A picture may be worth a thousand words, but a pictogram is worth so much more.
According to Wikipedia (the world's largest free encyclopedia, solely created through end user content, www.Wikipedia.com ), Pictography is a form of writing whereby ideas are transmitted through drawing. One of the oldest forms of pictography is hieroglyphics. Contemporary versions include what is colloquially referred to in investment circles, as "the back of the napkin diagram".
According to Investopedia , the term back of the napkin diagram (or for the purpose of this article "BoND") refers to:
the (pictorial) representation of thebasic components of a business modelexcluding any fine details. The BoND incorporates only the core ideas and success factors of the business. The name comes from the notion that a quick outline of a business can be easily sketched on the back of a napkinto sufficiently demonstrate its fundamental concepts.
In the late 1990s, during the first Internet wave, dot.com entrepreneurs would often draw a BoND for the potential investor, as a method of illustrating the ecosystem, value proposition and revenue model of their venture.
Just like the elevator pitch (discussed extensively in an earlier column ), the BoND conveys more than what the business does or how it will make money. A strong BoND also illustrates management's passion, focus and most importantly its ability to clearly and concisely communicate the underpinnings of the venture.
But during the early years of the millennium, BoND diagrams became obsolete. This was the case primarily because, VCs and Angel investors were moving upstream and focusing on later stages of investment where traction spoke louder than BoND diagrams. Now with the second wave of the Internet (dare I say Web 2.0) underway, BoNDs are making a comeback.
The true value of the BoND
Rick Segal, a Partner at J.L. Albright Venture Partners , states that "Having a great diagram allows the Entrepreneur to have one 'cheat sheet' that let's her tell the story with a compelling visual." Segal's statement was proven at a SpeedDating for Capital™ event that I hosted last fall, at which 11 Companies, met with 10 VCs for 9 minutes each.
Those that had BoNDs in hand were able to employ accuracy and celerity when answering questions posed by the VCs, such as:
What they were doing? Why they were doing it? Who benefited from it? Who paid for it?
All questions you need to answer if you are pitching a VC for investment.
Rob Imrie, CEO of DemandCast , was at the SpeedDating for Capital(TM) event and was one of the entrepreneurs who pitched with a BoND firm in hand. He explains, "Our diagram helped us to focus the conversation and ensure that we were able to keep the attention of the potential investors. It also showed that we understood the big picture and were focused on end users and the value our technology platform brings to them." And Imrie should know. His venture later went on to be named "Best Seed Deal in Canada" at the 2006 Canadian Venture Forum. "Without a pictogram of our solution, everyone would easily see all the moving parts and value that our solution provides - at least not as readily."
But BoNDs are not just used to attract investors. A good BoND can also assist with employee recruitment, team alignment, sales and technology build outs. Segal comments, that "As the prospective client, employee, or VC engages, both parties can use the drawing as a central reference point. It's a very useful tool that is often overlooked in favour of mountains of text laden painful power point slides." In fact, BoNDs can be used throughout the business, according to the Grandfather of business visualizations, Dave Gray, Founder and CEO of Xplane (the business visualization company behind the powerful BoNDs you see in Business 2.0 magazine):
"Visual diagrams can serve as a powerful 'platform for conversations.' They help people focus their attention and understand new ideas better and faster. Better understanding leads to better decisions, which leads to better business results," said Gray.
Marketing guru, Peter Evans, Partner at Riverdale Partners , a consultancy that specializes in helping its B2B clients take complex technologies to the market, agrees with Gray's statement.
"Technology at the feature level just doesn't sell," says Evans. He elaborates, "That's why visualizations are so important. They can immediately help you connect with non-technical decision-makers - these are often the people who are major influencers in the purchase decision."
What makes a Good BoND?
The secret to developing coherent visualizations, according to Evans, lies in the ability to briefly and clearly articulate a number of concepts that provide a richer context for various audiences. Start by thinking about how your solution can be visualized in the following ways:
1. Show the Ecosystem: How does your solution fit together with other technologies and partners across the market landscape from an "interoperability" perspective? Can you draw all these relationships out to show how they work together to provide a seamless solution?
2. Functions and Benefits: Show how your solution works in a detailed way.But do not just focus on function. Take the opportunity to richly describe the benefits that you generate along the way for your end users and customers. Do not forget to show who is paying whom. After all, if exponential value is being delivered you should be able to show how such value can be readily monetized.
3. Before and After: Paint a vivid picture of the points of pain (the business' problems) that your customers experience today. In a separate diagram, consider showing how your solution resolves these issues.
How to build a BoND
In order to map out the steps required to create a powerful BoND, Here is the process that Gray recommends:
1. First, be sure you are solving the right problem. The most common reason people have difficulty solving a business or creative problem is because of the way the problem was defined. The best way to define a communication problem is to find the question you want to answer with the communication. Define communications goals as a question that the diagram will answer. For example:
"How does this software work?" "What business result can I expect?" "What's unique and different here?"
2. Don't worry about your drawing skills. If you know the subject, just draw what you know. People don't need pretty pictures; what they care about is your ideas. Stick figures, boxes and lines are good enough to get your point across.
3. Think about your story. Even before we had the written word, story was the way that humans made sense and meaning out of a complex world. Remember, the BoND's first job is to support a story, and help you have meaningful conversations on a subject you care about. If any part of the picture doesn't support your story, maybe it doesn't belong.
4. Minimize the number of elements. Research shows that people construct mental models in very predictable ways. When asked to diagram a system, the average person uses around six or seven visual elements to support their story. This is true whether they are diagramming something simple, like a toaster, or something complex, like the Houses of British parliament. So keep it simple: If you use much more than six or seven components in your picture, the average person will not be able to follow you, or fully grasp your ideas.
5. Edit ruthlessly, using your goal as a filter. As you create your diagram, use your "goal question" to determine what stays in and what goes. Ask yourself, "Is it helping answer the question at hand?" When in doubt, leave it out.
6. Once you have a visual diagram that you like, ask yourself, "Is it replicable?" The answer is yes if: You can draw it on a whiteboard and tell the story in 10 minutes or less; You can teach someone else to draw the picture and tell the story.
7. Once you have something you like, test it on everyone you can -- friends, family, your spouse, etc. Keep working on it and adjusting it till you feel comfortable with it. Realistically, your story is a living thing and will change somewhat every time you tell it.
8. Revise and update the BoND often - like a good relationship or a good wine, it will only improve over time.
When you are done, this is what it should look like (at least if you have professional pictograph illustrators behind you).
The Process not just the Picture
"A pictograph can be an invaluable aid in creating a quick, impactful and clear explanation of a company's service or product, and they often lead to a far greater retention of the details" says Paul Gilligan ( www.PaulGilligan.com ), one of Canada's most successful commercial illustrators and a local leader in developing BoNDs who worked with Imrie on DemandCast's BoND.
It is interesting to note, that while the end product is obviously the most valuable piece in the process, the process itself can be helpful. According to Gilligan, the process of creating a BoNd forces founders to communicate their ideas to people who may not be as well versed in their industry or space. "I've done quite a few (pictograms) for companies, especially startups, lately. Sometimes entrepreneurs are too close to the forest, to see the trees," quips Gilligan. He continues by saying, that "Working on a back of the napkin diagram forces them to step back and take in the entire landscape and that in and of itself can be tremendously valuable."
That is something that Tom Sweeney, General Partner of one of Canada's newest early stage funds, Garage Technology Ventures Canada , agrees with whole heartedly:
"The exercise of generating these powerful sketches is at least threefold: (1) it forces focus; (2) the product-market concept drives attention onto the value of the innovation; and (3) it allows for the company's story to be carried further, faster and easier by others who may know investors that might be interested in the company's space."
Sweeney's point harkens back to one of the powers of the Elevator Pitch, as it helps mitigate against broken telephone. After all, no matter who you pitch to, they are likely to share your pitch with others and a BoND like an Elevator Pitch raises the probability that the pitch passed along will remain consistent with the original concept.
The Bottom Line
If you are seeking capital today or just looking to nurture your venture organically, you need to be able to describe your venture to anyone and everyone you meet in a way that ensures the message' clarity is preserved. Dedicating time and energy when creating a pictograph or Back of the Napkin Diagram is most likely one of most profitable things any entrepreneur can do. After all, as previously mentioned, a picture may be worth a thousand words, but a back of the napkin diagram worth so much more.
Now's your chance. Send Wise Words your best BoND and the the top submissions will receive a complimentary copy of Blog Marketing, by Canadian online guru Jeremy Wright. Send our jpeg or pdf images to Sean Wise at WiseWords@WiseMentorCapital.com
Sean Wise, BA, LLB, MBA is the Managing Director of Wise Mentor Capital (www.WiseMentorCapital.com ), a national venture capital consultancy focusing on bridging the gap between entrepreneurs and capital.
Sean is a former Director with Ernst & Young's Venture Capital Advisory Group for Canada, and currently sits on the Boards of the Canadian Venture Forum, the Banff Venture Forum, the Toronto Venture Group and Silicon Valley's IBD Network.
Sean speaks at more than 20 Entrepreneurial Bootcamps and events across North America annually. His monthly column on www.theglobeandmail.com/smallbusiness covers a wide range of topics on entrepreneurship and venture capital as does his blog and podccast found at www.SeanWise.com.
Email questions or topics you wish to have covered to WiseWords@WiseMentorCapital.com