You’ve got a slick 10-20-30 deck, you’ve tailored your elevator pitch to 30, 60, and 90 second versions, your value prop is dialed in so well that you could get baby boomers to use your tech. Now, all you need is some VC to sit in front of you for the full performance and you’ll be rolling in cash!
Not exactly. It seems we have been spoiled by the myth of the pitch. Perhaps Shark Tank is to blame for immortalizing “the pitch” as a new vessel for the American dream, giving the illusion that there’s a new opportunity to go out and get rich. However, the purpose of the pitch is nothing new; people without money are trying to convince people with money to give them some. But, according to Katie Rae of project 11, one of the worst ways to sell yourself a VC is to simply launch into a pitch.
“I’ve done it myself,” explains Rae, during her guest lecture at the Yale School of Management on April 13, “it’s what we do, because we’re excited about our thing, but we forget that [the VC is] making a human investment and is all about the relationship. If you start with connecting rather than launching in you’re already better than 98% of your peers.” According to Rae “some of the best entrepreneurs start their pitch with nothing,” she explains, “sometimes they start by asking [the VC] about their fund.”
What Rae is describing sure doesn’t sound like pitching. It sounds like a conversation between peers, an unaffected interaction between someone who has money and someone who is worthy of asking for it. To illustrate the faults of the canned interaction, Rae watched the pitch by the team behind Passenger Pigeon—comprised of SOM students David Johnson, Eitan Hochster, and CEO Jennifer Milikowsky—a Yale startup for peer-to-peer shipping, and explained to the students what they were thinking as the pitch progressed.
Milikowsky was asked to demonstrate good and bad pitching techniques to a classroom, in light of their upcoming Y-Combinator interview. Milikowsky first delivered a well polished pitch, but the VC’s stopped the presentation after a short minute to give them the aforementioned advice regarding human connection.
The VCs admitted that they purposely pull ventures down “rat holes” trying to trip them up to see how well they understood things. The main enemy of the pitch is boredom, after seeing canned speeches all day, it’s an uphill battle to keep their attention. “Here’s what I’m thinking,” explained Rae, “I don’t think they really understand their revenue model yet. They don’t really know what kind of items they want shipped yet–they’re just throwing it at the wall. There are lots of different customers out there and they don’t really know what’s out there. They’re waiting to figure it out.”
Once Milikowsky was asked to explain how Passenger Pigeon worked, there was positive response, but the VC’s stopped the clock to explain that they wanted proof, evidence, and facts that show them that it will work. Show—don’t tell. According to Rae, there are unorthodox ways to prove a large scale business model— advertise your product on Craigslist to test different price points, convince a stranger to use your service and see what it takes. The VCs wanted stories of hustle, of real results. Conveying real hustle is difficult. There is a tendency to use abstractions—I am organized, I am efficient. The best advice is to be specific, use real numbers, and don’t be afraid to make claims about things you don’t quite have nailed down. “What’s the difference between an entrepreneur and a fraud?” She asks, “a fraud sells you something they don’t have, an entrepreneur sells you something they don’t have… yet.”
Rae asked Passenger Pigeon to describe their roles, and explained that—counter to common belief—leading with titles wasn’t the best strategy. This stems from a heavy prejudice against MBA graduates in Silicon Valley, because there is an assumption that MBA students give themselves titles. Rae explained that job descriptions should be organized around the risk factors of the business with specifics of what you do. Each person should be labeled by the problem they solve: one person works with supply side, another builds the tech, and the other works on creating demand.
But all of the teaching demonstration aside, it became clear that the pitch in and of itself was the real culprit. When called upon to give the succinct summary or their organization—rather than a pitch—Passenger Pigeon answered with confidence and eloquence. It became clear that their product was desired, based off of testimonials and statistics they responded with. Milikowsky told a personal story of how the business had been inspired by her annoyance with traditional shipping methods. She had accidentally brought her boyfriend’s laptop home with her, and her only options to ship it back to him either weren’t fast enough or cost $400 at the minimum. She decided to drive the laptop back to Boston herself, and wistfully watched cars who were going there of their own volition, wondering why she couldn’t have paid one of them to take it for her. This moment was poignant and human. When asked who would fund Passenger Pigeon nearly the entire classroom was responsive.
The team described how their setup incentivized people to use Passenger Pigeon—customers would be able to ship items that were bulky or needed to arrive faster without having to pay huge fees. Drivers would use the service, because they’d be able to choose when they wanted to ship an item—in short, they’d be paid to drive somewhere they already needed to go. They had evaluated the cost of the shipping industry and exactly where they would be couched within it. All they needed was the funding.
This is the challenge for this generation of entrepreneurs—the challenge of breaking away from that which is formatted and comfortable, to what is most importantly human. There is a need for a revolution of the pitch—to generate real connections that let the VC see the strengths of the team, that lets the VC ask the questions instead of guessing what they want to hear. A format that prevents MBA students like Passenger Pigeon from having to rely on a formula to express their business model instead of using impactful stories from the start.
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In the past few weeks, Passenger Pigeon has helped Yale students: recover boots left at a party in NY, ship a baby glider to a pregnant friend, carry pork to a hungry customer at Google, and reunite a bicycle with its owner after a move. Visit Passenger Pigeon and sign up to be a driver or have an item shipped.