99% of adults know what an elevator shaft is even if they have never peered down into one. It’s a concrete cylinder in which elevators ascend and descend; elevators being one of the safest methods of modern transport. However, should you fall into an elevator shaft, you are I’m afraid shafted, as a fall from over 3m (less than one floor) is likely to be life-changing and at nine metres (approx. three floors) you are dead as you will be landing on concrete and the lift’s hard mechanical systems.
Hence the term ‘being shafted’. So how does this relate to the business of edtech?
Go to any business school, accelerator/incubator or group who promise to help your success in business, and one of the first things you will learn is about making an ‘elevator pitch’, which is nothing more than a very brief and hopefully compelling story about why an investor should put money into your business.
I have listened to multiple ‘experts’ whose own spiels take far longer than the skill they claim to teach, and I have yet to find one who made a successful pitch for their own business where anyone foolish enough to invest ever got a decent return. Pitch doctors are 99.9% charlatans, but in this they are no different than most business ‘coaches’, ‘advisors’, ‘mentors’ or whatever bullshit bingo descriptor they have on a particular day.
Being able to explain your business simply and compellingly doesn’t mean you need to pretend your audience are all ‘slightly dim 12 year-olds’ (the advice of a pitch expert at Wayra several years ago) nor should it be predicated on hyperbolic but meaningless numbers, such as “our TAM (Total Addressable Market” is $200bn growing at 15% CAGR (Compound Annual Growth Rate)”. According to my mate, Al Young (co-founder of St Luke’s Independent Creative Agency and an international guru in communicating the messages of brands), ”any great communication tells a simple story”.
In my limited world I always think back to what I didn’t learn at marketing schools (perhaps I wasn’t listening hence why I dropped out) which came from a book called The 22 Immutable Laws of Marketing. I read this after buying the first edition 31 years ago, yet can still recall the authors’ names (Al Ries and Jack Trout) and most of their 22 laws. The most relevant to this story is the one about positioning, or where someone thinks your product/service ranks in their mental ladder. This, as I sketchily recall, was covered in relation to the car rental company Avis, whose advertising agency Doyle Dane Bernbach, in 1962 came up with the slogan, ”When you’re only No. 2, you try harder”. Essentially, saying to prospective car renters, “we are the underdog and will do more to get your business”. In 1962 Hertz was the biggest car company in the world (approx 61% market share in the US) compared to 21% for the loss making Avis (whose market share was 29%). This very succinct story was instrumental in not only helping Avis narrow the gap with Hertz (by 1966 it was 49% to 36%) but helped them become profitable for the first time. As an elevator pitch those 8 words were genius and Avis went on to use them for the next 50 years!
So where does this all tie together?
When anyone pitches their business to you, disregard the hype (99% of what they say) and think instead about what you’d like them to achieve for you. As a minimum, how about –within 36 months I’d like some sort of return on my initial investment (without being asked for more); within 60 months I’d like to get out with a a minimum 2x return and at the very least, a realistic plan that allows early inventors to recoup their original money. You see anyone can blue sky piffle, but only two companies I’ve invested in have ever been able to answer the question, “Do you have a strategy for helping early investors when they want to exit?” It is no coincidence both of these companies are my best investments (I have exited both) and are still growing and succeeding. Each created a defined plan where early high-risk investors had the opportunity to sell their shares to later stage larger lower-risk investors (in each case it was a specialist edtech/edu fund) for a solid return (in one case 10x).
The lesson here is that the pitches made by budding entrepreneurs are elevator shaft pitches, i.e. a request for money where you and it will be pushed out of the elevator door and down the shaft so that bigger, fatter, sleeker investors can come in at a higher level and replace you on the promised journey upwards.
Finally, if you want a better estimate of whether the person pitching for your hard-earned cash is an entrepreneur in spirit rather than in name, take them to somewhere with an escalator and watch whether they stand on the right or walk up on the left. Unless physically disabled, anyone who stands isn’t an entrepreneur and those who walk, are at least displaying some of the unconscious restlessness that is an essential trait of any real business achiever. My guess is those who walk make up perhaps 1% of escalator users. The only group I have ever heard using a similar metric are Hell’s Angels, who call themselves ‘1% ers’ (i.e. the 1% who are different from the 99% of law-abiding citizens). Maybe the reason that the Hells’ Angels are the most successful transnational OMC (Outlaw Motorcycle Club), known in some countries as organised criminal enterprises, is the fact their leaders also have the 1% hardwired entrepreneurial gene (even if they use it for antisocial purposes rather than for good)?
