A recent episode of the wonderful NPR program “This American Life” featured a segment about investing in new ideas (Episode # 412: Million Dollar Idea). In this segment, the focus was on putting together an elevator pitch that would attract the attention of venture capitalists. One venture capitalist also shared his insights as to what he looks for when deciding whether to learn more about an idea by soliciting a business plan or seeking to meet with the team. Much of what he says is fairly standard stuff:
· Speak in a straightforward manner so that you can communicate the merits of your idea to anyone. Do not expect that the listener will be an expert in your field.
· Engage the listener from the start.
· Explain how you and your team are qualified to accomplish what you are setting out to do.
But there is one thing he says that surprised me. His final criterion for deciding whether to invest in an idea is whether it “matters.” Will this business make a difference? If it focuses on a problem that the listener thinks really needs attention, that’s almost a sure bet that the venture capitalist will want to learn more.
Personally, I was impressed to hear that the decision to invest was not purely driven by financial considerations. But here’s the catch. A business that makes a difference and also has the potential to make lots of money is extremely rare. The example mentioned on the program is a business that plans to manufacture concrete that is stronger – so that builders can use less – and also significantly reduces the pollution that comes with the concrete production process. Wow. This team is talking about increasing product quality while lowering customer costs, and also having a very significant positive impact on the environment. If that’s the bar by which ideas that make a difference are judged, then it might be easier to find a needle in a haystack.
But there is still hope. Although venture capitalists are looking for ideas that can become very big very fast, there are other investors that have more reasonable aspirations. The key is to show that your idea makes a difference to the potential investor. If the investor is connected with his/her local community, an idea that improves the outcomes of community residents would be a wonderful way to attract the investor’s attention.
The point is that business should be about more than just making money. Obviously, that’s an important goal as the business cannot survive for long if it is not profitable. But an equally important part of the business is whether it satisfies the founder’s goals. As we know, financial (extrinsic) rewards only offer a limited amount of satisfaction. Once people’s basic needs are met (i.e., food, clothing, shelter, etc.), intrinsic rewards become much more important. One of the best rewards as an entrepreneur is to be running a business where you are making a difference in the world. Best of luck to all of you in achieving your dreams while trying to make a difference.
Dr. Atul Teckchandani
CSUF Entrepreneurship Professor