Practicing the Art of Pitchcraft

Commenting on an earlier post of mine, Sridharan suggested that my four year old son’s simple and clear presentation of his thoughts is “a management lesson…Stick to the point and say it in a single sentence.”

I know it sounds a little crazy, but indeed I’ve come to agree that a clear, compelling elevator pitch is essential to growing a business. (And I’ve paid dearly for the evidence.) So after attending a board meeting yesterday in which the management team struggled to succinctly describe their business, I resolved to blog my agreement with Sridharan. Just in time, too, because Nivi’s been bugging me to answer the question: What makes for a good elevator pitch?

The elevator pitch forms everyone’s first impression of your venture. It needn’t be a single sentence, but the delivery ought to be measured in seconds, not minutes--like any good TV or radio commercial. In fact, other rules of advertising apply…

1. Show Some Leg Right Away

The primary goal of an elevator pitch is to intrigue someone to learn more. Like that novel you buy on impulse at the airport, the first sentence has to grab you. One way to do that is to highlight the enormity of the problem you are tackling….

• With healthcare costs rising 24% per year, fewer and fewer US employers offer comprehensive health benefits…

• In the last 18 months, the internet grew by over 100 million consumers in China who have no credit mechanism for buying online…

• Used to be If It Ain’t Broke Don’t Fix It, but worms and other hacks have raised the dreadful prospect that every important computer system in the world needs to be fixed on a weekly basis…

• Thanks in large part to Tivo, the $70 billion market for TV commercials is about to implode…

• 21% of the patients who take prescription medicine for the first time are genetically pre-disposed to have no benefit from that molecule, but still suffer the side effects…

If you get stuck on this step because the problem you’re tackling isn’t impressively large and obvious, you have a more severe issue to worry about than your elevator pitch.

2. Don’t Make Them Think Too Hard

Though it’s okay to start with the problem, never indulge in more than a sentence to describe it, no matter how juicy it is. Rather, tell the audience up front what your company sells (even a simplistic description), so the rest of the pitch will make sense. For example:

• Healthia offers an online comparison-shopping portal for all kinds of healthcare purchases like doctor visits and insurance.

Without going into the cause of the pathology, let me just describe the common symptom I see that inspired this rule: 5 minutes into the presentation (whether it’s delivered in person, by email, or sky-writing), the audience still doesn’t know what the company does—we understand that it’s somehow related, say, to real estate transaction technology. But is the startup a listings site for owners? A comparison shopping portal for title insurance? A resource for mortgage lenders or their brokers? The suspense is killing the message.

Don’t write your story as a mystery novel, in which the reader must guess what your company does. Instead, make it an edge-of-the-seat action flick.

3. Science Not Allowed In The Elevator

If the startup is in a competitive market, it may be necessary to describe the company’s salient advantages. But make the effort to distill the differentiation down to one, easy-to-comprehend sentence. (Mark Twain once wrote, I would have written you a shorter letter but I didn’t have the time.)

Here’s the pattern that I have learned (the hard way) to avoid: Some very smart people invent a unique, defensible technology based on a super clever approach to solving a problem. In an effort to recruit employees, raise capital, and, most importantly, sell their product, they present their cleverness with confidence and justified pride. To really expose the genius, the pitch includes a good 10-20 minute tutorial.

Who Has Time For This? Not VC’s, and certainly not prospective buyers. Besides, if the technology is too clever, it will confuse even those who stick around for the credits. Most importantly, these startups tend to focus on their technology rather than a market problem to solve.

[This would be a really great place in the post for a recent example. Regrettably, discretion stymies me. So I must reach back in time to confess my own sins…]

When Jim Bidzos first explained to me Ron Rivest’s idea for selling public key certificates (Rivest is the R in RSA), it took a while for the math to sink in. But as I came to understand how public key cryptography facilitates encryption, authentication and (theoretically) non-repudiation, I reveled in the cleverness. Like so many spectators of greatness, I congratulated myself for comprehending this wonderful meme. So when Jim and I launched Digital Certificates, Inc (later renamed Verisign), I proudly (and thoroughly) explained public key crypto to whomever I was recruiting as a partner, employee or co-investor. “You see, people encrypt messages today using a numeric key that they must first share with each other…blah blah… Now using one-way functions like multiplication of large prime numbers…blah blah… So if the public key decrypts the message, then that must mean…blah blah…” Surely the brilliance of the idea must compel them!

Compel? More like confuse, bore and repel. I don’t think anyone (including me) really understood what our little startup needed to do until we hired our CEO Stratton Sclavos. Stratton dispensed with the math, as well as the notion that people feel the need to buy obscenely large integers with incomprehensible mathematical properties. Instead, Stratton announced that we are bringing Trust to cyberspace, and our first product is a Driver’s License for the Internet. (One of these Driver’s Licenses evolved into SSL certificates.)

Stratton’s simple message focused on the market problem, not the underlying technology. Rather than make the audience feel stupid, Stratton crafted a metaphor that anyone can understand on even a short elevator ride.

4. Establish Credibility. Name Dropping Allowed

As a proxy for lengthy tutorials, it’s more effective to establish credibility by sharing the pedigree of the entrepreneurs, customers, or (as a last resort) the investors. A glowing word from Walt Mossberg or a Gartner Group analyst warrants a sentence in your pitch. For example:

…Counterpane’s founder and CTO is Bruce Schneier, the cryptographer and author whom most folks regard as the world’s foremost expert on information security.

So I hope this blog post helps you with the difficult but critical task of distilling your message down to an easily digestible morsel. As an example of an elevator pitch that follows all the rules above, here’s one that I have found to work well in about 45 seconds…

Used to be If It Ain’t Broke Don’t Fix It, but worms and other hacks have raised the dreadful prospect that every important computer system in the world needs to be fixed on a weekly basis.

That’s why Determina has developed a memory firewall to protect software on computer servers and clients alike so that they no longer need security patches. Unlike other Intrusion Prevention Systems, Determina never generates a false-positive alert, and stops even new attacks without requiring data streams of new signatures, so Determina can scale to the largest networks without human supervision.

A world class compiler team at MIT developed the technology over 8 years--the MIT professor and his grad students moved to Silicon Valley on a leave of absence when they got funding from Bessemer, Mayfield and USVP.

When your pitch inspires a VC to learn more, be sure to read Boris' and my tips on presenting your plan.

A Stroll Down Wisteria Lane

I first saw Desperate Housewives while watching GoTV, the Bessemer-funded mobile video network sold through Sprint and other wireless carriers. As a fan of the series, I accepted a friend's invitation onto the set yesterday to observe the filming. The experience stirred in me a newfound respect for Thespians of the Small Screen.

Most striking was the herculean effort exerted by the crew to produce each minute of footage. Five days a week they work from 10am to at least midnight in tight, dark, cluttered spaces, mostly waiting their turns (sometime hours) to contribute one step of a strictly serial process--a light meter reading, a dress fitting, snacks, transport to and from the outdoor set, landscaping, script re-prints, shopping for props, or a walk-by (for background activity)... The celebrity housewives show up only for their scenes, but most of the crew stand by 14+ hours a day with surprisingly good cheer. Clearly, these people enjoy their work, and it shows.

Just as impressive was the resource efficiency. Desperate Housewives must consume more studio real estate than any other TV series due to the number of homes they portray both inside and out, but even so all the indoor sets are compressed into two warehouses, surrounded by wardrobe, prop, food, and changing trailers. The camera angles and artifically sunlit paintings positioned outside the windows successfully convey spacious suburban sprawl from inside a studio where small sets are actually built back-to-back--in reality, the housewives snake their way through tight-fitting spaces to navigate the set.

When shooting outdoor scenes, the caravan of trailers convoy to Wisteria Lane, an outdoor set eerily reminiscent of my old Menlo Park neighborhood--except that the fake wisteria put our natural ones to shame (and without the water or maintenance).

In every set I saw signs of extraordinary attention to detail. For example, in Bree's characteristically meticulous kitchen, the pantry is stocked with evenly-stacked, carefully labeled tupperwares. The books on the shelves of each home are selected to suit each character. And just the right amount of background activity (pedestrians, cars, bicycles) completes the illusion.

I couldn't help but admire the culture of the Desperate Housewives production, where passion for the "consumer experience" drives a scrappy, team effort that every startup should strive for.

Shopping in Vegas

I haven't posted for 5 days because I've been at the Consumer Electronics Show (CES), the largest annual tradeshow in the country. Indeed, judging from the crowds, most people on Earth (including ALL the venture capitalists) were in Vegas this weekend. I surely would have run out of patience inching my way down the infinite taxi lines, if not for the company of porn stars in town for the concurrent Adult Video Expo.

For the handful of you who weren't there, here's my quick rundown on what you might want to buy this year, based entirely on the 5 types of consumer electronics on my personal shopping list...

1. DISPLAYS

Parents know that by the age of 3 months, baby heads will always turn to an active TV screen. They just can't help it. Unfortunately, I've never outgrown this behavior, and apparently I'm not the only one. At CES, bright, eye-popping, expansive flat panel displays covered just about every wall.

Panasonic still makes the best plasma displays, but who needs the high price tag, power consumption and burn-in of plasma when LCD panels have reached parity in size, brightness and color? Though LCD panels usually suffer from a bit of flicker around moving surfaces, or even a "screen door" effect on solid colors, perfect images are now available if you step up to LCD panels from either Panasonic, Samsung, Aquos (made by Sharp), or Hitachi. IMHO, upgrading a TV to the eye-popping colors of a great flat panel display enhances viewing even more than adding HDTV content.

As for projectors, there was only one. Sure, vendors distracted us by displaying hundreds of impostors--plastic junk that cast dim shadows reminiscent of scratchings on the walls of a dark cave. But only Fujitsu's LPF-D711 projected a wall-size image with the lumens and crispness of a high-end flat panel. I hate to report that the Fujitsu costs $25,000, but if you've got it, spend it here.

Finally, this was the first CES with displays that support progressive scan HDTV at full resolution (1080P). The Fujitsu projector and flat panels I recommended above all support 1080P.

2. HIGH-DEF DVD'S

Just when it looked like Sony's Blu-Ray had pulled ahead in the format wars, HP announced support for HD-DVD, joining Toshiba, Microsoft and Intel. Why did HP do that, when Sony, which owns a major movie studio, is in a particularly strong position to dictate format? In reality, Sony Pictures hurts Blu-Ray more than it helps--naively crusading for DRM, the studio execs continue to hamper Blu-Ray so that users can't easily rip or stream DVD's (as if we'll all buy a copy of Rent for each TV).

This war will last for years. Meanwhile, if you must have high-def in 2006, there will be far more content available for Blu-Ray than for HD-DVD.

3. HOME AUTOMATION

Home automation includes the remote control, synchronization and monitoring of electronic products through wall switches, remote controls, phones, PDAs, PCs and web browsers. I observed this year at CES that home automation products have finally matured to the point where consumers can stitch together broad, integrated functionality in existing homes without having to pay $50,000+ for professional installation and programming.

(Yes, the X10 protocol has been around for 20+ years to cheaply control household elements over powerlines, but I and many others know from experience that X10 does not work reliably, especially in large homes or alongside increasingly common electronics that draw current even when turned off.)

The first step is to decide which electronics you wish to control--lights, media, climate control, sprinklers, shades, window cranks, thermostats, door locks, alarms, garage doors, etc. (For some of those elements, you will need to replace existing products with controllable ones.) Then select a control protocol that supports those devices through in-house powerlines or wireless -- such as Z-Wave, Zigbee or Insteon. (Since Z-Wave is furthest along, my firm Bessemer invested in Zensys, the Z-Wave chip vendor, as did Cisco.) Finally, buy and install products that control those elements using your selected protocol, such as wall switches, touch panels, remote controls, TV interfaces, key fobs, and PC application or widget.

3. MEDIA DISTRIBUTION

The market for standalone Personal Video Recorders (PVR) is going away as consumers choose between PVR set-top boxes from their cable/satellite/IPTV service provider (Easy) and Microsoft Media Center (Robust). For anyone who wishes to integrate multiple PVR's (including handheld ones), Media Center is the best choice. As a platform, Media Center can also accommodate home video, video surveillance feeds, and third party video streams like Movielink.

Compelled by the promise of taking Scrubs and Monk with me on the road (as well as a $299 show special) I jumped into the world of mobile PVR by purchasing Creative's Zen Vision video player. It has nice resolution but what really distinguishes it from the dozens of competitors (most of which run Microsoft Mobile) is the 30GB of internal storage.

For audio distribution in the home, the best choice is still Sonos, though the company has been painfully slow filling in its product family. Sonos has waited a full year to debut a follow-on product, which appears to be nothing more than last year's product without the amplifier.

4. SMART PHONES

The Motorola Q phone preview was the belle of the ball, promising Verizon subscribers Microsoft Mobile, EVDO, a QWERTY keyboard, Bluetooth, and Razr-thin style.

5. HOME TELEPHONY SWITCH

Nothing--I couldn't find a single telephony switch at the show. Is Panasonic still the only choice for residential switches? With an increasing number of virtual phone lines (Vonage, Skype, fax, POTS, doorbell intercom, docked cell phone), it's impossible to reach them over cordless phones without the benefit of a switch.


Obviously, I've reported on just a sliver of what was at the show. There were entire neighborhoods devoted to other product categories like gaming consoles, photography, satellite radio and telematics. (Who Has Time For This?) I managed to cover less than half the real estate, and I missed the Innovations Zones at the Sands where, among other things, one could browse home robotics and media-enhanced exercise equipment. With all the opportunities to meet people, I didn't even have time to lose money at the poker tables or catch an evening show.

I did, however, find a seat at an Oxygen Bar, which applies a series of therapies over 15 minutes to Refresh the Soul. The spiritual diet includes oil for your hands, a whiff of strong-smelling alcohol, a 30-second neck massage by the dude behind the bar, a disgusting little cocktail laden with caffeine and sugar, and, of course, air. With all that New Age nutrition, I did, as promised, feel tranquil, balanced, holistically well, naturally high, internally resonant, and lighter... precisely, $22 lighter. Oh, and I also got some oil in my eye which hurt like a motherfucker.

Of course, the real highlight of my trip was bumping into Penn Jilette, but that's another post.

And A Child Shall Lead Them...

Over the holiday week with my kids, I noticed something in common among High King Peter of Narnia, the Lorax, and my son: they all like to save trees. This observation kindled a memory from early 2004…

It was the first time I had ever attended a city council meeting--my neighbor Lou had asked me to accompany him so that I could give him my proxy as a Menlo Park resident to address the council for 3 minutes. Among two other neighbors and me, Lou would get the time he needed to present his objections to a new city council amendment--strongly advocated by the mayor--that permitted anyone to chop down a mature oak tree without permit or notification so long as it stood in a permitted building envelope. At the time I was hobbling around on crutches nursing a bad ankle sprain, but this seemed like a worthy, if futile, expedition to help Lou save our town's native trees.

On the way out the door, my four-year-old son asked me where I was going. It was late at night, and he was already in his pajamas, but I thought, Hey, why not give the kid a civics lesson? "I'm going with Lou to a city council meeting, where neighbors we've elected make city laws. Do you want to join us?" Yes, he would.

It was only a three minute ride to the council chambers, and along the way he asked why we were going. "The city council is thinking about whether it should be easier for people to knock down trees in order to make their homes bigger. What do you think?"

"No, I don't think so," he said.

When we arrived, Lou told me that he didn't need my son's proxy, since he had already reached the cap. I asked my son whether he would like to use his 3 minutes to share his views with the city council. He nodded yes, so I submitted his name on the roster. We didn't have any time to discuss what he might say!

We sat through 45 minutes of rather boring administrative discussion, and finally reached the alloted time for public opinion. My son's name was the first one called. Was my four-year-old still awake enough to do this? Would he even speak? Did he actually remember why we were here tonight? If he did speak, he would likely just jabber on about the cool looking spotlights and big computer monitor. But I had promised him his chance, so I crutched up to the microphone with him by my side.

"My son, a Menlo Park resident, would like to tell the Council why he opposes the new amendment on heritage trees." To the look of many surprised faces, I lifted the small boy up to the microphone, having no idea what he would actually say, if anything.

But, sometimes children truly surprise. Without hesitation, he spoke a single sentence--delivered clearly and to the point. "I think we should save the trees because they make the air we breathe, they give us shade, they're beautiful to look at, and they're home for the animals."

I set him on the ground, and he walked slowly beside me as I crutched my way back to our seats. I heard the first sound of clapping hands from somewhere in the audience but within just 2 or 3 seconds every person in that room joined in, including the city council members and mayor. We sat down amid a thundering applause--one tired little boy and the proudest father who ever lived.

My neighbor Lou then delivered his presentation, but it was moot. My son had already chopped that amendment down with ten times the force of an excavator uprooting an oak. Turns out that he gave me the civics lesson!


Update: I'm often amused that commenters to my blog challenge the veracity of my reports (e.g. see comments on these posts), as if I have any reason to hoodwink you. Fortunately, our local newspaper backed up this little anecdote of mine with a front page story on how Avery prevailed upon the council to repeal the amendment!

Control Roulette: A Bet on Red or Black

Dining last night on the best tuna tartare around, an entrepreneur asked me my thoughts on board structure. My answer surprised him, prompting his suggestion that I share it in a blog post. So here goes: Crafting the right board of directors has nothing to do with legal structure, and everything to do with getting the right people in the room.

I find that the ideal board of directors has 5 members--a nice, small odd number that allows for multiple skill sets without losing anyone's attention or complicating communications. The CEO is the only employee on the board, so that open, apolitical conversation can ensue regarding the team. VC's occupy no more than two of the seats--more than that yields rapidly diminshing returns (and fuels the conspiracy nuts who blame all setbacks on evil VC control). The remaining seats are held by outside experts recruited opportunistically--the board should regularly consider skill sets and credentials that would add value to the board (contacts, reputation, domain knowledge, customer perspective, CEO coaching experience...) and keep all eyes open for the right individuals who inevitably pop up.

For the record, my "ideal configuration" is a guideline, not a rule. Historical constraints commonly require deviation, which I have often seen work just fine.

Here's the surprising part... I don't care who elects whom, how many seats the common shareholders elect, or whether I even hold a formal board seat. Ask any entrepreneur I work with--Bart, Chini, Scott, Messiana, Risley--and they will confirm that I'm 100% easy on control terms, because I have learned from experience on 40+ boards that they don't matter. Real control has nothing to do with the documents, and everything to do with the color of the ink at the bottom of the cash flow statement. Simply put, when a private company is losing money, the investors control it, and when it's profitable, control rests in the CEO's hands--unresolvable differences between the CEO and investor group inevitably pan out this way. It's simply a matter of which is more dispensible at the time--the financial support of the venture firms, or the knowledge and momentum that the executive team brings to operations.

So as you can imagine, I'm always quite happy the day I truly cede control of the board!