I recently watched August, an indie film about the last month of an IPO’d startup during the bubble burst in 2001. The movie isn’t very good, but at the same time a humorous look at the first bubble for anyone in early-stage capital or the Internet industry.

The best scene is when Josh Hartnett, CEO of Landshark.com, pitches his business. In hilariously vague and dated terms he describes his business as “E. Pure E. Not ‘e-commerce.’ Not ‘e-business.’ Not ‘click-and-mortar,’ dear God, please not that … You want ‘E.’ Pure ‘E.’ Not old, not tired, not stepped on. Not a gram of ‘E’ and 10 grams of baby laxative. ‘E.”

Watch the entire scene here.

The viewer never gets a better explanation as to what Landshark.com does. As bad as this pitch is, it’s better than what we see from many entrepreneurs. Hartnett is vague, but at least he’s interesting.

Landshark, like many of the initial dot-coms, didn’t have a clear value proposition and it ultimately fails (spoiler). Entrepreneurs haven’t improved much in this department during bubble 2.0, the investors just lowered their expectations.

In addition to vague value proportions, many entrepreneurs are terrible at describing their companies. Hartnett is great at pitching to guys that are too worried about missing out on something to question him. The investors and customers have learned since ‘01, and entrepreneurs have to be able to describe what it is they do.

The first major field on the Angelsoft application is the One Line Pitch, and it’s probably the most important. When an investor browses deals they see the company name, if it has a video, and the one line pitch. This is the one-shot to get an investor to click-through and read the full application. It’s 150 characters, 10 more than a Tweet. Entrepreneurs get another 450 characters (3.2 tweets) to summarize their businesses for the investors that click-through. If they record a video, they have a lot more time to describe their business.

After looking at many deals, especially ones without video, I have no idea what the company does. The problem is one of the two described above. Either the company has no clear value proposition, or the entrepreneur isn’t doing a good job at explaining it. If you are an entrepreneur wondering why you aren’t hearing back from investors, one of these two factors may be the problem.

Jason D. Schwartz :: Oct.01.2008
Entrepreneur, Startup