, while they also target a large market share for whom the product is appealing because it is accessible. The perfect example would be Starbucks during its period of aggressive growth. In fact, what Starbucks proves is that the combination of both high fidelity and high convenience is disastrous for the brand. The contradictory powers fight each other and usually demote the brand to a zone close to the bottom left of the previous illustration. That zone is called the fidelity belly. Brands that fall into the fidelity belly usually have a very hard time coming out of it. This is because companies within that space cannot make up their minds as to whether they would like to pursue the fidelity axis or the convenience axis. The author presented several examples of companies who have succeeded in that endeavor by clearly choosing a path for growth and only in one direction.

This is exactly why Maney’s presentation reminded me of the discussion of Gilt’s acquisition of Bergine. In my mind, Gilt is moving along the convenience axis, expanding geographically and making discounts available to a broader geographic region. This does not mean that Gilt itself is a luxury retailer. It has now become a discount retailer and it so happens that the discounts it sells are of products within the high-end sector of the lifestyle industry. The products themselves originally belong to the fidelity zone but when they are marketed through Gilt or Groupon they temporarily shift to the convenience zone. But e-commerce does not necessarily have to be a shift toward convenience. Within the luxury sector, I distinguish Portero.com, a company that sells premium, pre-owned, prized luxury goods while maintaining a very clear definition of its own brand within the domain of exclusivity (fidelity, experience, coolness) that both it and the brands it markets occupy.

While I had thought about these issues before, I gained a new perspective on things tonight. I think Maney’s model is a very handy tool both for established firms that are re-examining their own strategy for growth or start-ups that are in the process of defining which segment of the market they serve.

The missing link: Women in the Boardroom

A panel showcasing Susan Engel, CEO, Portero.com, Barrie Berg, CEO Americas, ?What if!, and Meesha Rosa, Head of Communications with Catalyst’s Corporate Board Services, and moderated by Marie C. Wilson, Founder of The White House Project is no small feat. For Sheila Ronning, CEO and President, Sharp UpSwing who organized the event this was another opportunity to add value to the audience of Women in the Boardroom (http://www.womenintheboardroom.com/), an executive leadership event designed to assist in preparation for board service.

The event took place today (November 1, 2010) at The Park Hyatt in New York and hosted approximately 750 women, all leaders in their industry and all eager to serve. We all enjoyed Marie C. Wilson’s opening remarks on Norway’s legislative mandate to public corporations to recruit more women for their boards (http://www.guardian.co.uk/money/2006/jan/09/business.workandcareers). Running a publicly listed company in Norway five years ago must have been a real drag but today Norway is leading the way in prosperity (http://www.eubusiness.com/europe/norway/econ). Is there a direct correlation between economic success and female executive leadership? The experts today confirmed there is. They discussed the data, elaborated on its consequences, and recounted personal experiences, which prove that corporate governance in the US today remains opaque and antiquated—in spite of the SEC’s efforts to update the corporate governance process and the meaning of fiduciary responsibility.

Admittedly, women offer a different way of thinking (not better, not worse, just different), a different approach to problems and their solutions, and a superbly qualified profile that has been thriving in executive positions for years. In addition, women’s inclusion on corporate boards offers reassurance that diversity is appreciated and valued. Why aren’t there more women in corporate boards? And when there are, why aren’t they necessarily part of the Compensation, Audit, and Nominating Committees?

Perhaps these are the wrong questions to ask. What would be more interesting than trying to comprehend the internal politics of public companies is to offer the missing link to that part of the industry that usually offers innovation: the private sector. Indeed, the panelists established today that the most active and creative industry in recruiting women for available corporate seats may be private equity and specifically small to mid-cap private equity investors who are constantly looking to equip the boards of their newly acquired companies. This is not to say that women’s presence is palpable or already actively pursued within private equity. On the contrary, what this note offers is a suggestion that perhaps the missing link between private equity investments and their concerted effort to lead private companies to growth is the recruitment of qualified women for Advisory Board or Corporate Board roles.