October 9th, 2009

Explaining what you do in five minutes

in: Communicate, Funding, Startups

Next week, the ever-energetic Phil Telio is organizing the fifth Startupcamp in Montreal. He’s assembled five excellent new ventures from a long list of submissions, and both Tara Hunt and Chris Shipley will be attending the event.

I’m helping to judge and counsel the participants, and in doing so I’m remembering just how hard it can be to explain what you do from within your own company.

• You can’t hone your pitch: At an event like this, you’re speaking to investors, employees, competitors, and advisors.
• You want to explain it all: You’re convinced that you have to offer a tour of your whole product or service, which makes you rush.
• You’ve got the curse of knowledge, something Made To Stick talks about a great deal. Basically, you know your own product so well, you forget that others don’t know anything about your market or technology.

In a pinch, here’s what I usually advise people to do if they have no idea how it’ll go. You can break a presentation up into five chunks of a minute each, and use 2-4 slides for each minute, to get your point across.

Minute one: How big is the pie?

The first thing you need to do is set the stage. What industry are you in? What market are you servicing? Why is this segment of the world growing, or poised to gain attention? This part should feel like a TED presentation, telling the audience something surprising that inspires them to continue listening.

As you’re explaining this, remember that many of the people in the audience won’t know what you do. Give them analogies, or concrete examples from their daily lives. When I’m talking about cloud computing, for example, I often ask people, “do you use GMail, Hotmail, or Yahoo Mail? Where are all your mails stored?” They may not know clouds, but they grasp that concept quickly when it’s made relevant to their lives.

This is where you mention comparables — other companies that did well in an adjacent space, or who have had success in this space but aren’t competitors. Lucrative comparables make investors drool.

Minute two: Why is there still a piece of the pie left?

Now that you’ve told the audience about a huge opportunity, where’s the gap? What’s the shortcoming? Hopefully, this is a major disruption: The broad adoption of mobile devices; economic pressures changing budgets; consumer understanding of web applications; concern over healthy eating; etc.

You want to show a hard problem. If the market gap is easy to overcome, then the audience will question whether you can build any kind of sustainable competitive advantage. But if you state a hard problem that’s genuine, it’ll be interesting. Your problem doesn’t have to be technical, either: you might say that it’s hard to reach consumers, but you have a partnership that bundles your product in with something they already use.

This is where you can drop the names of competitors to show you know them, and know why you’ll beat them.

Minute three: Why will you claim that piece of the pie?

Now the audience is ready. There’s a change coming, and there’s an opportunity. At this point, you need to prove that you can fill the need. This is the only part of the presentation that should include a demonstration, and it should demonstrate only that you can overcome the big challenge. Don’t bother showing me the login page, or the account administration screen, if your key feature is a dashboard.

Also, if your value is the viral loop or the process, show that. Make it personal. If your target customer is a small business owner, for example, then give her a name and follow her through a day in her life. Making your product concrete will help others put themselves in your customer’s shoes and understand the benefit you offer.

Minute four: How will you make money from it?

Now that you’ve shown value, explain how you make money. This is simple accounting:

• What are your initial costs?
• What are your marginal costs (i.e. how much does it cost to deliver product or service to one more customer)?
• What are your revenues? Are they recurring or one-time?
• How do people find out about you? How will they spread the word? How much does this cost you to encourage?

Remember Sergio Zyman‘s definition of marketing: Selling more things to more people more often for more money. How do you do that?

Don’t get into financial projections here. You’re not expected to use real numbers; instead, you’re helping the audience to think about the fundamental equation that drives your business. Revealing your business model happens in stages.

If you were Netflix (or in Canada, Zip.ca), for example:

• For a broad audience, you’d offer, “we have a monthly subscription model, and delivery is done via post initially. As networking becomes cheaper, we’ll switch to a download model that will slash our costs dramatically.”
• For your first meeting, you’d say, “customers pay us a monthly fee to ship them movies from a list. Our analysis of the cost of DVD purchase and the frequency of rentals shows we make money because people don’t watch as many movies as they think they do, and because ground-shipped mail is cheap.
• In a one-on-one discussion with an investor you might explain, “the average person watches 6 movies a month. We can rent out a DVD that costs us $50 fifty times, and shipping is $1. If someone pays us $25 a month, we make $13 a month.” It costs $0.06 to download a movie today, and that’s dropping by 50% a year; and a digital copy of a movie won’t get destroyed in the mail, so our margins will increase as costs go down and re-use increases.”

Don’t get into this kind of detail in an open forum unless you’re directly asked. But when you are asked, answer quickly, clearly, and without hesitation. Prospective investors are testing to see whether you really know your market. Also, if you have a convincing way to get the word out or drive down costs, emphasize it here. Remember — this is about your business model, not your technology.

Minute five: What do you want from the audience?

There’s always an ask. If you just present without a goal, you’re wasting your time. Some examples include:

• I want customers, beta testers, or referrals
• I’m looking for investors
• I want to recruit new talent
• I’m looking for service providers (lawyers, ISPs, etc.)
• I want feedback, criticism, and suggestions

Know which of these you’re after and leave the audience with a clear call to action. This conveys the impression that you’re confident, and you know what you want to achieve, which is a good thing.

I’m really looking forward to next week’s event, and to hearing what marketing veterans like Chris and Tara take away from it. Let’s hope the participants have a short, pithy explanation of their companies so we can understand them quickly and provoke some healthy, challenging discourse.

Tags: presenting, Startupcamp

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