The most important reason for having a good elevator pitch doesn't have anything to do with investors. Yes, having a concise, compelling elevator pitch can help get an investor's attention. Or get prospective team members excited about your company. And it's useful to have that well-rehearsed answer on the tip of your tongue when you get asked the "so what do you do?" question at the next cocktail party.

But none of those are the most important reason for having one. My experience in working with a lot of startups over the past three years at OTBC is that entrepreneurs who can't give a concise, compelling and clear answer to the question "what do you do" don't understand their business as well as they should.

A fuzzy elevator pitch reflects the fuzziness of the entrepreneur's thought process about the business. It usually means they don't have a clear idea of one or more of the central aspects of the business, like who the customer is, what the compelling unmet need is, how their solution is unique, or how they'll make money.

Some lack of clarity at the beginning is understandable. When you're in the "idea" stage, thoughts are still coalescing. But if you're ready to build a team and start designing a product or delivering a service, you really need to have an effective elevator pitch. Otherwise, you don't have a clear idea of what you're building and why. And with that kind of a start, you probably will not be happy with the results. So spend the time to develop a concise and compelling elevator pitch. And if you're having trouble doing it, ask yourself: what part of your business do you not understand well enough? In my next post: how to structure your elevator pitch in five steps.