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Pitch vs. Idea, Entrepreneurs vs. Investors: A Talk with MIT’s Linda Plano

April 1, 2014 • ANALYSIS

Linda Plano is the founder of Plano & Simple, which provides pitch and business coaching for entrepreneurs. Since 2005, she has coached nearly 600 entrepreneurs in Boston, across the US and internationally, in person and online. They have gone on to raise well over $250M. Prior to starting Plano & Simple, Linda was the Associate Director of the Massachusetts Technology Transfer Center (MTTC), where she coached entrepreneurs one-on-one, to present in front of small, influential groups and for large audiences. Linda helped launch the Ignite Clean Energy Business Competition in 2004 with other founding members of the Energy Special Interest Group at the MIT Enterprise Forum of Cambridge. The competition was merged in 2010 with the Cleantech Open, a nationwide competition and international showcase for early stage cleantech companies.

EMEAstartups.com had the chance to interview Linda Plano on the occasion of MIT Enterprise Forum Greece’s event “Build the Community“. It’s a four-day program running from April 3 through April 8 and includes workshops for technology entrepreneurs and investors combined with community and networking events. It’s designed to bring together the people who are working to build a local entrepreneurship cluster and to accelerate its growth.

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EMEAstartups.com: Linda, you have designed this workshop for the technology entrepreneurship community in Greece. What are its main elements and how will it help those participating?
Linda Plano: First, thank you for this opportunity to talk about the “Build the Community” program. I based its design on the work I have done over the years in helping to build the cleantech entrepreneurial ecosystem in Boston, as well as on programs in other fields that have proven to be the most useful to entrepreneurs and startup success. I am very excited to bring the program to Athens for the MIT Enterprise Forum of Greece because there are few things more rewarding than helping a nascent community to realize its potential.

“Build the Community” is comprised of four major programs plus many hours of one-on-one coaching for participating entrepreneurs.

– The “Perfect Pitch” workshop is a two day (3 & 4 April) intensive program for entrepreneurs who want to be ready to pitch their company to investors, customers and others. They will develop a compelling one-minute elevator pitch, assess important aspects of their business plan, and get practice pitching. They will also receive one-on-one coaching.
– The “Team Building” event on Thursday evening is intended both as an opportunity for entrepreneurs to practice their pitch in front of a real – but safe – audience. It is also an opportunity for them to add critical personnel to their company to help it grow and succeed and an opportunity for members of the community who wish to join a startup to find one to join.
– The “How to Pick a Startup” workshop is a one-day (7 April) intensive program for experienced investors who are new to investing in technology startups or who would like to add new tools to their evaluation process. They will leave with a practical guide to assess any startup in the absence of the normal indicators, like earnings.
– The “Investor Pitch Showcase” is the final event, being held on the evening of 8 April. We will be showcasing the top entrepreneurs with the best pitches from the “Perfect Pitch” workshop. Each will deliver a ten-minute investor pitch to the audience and receive expert feedback on it. Networking after the pitches is highly encouraged!

EMEAstartups.com: The goal of the workshop is to help accelerate the growth of the local entrepreneurship and innovation cluster. What steps should a developing ecosystem, such as Greece’s or CEEurope’s, follow in order to compete in a regional or global level?
Linda Plano: I have never seen a shortage of ideas or passion when it comes to growing an innovation cluster, from the entrepreneurs to the investors to the industry organizations to the government economic development offices: every person involved wants to build a vibrant, growing cluster.

The trick is to bring the leadership of cluster to consensus on how to build it. So much time and money is wasted on individuals each wanting to start their own program or entity. This approach increases competition for sponsors, volunteers, money and attention when all of these factors would be better spent on building a cohesive environment for growth. Encourage people to work together to build complementary programs rather than competitive ones.

Next, make sure there is enough money to catalyze the cluster and spend it wisely. Investors are rarely willing to invest in a startup before it has proven its technology and the potential for strong market demand. Small government or foundation grants – enough to establish a proof of concept – obtained via a simple application process can be instrumental in identifying viable (and non-viable) technologies quickly. And it is very cash-efficient compared to trying to pick a single winner of a big investment.

Finally, encourage responsible mentoring of first-time entrepreneurs: successful business people who are interested in and have the time to provide advice, insights and sometimes valuable referrals. Strong mentoring is well-established as a significant factor in startup success.

Of course, you can start all kinds of high profile competitions and accelerators, or support the building of incubators and co-working spaces. All of these can add to the success of a cluster – as long as they are complementary, not competitive.

EMEAstartups.com: You are coming from MIT, the most advanced technology and research institution worldwide. From your experience, what are the most common problems a researcher faces when they try to turn their breakthrough into a business and how do they solve them?
Linda Plano: MIT students-turned-entrepreneurs are fortunate: there is a very strong culture of entrepreneurship there, an established Venture Mentoring Service and all the resources any entrepreneur could want (including easier access to investment money than someone from a less famous school). Nonetheless, I have never met an entrepreneur from MIT that did not make some of the very same mistakes that every other academic entrepreneur makes.

First problem: They think that the invention is 90% of the work required for having a successful company.  R&D *is* a lot of work, but it is just 10% of the work needed to make the company successful. They need to appreciate that business may not require the same level of training for success as technology does, but it still requires creativity, intelligence, strategy and skill. Just because you are brilliant does not mean that you are a brilliant business person!

Second: They worry too much about protecting their “secret sauce”. No investor will sign a nondisclosure agreement on a first meeting and none will ask for a follow up if all you can say about your technology is that it is so easily stolen that you cannot say anything useful about it without that NDA. There is *always* a way to talk about your innovation that is safe: try talking about *what* your technology does to solve a problem rather than *how* it works.

I could go on, but I suspect that I am giving you too much material already – if you want more, just ask!

EMEAstartups.com: As a coach you have worked with around 600 entrepreneurs, having helped them raise over $250mn. What is most essential to get funded after all, your pitch or your idea/product?
Linda Plano: Bad ideas have gotten funded with a slick pitch (one company with a scientifically unlikely product has raised nearly $100M from investors with its beautiful website and fancy-sounding technology). Some good ideas have been missed because of a pitch so bad that no one understands them. I’d say the latter happens much more often than the former, but they are both extremes. Good ideas are the only ones worth the sacrifice and passion required to turn them into business successes. Good ideas are much more likely to get funded than bad ideas. They are certainly more likely to get follow-on rounds of funding. And they won’t ruin your reputation the way a bad idea will when it turns out to be a house of cards.

Do yourself a favor and develop the best pitch you can: you are competing for scarce resources against lots of other people with good ideas. Give yourself every advantage by being able to communicate clearly and well.

But first have a great idea.

EMEAstartups.com: On the other hand, during the workshop you’ll be instructuring investors as well. In most people’s minds, investors and VC’s are the “vultures” sort of speaking, but could they become the “victims” themselves at some times, getting tricked by entrepreneurs into investing in something with little value? What an angel investor should be looking for in a company before they invest?
Linda Plano: Certainly, when you’ve dedicated 5 years of your life to bringing your technology to the point where it could be the basis of a company, when VCs want half your company just for investing some money, they can seem like vultures. But that money can mean the difference between success and failure, and if you fail, they fail. So a good investor is really more like a spouse than a partner – your futures are tied together.

Can they be victims? Yes and no. Most entrepreneurs I know are absolutely passionate about their ideas and convinced that their company will change the world (or some part of it). They are not trying to build something of little value.  There really are much easier ways to make money by scamming people.

What is hard about startups is that the entrepreneur really believes that his idea will work, it just has to get tweaked a little bit more.  Investors can get just as invested in this trap – I know of a company in Massachusetts that has been collecting investment money for years from the investor, happily doing research and promising that the real thing is just around the corner.  The inventor may well believe it and the investor has sunk too much of his money and his reputation in it to back out now.

The only way to never get burned by investing in startups is to never invest (or to be mind-blowingly lucky – if you are, please give me a call; I want to plan a trip to Monaco with you).  Of course, that is true of virtually any investment class, but the stakes tend to be higher for startups.

I will be talking at length in the “How to Pick a Startup” workshop about what to look for before investing, but here are the top five:
– Has the entrepreneur identified a real need and validated that need by talking to potential customers?
– Does the entrepreneur have a “secret sauce” that provides an innovative solution to the need?
– Has the entrepreneur validated the technology, at least at the proof of concept level?
– Do you believe in the team? Can you work with them?
– Does the amount of time and money being requested fit with the plan and with your investment goals?

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ENTREPRENEURS, INVESTORS, LINDA PLANO, MIT ENTERPRISE FORUM, PITCHING
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