Intro

A great tool you can use to communicate your idea to the world is the Elevator Pitch: a finely-tuned explanation of your business’s key value propositions meant to spark interest in your idea in under 60 seconds. In this phase, you will synthesize your learnings from previous lessons and walk away with a fully-formed Elevator Pitch.

A well-crafted Elevator Pitch will be invaluable as you push your business forward. It can open all kinds of doors with potential partners, customers, future employees, and investors.

In our previous lessons, we focused on the importance of defining your problem, market, advantages, and customer needs. Now it’s time to refine those learnings into a polished Elevator Pitch.

The heart of every great Elevator Pitch includes 4 essential components:

one

Nail The Problem

As we learned, great businesses start with a well-defined problem and the ability to identify how painful that problem is. Now, we’ll concentrate on how to effectively articulate it in your pitch.

two

Explain The Solution

You’ve zeroed-in on how your solution will fix a super-specific problem. Now, we’ll look at what information to include -- and not include -- in order to boil it all down to a punchy, value-driven solution statement.

three

Identify The TAM

Now that you’ve investigated your market, it’s going to be critical to communicate a realistic, quantifiable understanding of the true market potential in your pitch.

four

Highlight Your Competitive Edge

With a high level understanding of the other players in your space, we’ll cover simple, effective ways to call attention to their shortcomings while emphasizing your unique advantages when pitching your idea.

In its shortest form, if you were pitching your business to a potential investor, they would want to know these critical pieces before they would listen to (or care about) the rest of your business plan.

Simple, right? Well, not so much.

A seasoned Founder may iterate on this pitch hundreds of times until they get it right. It's not just words, but an understanding of the business itself that comes with lots of cycles and experience. The constant revision until you get it right is what makes this so hard.

Before you do anything else -- like create financial projections or put a funding plan in place -- you need to nail your Elevator Pitch.

Step 1: Nail The Problem

Founders often overlook the importance of giving the Problem more weight than the Solution. They get so excited about their Solution that they forget to explain why the Problem is so important. A well-articulated Problem makes the value of your Solution and your entire plan 10x more effective.

Let’s use the example of Netflix, who initially solved the problem people had having to travel to the video store to rent a movie. Netflix sought to avoid video stores altogether and instead deliver movies in an envelope to your mailbox, allowing you to keep the movie as long as you’d like.

At the time, the Netflix problem statement would probably look like this:

Going to the video store is a pain. People don't like traveling back and forth just to rent a movie and they hate paying late fees even more.

That’s a pretty simple problem statement, and it’s accurate. Notice that it doesn’t include any reference to the solution. We’ll get to that later. A good problem statement focuses entirely on the problem so that the audience can build a powerful case for that problem.

A great problem statement tells more of a story and provides an emotional connection to the solution. Building a better story takes more effort, but the payoff is real because you can draw your audience into your world and get them excited about your journey.

Pick the Biggest Problem. There’s a good chance that your product solves multiple problems, and that’s wonderful. Right now, however, it’s time to lead your Elevator Pitch with just one of them – the biggest problem you solve.

There are two important reasons for this:

  1. Investors Won’t Remember
    Investors don’t have time to remember every detail of your pitch. Can you remember the last time you spent an hour watching a TV show and remembered every line of dialogue? You need to focus on the highlights and save the details for pointed questions later.
  2. One Problem Needs to Succeed
    If your biggest problem isn’t compelling, it stands to reason that the second biggest problem you tackle isn’t going to save you. You don’t win on the number of problems you solve, you win on how well you solve a particular problem.

In the example of Netflix, we know that movie delivery solves lots of problems – convenience, movie selection, and cost effectiveness – among others. Yet some are more important than others. If Netflix was far cheaper than its rivals but less convenient you could argue that it would fail. Therefore, Netflix needs to be cheaper, but more importantly it must be more convenient. We then realize that “convenience” will be our lead problem.

This doesn’t mean we will ignore the other problems. We can certainly cite those as well, but we want to tighten our focus initially so that we can talk about this problem first, build a story around it, and then dig into related problems to solve after you’ve captured the attention of the person you’re pitching to.

Pump up the Pain. You don’t have to be addressing a life-threatening problem to make it powerful. In your pitch, you need to focus on the detail of the pain in your problem. Even “convenience” can be presented very differently if it isn’t given enough character.

Compare these two versions of the same problem:

Version 1

“Going to the video store is a pain.”

Version 2

“Going to the video store requires fighting traffic, wandering the aisles and waiting in long lines just to get a single movie.”

Both statements have the same intent, but the second one details the pain. You don’t want to hope your audience will remember what fighting traffic was like – you want to tell them. You want to remind them of the nuances that make “going to the video store” such a miserable experience.

Articulating The Problem Statement. Even though you know the elements of a good problem statement, it’s still possible to articulate this poorly in your Elevator Pitch. Just assume the first 20 times you pitch this problem (maybe a lot more!) you’re going to refine it.

Here's a horrible way to articulate the problem:

"The video rental industry has a categorically broken distribution model when delivering video-based content to consumers."

Is that true? Yes. Is it relatable? Not at all! Remember that facts alone are not a compelling narrative.

The goal of the problem statement is not only to garner the attention of your audience, it also serves to make the solution look amazing.

Key Takeaway

A good problem statement isn’t just correct - it’s compelling. It pulls the audience in and gets them fired up.

Step 2: Explain The Solution

Once you've articulated the Problem, your next step is to illustrate how your Solution fixes that Problem beautifully. This requires just as much effort to keep the answer as short and punchy as the Problem Statement.

Founders assume that their audiences already understand why a product is important. They want to rush into their demo. Take a moment to make sure your audience understands the value of your solution before you crack open your laptop and start your demo!

Sell the trick, then perform it!

Connect Directly to the Problem

Your Problem Statement should set the stage for your Solution to shine. In the case of Netflix, we did a nice job of explaining how painfully inconvenient going to a video store is.

We want our solution statement to connect directly to that problem – before we get into any other part of the Solution. In the case of Netflix, our solution involves allowing anyone to watch movies streamed directly to their home or delivered to their mailbox (in case you forgot, Netflix also delivers DVDs!)

Problem

“Going to the video store requires fighting traffic, wandering the aisles and waiting in long lines just to get a single movie.”

Solution

“Netflix allows anyone to enjoy thousands of titles streamed directly to their home or delivered to their mailbox.”

Voila! In just two sentences we’ve given a potential investor an easy-to-digest Problem/Solution Statement.

What’s equally important here is what we’re not including.

We’re not talking about the cost savings or the ability to get streamed content on multiple devices. We will certainly discuss those benefits as we dig into our pitch, but we want to hook the audience in with our strongest value proposition from the start.

Step 3: Identify The TAM

Solving the Problem beautifully is nice and all, but if you fail to give investors an idea of the Market Size of the Problem in your pitch, you're not likely to get them very excited.

The Market Size explains just how much potential for growth your startup has. Investors want to know you're solving a painful problem in a giant market. If you can combine those two factors and properly communicate it in your Elevator Pitch, you'll be sure to generate a lot more interest.

Investors want to invest in good companies that can have huge outcomes to make up for all the bad investments they might have made. They’re thinking to themselves, “If this startup isn’t going after a big enough market, it won’t be able to create an exponential outcome for me.”

Warning: This Gets Confusing

The problem starts when people don’t realize they are using different terms interchangeably. Are you being asked how many people could potentially use your product or how many people will use your product? Nearly every person on the planet may have the ability to watch Netflix, but that doesn’t mean the TAM for Netflix is the entire population of Earth!

There are some nerdy things you can skip when it comes to pitching your idea, but unfortunately this isn’t one of them. You really do need to understand the difference, so let’s dig in.

The Three Pies of Market Size

Your Market Size is broken into three pies from big to small:

Total Addressable Market (TAM). Addresses the question “How many people could potentially use this product?” It doesn’t mean how many people will use your product. This is the question you’ll get asked the most, and the answers are often the most wrong. We’ll get to that later.

Served Addressable Market (SAM). Filters the whole TAM by how many of those customers you can actually acquire. Remember you can only serve as many customers as your sales and marketing channels will acquire. You can’t serve customers who have never heard of you!

Target Market. Determines who are your most likely customers. Imagine you ran a banner ad online and presented it to 100 people. They all watch movies. Which of those 100 is most likely to click and buy? That’s your target market.

Getting This Less Wrong

In a perfect world, you could simply Google “Market Size for the Product I invented 9 seconds ago” and you’d get stats, charts and graphs that would make the nerdiest MBA swoon. Chances are, you won’t find any of that.

For now, just recognize that having an accurate estimation of your Total Addressable Market will be important. For our purposes, we’re going to build our Elevator Pitch around the largest pie – Total Addressable Market.

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