

The Downside of "Demo Day" - jordancooper
http://jordancooper.wordpress.com/2011/04/18/the-downside-of-demo-day/

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pg
This guy's idea of what happens at a Demo Day is so far removed from reality.
E.g.

 _investors walk around committing $100K checks to their “favorites.”_

All that happens is they exchange contact info. The investor will want to meet
(often multiple times) before writing the check, and the founders will
meanwhile check up on the investor.

This too is completely false:

 _with the acceptance of outside capital they are making a 3-5 year life
commitment_

Neither founders nor investors believe there is any commitment to keep working
on the startup any longer than the investors' money lasts. In fact, investors
have even lower expectations than that. I've seen several startups blow up
while they still had some investor money left, and they just returned what was
left and there were no hard feelings.

And as for this piece of advice

 _If I were running an accelerator I would be brutally honest and advise the
bottom 25-50% of their classes not to move forward with financing post-demo
day_

the problem is, we don't know that early who the big successes are going to
be. E.g. Greplin now looks like one of the top startups in their batch, but
after Demo Day they would probably have seemed in the bottom half. They were
down to one founder, and a new idea he'd come up with 2 days before DDay which
at that stage consisted of nothing more than mockups.

~~~
jordancooper
PG, it's not just YC that I'm talking about, it's lots of other
accelerators...but i do have multiple concrete datapoints from investors who
committed on the spot across accelerators post demoday...

re: 3-5 yr commitments: that's how long it takes to exit a company. As a
founder, I view the acceptance of outside capital as a commitment to return
their investment. emotionally, i think you are signing up for the long hall
when you accept investment

re: Greplin, i agree, perfect example of someone who actually didn't try to
raise a big seed round at demo day, but capitalized over time after demo day,
once he was more sure of what he was doing...i think that's the model to
follow, not just raise because it's demo day, right?

~~~
pg
Committing on the spot can happen, but it's the exception, and a small one.
I'd be surprised if it accounted for 5% of investments out of DDay. So it's
misleading to describe DDay as if that was how things worked.

It was not a tactical choice by Greplin not to raise a large round after DDay.
No one would give them one. But your advice for me was not to tell people only
to raise small amounts. I often do that. You said I should tell people to
quit, which would be a mistake, because I don't know yet which ones I should
be telling to quit.

~~~
robg
How often have you told groups to quit, even one year later?

~~~
pg
Dozens of times, I would guess, because dozens of startups we've funded have
given up, and usually they consult me first.

~~~
robg
Which is the first go: Money or motivation?

~~~
pg
Usually money. A startup can change what it's working on, so as long as
there's money left, they can simply restart if an idea seems hopeless.

When motivation goes first, it's usually because the founders had a falling
out.

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pauldisneyiv
I agree with the premise - not the content.

My recent co-founders and I applied for YC this summer. While we did not make
the initial cut, we did not move forward with applying to other incubators.
The reasoning:

\- YC provided experience not only from their own start-up success but also
from an incubator (though they're really not an incubator) standpoint. Major
reason to apply.

\- None of the others we found provided something truly special.

Incubators need to find ways to differentiate. If they want to entice the best
applications, it is important they offer something of interest outside of
office space, some cash and a widely attended demo day.

I'm ready for another program worth applying to, and I do not want it to look
anything like YC.

------
davidw
> I would be brutally honest and advise the bottom 25-50% of their classes not
> to move forward

Seems to be 'grading on a curve' where it's not necessarily applicable. You
could have a group where they're all great, and a group where they're all
mediocre. Also, you could have different sorts of companies: some that are
swinging for the fences and will either do something great, or fail, and
others that aim for more modest growth.

