
Reverse Demo Day: Angels Pitch Entrepreneurs - chrisyeh
http://chrisyeh.blogspot.com/2012/02/reverse-demo-day-thursday-february-23.html
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joshu
I'm an active angel investor and a lot of my incoming leads are from founders,
I guess I bring value, but I never really thought about how to explain how I'm
different (if at all) from anybody else.

I'm terrified of doing this.

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cperciva
Sounds like you should probably do it, just for the experience and opportunity
to improve your understanding of what these things are like for founders. :-)

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joshu
Not sure what you mean - I'm a two-time founder currently. Or do you mean
going through the YC-style demo day pitching?

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cperciva
I didn't mean you personally so much as angels and VCs in general. But sure,
given how much the funding environment is changing I can't imagine that it
would hurt to experience what it's currently like even if you've been through
it in the past.

Of course I'm speaking here as a founder who has never raised any funding, so
everything I say on the topic is deserving of multiple grains of salt.

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CoffeeDregs
The number of people with business ideas greatly exceeds the number of angels
with money to invest, so the notion of angels pitching to entrepreneurs _as an
event_ signals that angels have too much money.

This is not to say that angels don't pitch to entrepreneurs; they do, but they
do it after the entrepreneurs pitch to them (and a pitch can be a purely
reputational discussion/email (e.g. "if you want money, ask for advice")
rather than a session in the elevator, so let's not be constrained by silly
definitions).

To see that process run in reverse is insane and signals a serious problem in
the market.

Note: I'm an entrepreneur and am in this game with some success, so I'm not
speaking out of jealousy...

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geoffschmidt
On the other hand, the number of GOOD people with GOOD business ideas is
almost always far less than the available capital. Angels don't want into any
old deal; they all want into the best couple of deals. That is why YC Demo Day
is so well attended.

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irollboozers
This is a brilliant idea.

As a young, first-time entrepreneur still learning the ropes, it'd be
interesting to see just exactly how angels differentiate their 'value prop'.
Which is interesting, because as startup or founder, you're always looking for
unique ways for the 'right' investor to help you.

I'd be surprised if 90% of the investors didn't just pimp their successful
stories or portfolio exits. And the next logical step after that is just,
'well, we work really hard for you'.

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tferris
Though angels often seem to be nice people they are hard-bitten dealmakers
(while first-time entrepreneurs are not).

No serious angel would participate at such an event.

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bretpiatt
And you say this from what sort of experience? Investing is all about deal
flow and this is a chance to gain additional visibility. Visibility turns into
deals.

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dmk23
The fact of the matter is "the best" companies naturally have investors
competing to get a piece.

What defines "the best" and what creates true competition is quite fickle. The
private equity market, despite all recent changes, is still inherently
inefficient. So I'd venture to say there are several dynamics going on:

1) Social Proof: Many investors are just lazy and won't look beyond who is
introducing or vouching for the deal. Nothing wrong with that, it is a
legitimate defense mechanism, but this limits what they actually pay attention
to and creates frenzy around half-baked projects with "superstars" onboard.
Think Color.

2) Right Fad: This is closely related to the previous point. If an investor
has a theory that something "just like XYZ" is the next big thing, they might
be willing to overlook a LOT of legitimate red flags. This could create a
frenzy around a certain space or make them avoid another because "it is played
out", which is often wrong.

3) Their Knowledge: On one hand this is what they legitimately understand
about the space to make their own intelligent judgement of why there is an
opportunity. That is the type of investor with the most potential to bring
something useful if they can explain: "because I've done this and this, I can
contribute this". Flip side, experience often means pre-conceived notions,
with Exhibit #1 being YC's bias against solo founders.

4) Actual Metrics: If your numbers speak for themselves quite a few investors
would want in just on this basis. The flip side it might be too late. Another
flip side is investors might think a deal is overpriced or they cannot get
enough control, etc. Best companies though are able to execute regardless of
who invests or not invests. That's where you can have a legitimate competition
on who is allowed to invest, based on what they offer.

5) Hidden Gems: Investors can often get the best deals by being early enough
but that's where you have to find something new, that has a good chance of
success, bring something to the table and get a better deal. But this requires
to pay attention and do some actual work, so not everyone wants to do this vs.
try to co-invest in the latest syndicate someone else is putting together.

If you are an entrepreneur you want to maximize your outcome, but if you focus
all your time on jumping through the hoops of investors who do not actually
understand what you do or have much to contribute you are being distracted
from actual business. Note, I am not using the word "startup" here, because
every successful startup is a business. Ignoring this simple fact is what gets
people into trouble, leads to bad deals or puts them on the road to failure.

So yes, investors pitching to entrepreneurs could be a great idea but it works
only if both parties bring the right mindset to the table and can articulate
their value proposition.

PS: As entrepreneur you have to be extra careful with people who invest mainly
based on social proof / fads. Do not expect them to do much for you, though
their involvement might be a social proof for someone else who would make an
actual contribution.

