bad idea + good pitch >? good idea

Anyone who is involved with entrepreneurship, small companies, or funding startups will tell you how important your 2 min elevator pitch is. Above all else this short snippet must capture the attention of your audience. This memorized bit has become one of the most important part of getting your new company off the ground.

In the face of our technical society’s full acceptance of Occam’s Razor, these pitches must be leave the audience with an honest understanding of why your solution is better and how you will bring that technology to market all within a few minutes of talking. For technologies that have the potential to solve big problems like clean water, food and energy, this is absolutely impossible.

Being the resourceful people they are, entrepreneurs have made one small change to the requirements of the pitch.  Instead of an honest understanding of why our solutions are better, we are now only required to provide a perceived understanding. That is to say, we are forced to give half-truths about what our technology really does in order to make it seem simple and obvious.

Lets look at one of my favorite examples. The Liquid Metal Battery Company recently raised $15M from Kohsla and Gates. They have done an amazing job operating in today’s fund raising environment by working off this principal. Their popular statement “If you want to make something dirt cheap, make it out of dirt” is a great example of this.

This statement embodies the idea of perceived understanding perfectly. When we hear this statement the feeling that we “get it” sucks us in. We can imagine a battery filled with dirt, and we can see why that would be cheaper then a battery filled with, er, well we probably don’t know what is in a battery, but we know it’s more expensive than dirt. We get a perceived feeling of understanding and that helps us move past the technology and onto the massive market that exists.

Unfortunately, the statement is a half-truth. Magnesium (Mg) and Antimony (Sb), the materials used in the liquid metal battery, are elements found in the earths upper crust (that’s the truth part). But neither are available in the form needed for the battery, antimony is not very prevalent compared to materials used in other batteries, and both materials are actually pretty expensive when it comes to purchasing them in pure form (that’s the part that makes it a half truth).

In reality Antimony is about 3000 times less prevalent in dirt than lithium used in Li-ion batteries and about 1000 times less prevalent than Vanadium used in Vanadium flow batteries.

Magnesium is incredibly prevalent in none-metal forms in dirt, but the battery needs metallic magnesium, which requires a tremendous effort to extract from ores.  This makes its actual cost significantly higher than other materials like aluminum and steel.

So in the end this captivating statement, like all elevator pitches, is quite empty. So why did LMBC do this? Are they being dishonest? NO! They did this because their audience: Investors, Judges, grantors, and the general public forced them too. We all collectively said, “If I can’t understand something in 2 min, than it must be worthless”. LMBC is just playing by those rules.

The danger here is that the elevator pitch is the first impression we get about a technology. The “buy-in” power of a good elevator pitch leads to sloppy technical diligence down the road. Real technical problems are overlooked because we have a false sense of security about a technology.

My company is only 6 months old, but I have already seen people latch on to our 2-minute elevator pitch and bring it up whenever they feel technically out of sorts. When we are talking with people openly about our technology they will often admit to not understanding the technical details of what we are doing, but then immediately without any prompting cover themselves by repeating statements from out pitch as if to re-apply the perception of understanding.

I have not found a good solution to this problem. However, when we look at how 80% of companies that receive funding fail, I can’t help but think it is part of the problem. Equity funded startups are, in the end, bringing a new technology to market using money they get through a relationship with their funding source. When all those relationships are predicated on the idea of perceived understanding and not honest understanding is it surprising that most of them fail?