Ian Portsmouth: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine and we’ve developed this podcast in cooperation with BMO Bank of Montreal.
Now entering its fourth season on CBC television, Dragon’s Den makes its business with game show, with reality television in a show that delivers lots of drama and even a few lessons in the area of raising capital. Sean Wise is managing partner of Wise Mentor Capital which provides consulting services to high growth companies in their search for financing. And in his capacity as an online host and industry advisor to Dragon’s Den, in recent weeks, Sean has been screening entrepreneurs and their investment pitches at Dragon’s Den auditions held across Canada. He joins me today to share some of those lessons. Sean, welcome to the Business Coach.
Sean Wise: Thanks Ian, it’s always great to be here.
Ian Portsmouth: So, Sean, how many auditions across the country this year and how many people do you think will audition this year?
Sean Wise: You know Ian, it keeps growing every year. I remember the first year where we barely had 7 or 8 cities covered, fast forward four years later, this year, auditions will go coast to coast to coast and cover over 45 cities including several aboriginal reserves and several mining towns that are finding themselves more entrepreneurial than they thought they would be. You know, in total, we usually get anywhere from a dozen to fifty people turn up, it really depends on the locality and what people are interested in.
Ian Portsmouth: Now, at each of these auditions, people are generally giving an elevator pitch for their product or service. So, what is an elevator pitch and what is it intended to achieve?
Sean Wise: I think it’s probably the key tool of entrepreneurs. You only get one chance to make a first impression. So the elevator pitch makes sure that impression you are giving right off the bat is good. An elevator pitch is a succinct, easy to understand explanation of what your business does ie what pain it tries to address and why investors should care. A good elevator pitch will always capture investor attention and audition that will capture our attention.
Ian Portsmouth: Now, of course, it’s named an elevator pitch because you’re supposed to deliver it in the time it takes to get from the bottom floor to the investor’s office.
Sean Wise: Absolutely. The elevator pitch comes from an urban myth, myth that’s back to the early 1990’s in New York City, in a building called the Flat Iron Building and the myth goes that entrepreneurs used to hang out in the lobby with a picture of a venture capitalist in their left hand and in their right hand a binder full of slides. They would sneak on to the elevator as the investor makes his way to the Penthouse Suite where his offices were kept. During that 10 or 12 floor journey, if you will, they would flip through the binder and one of two things would happen. They would arrive on the top floor where the investor keeps his offices and be invited in to discuss the idea more thoroughly or the investor would call security.
Ian Portsmouth: And the key is not to sell your venture to the investor, it is simply to get the meeting at which you would explain it more thoroughly.
Sean Wise: Absolutely. Investors including our Dragons, they hear dozens of pitches each day. A strong clear pitch helps you get to set you aside from the crowd, it helps you stand out. But not only does it help you stand out, it assures you the highest probability of attracting investor attention. You really need to stand apart from the crowd whether you are one in 10 pitches the investors will hear that day or one in 10,000 applications that the producers at Dragon’s Den will see.
Ian Portsmouth: What are the elements of a great pitch?
Sean Wise: There are 2 key elements to every great elevator pitch. First is the pain statement, at least 50% of sort of the one paragraph summary of your business should be dedicated to providing your audience with concrete facts that allow it to sort of understand how big the pain is. The second part of an elevator pitch is the value proposition. How do you address that unique selling point? How do you solve that pain? I can give you an example if you would like.
Ian Portsmouth: I would love one.
Sean Wise: My favorite example and one that I am not inclined you personally would know is Viagra. Obviously, Viagra was discovered in a laboratory and was not a venture capital back pitch, but if it were to come on the Dragon’s Den, I imagine the pitch for Viagra would go a little like this. People want to have sex longer than their bodies will allow. Our blue aspirin-size, FDA approved tablet allows them to do so in a non-invasive cost-effective manner. You see Ian, the first part, people want to have sex longer than their bodies will allow, that’s really is irrefutable succinct pain statement that makes people want to listen more. Imagine you are at that Top100 networking event and you turn to someone over a cocktail and say, so what is it you do? And they say, people want to have sex longer than their bodies will allow, even someone who sees as many great businesses as you Ian is going to want to hear more. And that’s what the second part is for, the value proposition, our blue aspirin-size, FDA approved tablet. It really shows the audience or lets the audience know how you are going to solve that big pain. And when you combine them, you have the two key elevator pitch elements.
Ian Portsmouth: Now, over the years, you have seen thousands of Dragon’s Den auditions, you’ve seen hundreds of presentations in the actual Dragon’s Den, how good are Canada inspiring entrepreneurs at delivering this elevator pitch?
Sean Wise: I think Canada can go toe to toe with most places in the world. That’s not to say they can’t be improved. All elevator pitches sort of need to meet four key criteria, they have to succinct, they have to be easy to understand, so no tech talk, they have to be [indiscernible] the audience have to know why this will make money and they have to be irrefutable, you don’t really want to start debate an elevator pitch. As for how Canada does, I think that they are doing just fine, I think each and every year, we see an improvement across the board. I think a lot of people are interested in discussing, you know, entrepreneurship in new markets like India and China but they forget that Canada has pro rata doubled the number of entrepreneurs that our friends below the [indiscernible] parallel do. So while we may not think of Canada as an entrepreneurial nation, I think Dragon’s Den and the recent statistics that are coming out show that we are.
Ian Portsmouth: Now in your full time capacity and your full time job as managing partner at Wise Mentor Capital, you help growth companies, I guess, you know, a lot of high tech start ups, kind of thing, raise investment dollars and one of the things you help them with is honing their elevator pitch. Do these companies are after big venture capital dollars do any better job at delivering a pitch than the typical Dragon’s Den [auditionee]?
Sean Wise: I think they do. I think it is more a matter of timing. When you go for venture capital and you are looking to raise sort of a $2, $5 or $10 million in funding, you’ve already been through the process most entrepreneurs start with friends and family. And friends and family tough raise $10 thousand to $100 thousand. But even the friends and family requires you to explain what you are doing a little bit of an elevator pitch. Maybe it’s a longer elevator or maybe it’s a more friendly person you are riding with but it’s still the same concept. Then most start ups will have gone to angel investment, either through an angel they know or to a group organized by the national angel capital organization and that will be another time that they will have refined their elevator pitch, when they go to get that angel money of $200 thousand, $400 thousand, $500 thousand. Finally, when you get to my stage, at the venture capital stage where you have been successful in helping people raise $2.1 billion over 10 years, you will see that the elevator pitch has been refined throughout the process. Comparing with the Dragon’s Den, often, this is the first time that many people are looking to meet external investors. So I will always advise when we do advise that people spend more time working on their pitch and less time counting the dollars they hope to spend.
Ian Portsmouth: Some products or services are more difficult to explain than others. So what’s the key piece of information that you have to get across when delivering an elevator pitch?
Sean Wise: It really is about the pain. It’s trying to say that the larger the pain, the quicker you solution will get taken up. Imagine that if I told you that I can clear all of the spam from your email mailbox. So you no longer receive a note about Algerian money transfers or how to enlarge certain body parts. That’s a big pain. They say that more than 60% of all email traffic around the world is now spam. So being able to fix that would be a big pain that investors would be interested in. I think entrepreneurs need to spend more time figuring out why it is that potentially users or end-users or clients would pay for their product, and developing that into the core pain that they are going to explain to investors.
Ian Portsmouth: Sean, thank you for joining the Business Coach Podcast.
Sean Wise: Thanks Ian, it’s always great to be here.
Ian Portsmouth: Sean Wise is online host and industry advisor to Dragon’s Den and managing partner of Wise Mentor Capital in Toronto.
That’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com, profitguide.com and iTunes. If you have any comments or suggestions about the podcast, please send them to me at firstname.lastname@example.org.
Until next time, I am Ian Portsmouth, the Editor of PROFIT Magazine, wishing you continued success.