If you can't explain your clean technology in a tweet you are going to struggle to attract investors
It used to be called the elevator pitch; the clear and concise explanation of what you do and why the customer or investor should be interested. But the world moves ever faster, now the elevator pitch barely lasts one floor. What you really need is a Twitter pitch, a compelling explanation of what you do in 140 characters - or preferably less.
That was yesterday's core message for the 16 UK clean tech firms preparing to pitch later this week to a room of Silicon Valley venture capitalists as part of the Clean and Cool trade mission.
It is a difficult lesson to learn; by my reckoning probably about half of the companies involved currently have the "Twitter pitch" down pat, although everyone is practising diligently. You can hardly blame them. Most clean technologies are technically complicated and shaped by huge numbers of environmental, policy, political, and market factors. Explaining how you produce hydrogen or ethanol using an ultra-efficient new process is not easy in one sentence, nor is explaining the importance of energy storage and management of peak power loads. This stuff is complicated, if it was easy everyone would be doing it.
Yet, as Jerry Ennis of UKTI's Venture Capital Unit eloquently explained, if you want investment the concise pitch is a non-negotiable. "If after three sentences you don't know what it is, it goes in the bin," he says, recalling his time as a VC.
The VC model is based on "kissing a lot of frogs"; a typical VC firm will receive around 1,000 business proposals a year, they might take a closer look at around 200 of these, and then call about 100 companies in for interviews. At the end of all that it is a good year if they invest in 10 to 15 companies. With odds like that clean tech companies are only going to attract funding if they make it easy for VCs to understand the investment opportunity.
None of this is new advice, but it is remarkable how few firms follow it. As the leading VC and former Apple exec Guy Kawasaki once memorably explained, most pitches are "crap", hair-pullingly, room-spinningly "crap".
This gives a huge advantage to those companies that can offer a succinct and compelling explanation of the investment opportunity. It is possible to stand out amidst the dross.
Although, as Ennis again advises it is important to understand that you are pitching an investment opportunity and not a technology opportunity. The vast majority of VCs are neither technologists or environmentalists (some entrepreneurs might ask what their skill set actually is, but that is a whole other story). They might have questions about the technology, but only in relation to how much money they can make, how big the market is, how much investment is needed, and how long will it take to reach the optimum exit point. As Ennis puts it: "Investors make investment decisions, they do not make technology decisions."
How do you deliver the perfect pitch? Again the checklist is the stuff of countless business books, but remains easier said than done. You need that simple 30 second pitch; you need to do your homework and know about the potential investor; you need to be bold, the VC expects you to exaggerate; you need to be able to anticipate and answer tough questions; you need to stick to your guns and have faith in your technology; and most of all you need a great idea and good management team.
Get all that in place and you might just get the opportunity to address the legal challenges that were also outlined to the mission companies yesterday: whether to set up a US corporation or LLC, whether to register the company in Delaware or California, whether to go for preferred stock financing or convertible promissory notes, how to secure US copyrights, patents, and trademarks, how to comply with US employment law and avoid getting sued, and how to negotiate equity division and corporate valuations.
But ultimately the only way to reach the stage where you start to worry about legal fees is to have the kind of concise and compelling "Twitter pitch" that will hold investors' short attention spans and attract the funding that makes global expansion possible. Ultimately, if you want your clean tech firm to go big, you need to start with the shortest possible pitch.
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