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There are several lessons that entrepreneurs can take away from the auto maker CEOs' performances on Capitol Hill today.  I can think of eight:

Lesson One: Love Your Product

Imagine for a moment that you're Dean Kamen, inventor of the Segway, and you're pitching investors on a "transportation product" that offers the benefit of moving people from one place to another.  Imagine that the distance between the manufacturing plant and the investor's office can be easily covered by the Segway.  Now, try to imagine Dean Kamen turning up on a Harley to pitch John Doerr on making an investment.

The media has been criticised for focusing on the use of Gulfstreams by auto executives.  But I don't know a single entrepreneur that would make the mistake of pitching a new presentation application using PowerPoint.  I think the decision by all three to drive themselves the five hundred miles to Washington is the first thing they've done right since they started pitching.   

Lesson Two: Don't Outshine Your Audience

Every successful sales guy understands the importance of the subtle communication of status and success (i.e. a nice watch, a sports jacket, matching teeth, a haircut) when it comes to closing a deal.  Numerous studies show that people respond favorably to folks able to communicate success in this way. 

But, as almost all sales guys (and most entrepreneurs) understand, there's a limit.  I'm not sure the act of pulling a Faberge egg out of your Zegna jacket and rolling it around on the table in front of a customer ever sends a good message.  I know some folks that recently invested in a company in which the CEO had consistently displayed ostentatious behavior, including the purchase of expensive jewellery. The end of that company should not have been a surprise - he was clearly passionate about something other than inventing, coding, or selling. 

Messaging "I'm successful" is one thing.  Messaging to people that you value the shallow trappings of an outwardly succesful life above spending time with your products (rather than in your Gulfstream), is something most beginning entrepreneurs understand. 

Lesson Three: Show You've Learned From Your Mistakes

VCs see a lot of "retreads" through their doors.  There is nothing intrinsicly wrong with an executive or a company trying again with a new business idea - almost every succesful entrepreneur has a dud or two in their closet (Traf-O-Data?).  The key to succeeding in being given a second chance is to demonstrate that you know what went wrong the first time, and know how to not lose money this time.

The auto manufacturers visiting Capitol Hill this week are, to borrow our incoming President's words, "tone-deaf" to this requirement. Not one has admitted what we all know - that a sharp decline in investment in innovation over the past two decades has resulted in a migration of value away from US-made cars by an entire generation of users. Not one of them today articulated a plan for why they will be succcessful marketing to the new generation's expectations.  

Lesson Four: Don't Change The Numbers Between Meetings

During their first meeting in November 2008, the car manufucturers asked for $25 billion.  Just two weeks later, "the ask" has gone up to $34mm.   

Even a rookie entrepreneur knows that consistency matters when it comes to pitching your business plan and estimating the cost of bringing your products to market.  You cannot attend a meeting with investors and pitch them $25mm one week, and go back two weeks later with a different number - unless encouraged to do so by people that like your plan, but think you're undercapitalized.  Neither of those qualifications applies here.

Lesson Five: Create Value

The members of Congress on the Banking committee asked the manufacturers to bring their business plans with them.  In their opening remarks, none of the exceutives made more than a passing reference to the amount of value that would be created by the infusion of capital. 

Imagine making this pitch to investors: I need your money so I can continue to pay my employees so the neightborhood stores won't suffer.  That sentiment was (in paraphrased form) the key bullet point expressed by two of the CEOs pitching for $34 billion today.  Would any professional investors that you know "bite down" on this request?  Of course not.  The health of the neighborhood that your business is based in is largely irrelavent to the decision to invest.

Few customers end up getting more value from a US car than from a foreign competitor (see Lesson Seven below) - and they are more likely in many cases to lose value over the lifetime of ownership.  Every entrepreneur knows that they need to come up with a business plan that continuously improves the value of their services in the eyes of their customers before they can hope to create value for their shareholders. 

Google and Oracle and Microsoft and Sun have built very successful businesses on this premise.  The car guys could too, if they'd just go back to basics and understand that shareholders are fundamentally looking for value - or at least a shot at achieving it.

Lesson Six: Innovation is Essential to Maintaining Market Share

If you were to ask most customers to name the three innovations the US auto industry has introduced over the past twenty five years, they would probably come down to XM, OnStar and in-seat video screens for the kids. But these are mostly expensive options - basic models of European cars come fitted with safety features, such as all-wheel disc brakes and navigation units as standard.

As the CEOs have admitted, and most rental car agency customers know, the US industry has been standing still relative to its foreign competition.  For this reason alone, congress should not invest.  You shoudl never invest in a company with a proven track record of not understanding that product cycles historically hit two low points - at the initial point of conception and innovation, and at the point at which those innovations no longer match the customer's needs.   

Lesson Seven: The Customer Interface Needs To Change With The Customer

Many of the committee members are old enough to remember when American cars ruled the world.  I certainly remember.  You can't imagine a movie star from the first half of the twentieth century *not* driving a US auto. 

However, these days, the visible trend-setters and soccer moms of Hollywood, New York, Seattle and Miami - and cities in between - don't drive US vehicles in nearly the numbers they used to.  They drive well-constructed Japanese hybrids with five year warranties or precision-engineered European sports cars, built by companies with fat balance sheets and terrific service plans. 

Although I'm sure these drivers appreciate the better fuel consumption rates referred to several dozen times today as key objectives of the carmaker business plans, when you compare the US "user interface for driving" with its competitors, you start to understand why the customer experience is a critical reason why users are migrating away from US cars to foreign competitors.

I'm not only talking about the experience of driving a car or smelling those expensive European-leather seats - I'm talking about entire lifetime experience of owning a US-made vehicle.  The consumer faces enormous pressure to *not* buy US-made vehicles.  Many foreign manufacturers create a consumer experience that is much more valuable to soccer moms than their US counterparts.  

Consider the superior warranty terms offered by some European and Asian manufacturers (five years and a 100,000 miles), the savings offered by fuel consumption rates that are almost half those of US competitive vehicles, and the experience the customer has at the end of their relationship with the vehicle, when they go to sell their vehicle into a diminishing market (take a look at Saturn resale prices and you'll understand what I'm talking about).

All of these things remove value from the products and services, relative to the competition.

Lesson Eight: You Can't Legislate Innovation

There are thirty or so *new* car companies currently receiving venture backing in the US that are building the cars we will all drive ten to twenty years from now. 

None of these guys are on Capitol Hill asking for money - because they obviously have viable business plans that address changing consumer and business needs through innovation. 

Should Congress decide it is in a lending mood, it might want to act in the interests of its shareholders and heed the remarks of George W Bush today, who said that a bailout would be "good money after bad".  They might want to consider creating a fund of billions for the true innovators in the industry, rather than "tone deaf" executives seeking to save failed, non-innovative businesses.