I’ve attended dozens of Demo Days at 9 different accelerators. But this past Friday was my most comfortable one ever. And I didn’t even have to show up.
Thirty years ago, every Wall Street firm sent out their own research individually to investors. Investors hated the pile of reports, and the firms hated maintaining all the mailing lists. Then came a startup named FirstCall, which bundled them all together, coordinated the release of materials and let the investors choose which reports they wanted to receive. While Merrill Lynch initially held out, fearing loss of its status as the best research house, it eventually opted in as investors overwhelmingly opted for convenience. Logic trumped ego.
Today’s Demo Day experience is like Wall Street research experience before FirstCall. In exactly the same way, every accelerator today asks investors to attend THEIR Demo Day — there is no common portal. The result is predictably suboptimal for us investors — we suffer through a bad signal-to-noise ratio — too many disparate companies, not enough vetting, insufficient depth of information, too much time wasted sitting through presentations of no interest, not to mention the logistical pain of trying to figure out which events to attend and how.
But this doesn’t mean the concept of Demo Day isn’t necessary and valuable. Demo Days are the best forcing function known to attract funding and buzz for the companies. It’s simply time to reimagine how these events are designed.
It sure feels like we have reached Peak Demo Day. YC’s semi-annual Demo Days stuff 100+ companies into 3 minute slots over 2 days. 500 Startups does Demo Days once a quarter, cranking out 40+ companies at a crack. Techstars will hold Demo Days in 18 cities in 2017, each featuring around dozen companies…with several occuring on the same day. MassChallenge has 128 companies, but only features 26 at its annual event. And there are — literally — hundreds of more accelerators out there, not just in the US but across the globe. Good luck in having a good strategy to cover those of potential interest. It’s like trying to take in all the events live at the Olympics — it can’t be done in person, and if you try to attend too many, it’s a miserable experience. Pity the poor companies who attend an accelerator outside of a major VC money hub. But this all changes with online video.
It’s time to reimagine the whole experience. Here’s how I hope we do it from now on. Nivi and Naval, I’m sure you’re way ahead of me, but time for AngelList to do for Demo Days what FirstCall did for research reports.
What does my ideal Demo Day look like? It can be attended live or virtually, with a crowd of investors present or just in private, on schedule or on demand. Most importantly, it’s not restricted to just one accelerator or geography. And it’s all centralized, down to using standardized legal docs with payments handled through AngelList with securities registered through eShares.
- Pre-Demo Day
Here’s how I see it working. Each participating accelerator registers the companies that will demo with AngelList. AngelList can then commingle and present any or all of the companies demoing all over the world within some time span — say, same day with availability for investor viewing for 2 more days. To participate, companies must put up an AL profile. Interested investors must be pre-approved on AngelList. This legally will allow for more frank discussion, including broadcasting of terms desired. Investors also will have their profiles listed, enabling companies to vet who sees them. The investors’ venture holdings are sortable alphabetically, by sector, by date and, (at the discretion of the investor,) by size. Companies, if they wish, can specify level of access of information available to investors on either a global or an investor level basis.
Since an investor can now conceivably take in hundreds of companies, all over the globe, investors screen or reduce the number of companies they want to view based on accelerator (“only AngelPad or Harvard iLab”), geography (“Israel”), sector (“fintech”), tag (#drone) etc. with Bayesian and/or logic. Perhaps other filters spring up, like “most watched” or “Mattermark score above xyz”.
Every company that demos needs to submit a 1 line blurb and a 1 minute elevator pitch video to help familiarize the investors in advance. Here’s an example of the former from 500 Startups’ Batch 18, with a big button to connect companies with investors.
Below is a video version used by Techstars with sub-1 minute clips that does the same thing. Personally, I think both are necessary.
In my ideal version, the companies also have all of their standard information available in advance on their AngelList profile. I’d recommend that in addition to standard links to websites, decks, press articles, etc., companies looking to have potential investors effectively screen themselves post several 5 minute videos to enable slightly deeper dives. That hopefully will allow them to avoid going over the same old stuff with each potential investor once they get introduced via a video conference call stage. What topics should get covered in the videos? — All of the standard questions they receive that don’t fit into the tight format of a physical Demo Day pitch. For instance, there should be video snippets introducing key team members, discussion of the tech involved, the roadmap ahead, financing needs, benchmarks to be reached, etc.
No reason to reinvent the wheel for this. I suggest using some standard video interviewing software like that offered by Take The Interview. Such software allows companies to record on their own time schedule and permits multiple retakes. Serious and diligent investors will definitely check this out — and records of the identity and viewing stats of those investors that watch the videos will be sent back to the companies. Subsequent investor followup questions and the company responses should be shared (at company’s discretion) in a format like the question section below from Amazon:
Equally useful are more free-flowing interviews, just to hear the team talk.
Here is an example of 5 minute videos that a Bostinno journalist did with the last Techstars Boston class.
(Hint for journalists and videographers — I’d pay good money to subscribe to see such profiles of the grads from top accelerators in advance of Demo Day.)
The more info available to investors, the better. In fact, I pulled the trigger on one of my first AngelList investments, UpNext, because I found links to this terrific hourlong interview of the CEO Danny Moon by Rob Woodbridge of Untether.tv, who asked much better questions than I would have. To make it friendly, I’d suggest having one of the accelerator’s partners longform interview the companies. More information => less reluctance to write a check.
2) Demo Day Itself
Face it — many investors go to Demo Days for the fun, the celebration and the schmoozing. But as for me, please spare me the speeches by the mayor, the keynote speech by a star alum, the silly videos…I just want to see the teams I am interested in. What’s the best of all worlds? The accelerator offers their physical Demo Day as usual, but supplements it with a live stream video, and for us lazy ones who want to cut to the chase, an archived, searchable video we can watch at our own time and pace. For example, here’s the feed from that MIT Demo Day I watched with my feet up. Definitely some investable companies sprinkled with others less ready but good to monitor. I caught what I wanted but was still able to multi-task.
The accelerator whose Demo Day comes closest to my ideal is StartX. Investors are given a time slot of a few hours during which you view the pitches. If or when you know you have no interest in a pitch, you just skip past that one to the next one teed up. Once a pitch is viewed, you immediately need to indicate your interest in one of 3 levels: “none”, “yes, let’s talk”, or “I’m serious and considering investing”, with the company receiving that information. What does this mean? I now can take a Demo Day in multiple cities at the same sitting, with calendars pre-set up to help schedule a video call follow-up. It’s efficient for both sides, although I’m hoping as they refine the model they include more info as per above, allowing any follow-up videoconferences to be more efficient and informed.
Just like TED talks can be accessed anywhere in the world, a virtual Demo Day framework allows startups can reach investors without concern for geography. Investors get to see companies where there is equal tech and lower valuations, and companies find more investors who use fair and decent legal docs.
3) Post Demo Day
With the indications of interest tallied, the companies can then review the interest received, check out the potential investors, decide who they want to meet with, and schedule the followup. Most of the larger or more prestigious accelerators have some automated way to do this. Where AngelList can up the game is by creating statistics on the investors for the companies, spread across many reference points. Did Investor A schedule dozens of meetings, but not invest? He gets a low score. Investor B wrote 3 checks out of 5 meetings? She gets a high score. And this can be supplemented with simple grades given after the fact by the companies about their interactions with their investors. After a year, the companies can be quizzed by AngelList again: did that investor add value besides money? Were they a pain? Did they make valuable intros? Were they high maintenance? Good investors will love to be graded, and the companies need a way to find out who is who, especially when we start breaking down geographical boundaries to expand liquidity. While reputation is mostly anecdotal and regional now, meaningful profiles can be created that will reward the good guys and alert companies to the shady types.
If a lead investor and terms are set, that information is easily shared. If the valuation and lead investor roles are still open, the portal’s UI can let potential investors indicate their desired size at a set valuation, plus any minimum allocation they require. If there are other conditions to the bid (e.g., “will only invest if company raises a minimum of $x”), that can be noted and collected for the company to figure out allocations. N.B.:while it would be easy to pass back information to the investors on how over/under-subscribed a deal is, please don’t — doing so simply encourages gaming of the hot deals, and strengthens the lemming effect which doesn’t do anyone any good. Good investors make independent decisions.
When commitments are made, the successful investors will be able to archive the all information for their due diligence. Otherwise let the companies edit any other information on their AL profile as they can now. All of the Demo Day pitches, however, should stay up on the system for reference and publication. Want to watch those MIT students pitch with your feet up and a beer in your hand like me? Here you go. Now imagine if you could watch any Demo Day, from any accelerator, from any year, on demand without hunting them down at 100 different sites!
For closing the round and beyond, payment and investor communication should take place in the same way as AngelList syndicates work now (it’s SO smooth.) Make it dead simple with a bulk rate for eShares to be linked in. I’m very happy to pay AngelList or any other organizer a fair rate for doing all this centralizing work — let’s make this sustaining and profitable for everyone. Lastly, since no investor I know of (other than ff Ventures, who deserve kudos) makes accounting services available to startups, hopefully AL can line up a startup accounting firm who will provide standardized, inexpensive accounting services to make life easier for the startup and provide dependable, pushable financials to investors.
Does this all go online, all at once? Of course not. Just as AngelList started out as a highly curated list before becoming more inclusive, the portal could begin with some arbitrary cut-off of accelerators as ranked by some third party. This “Top Ten” list from Forbes, plus YC, makes a good starting point. But the intention is broader — let the investors set the ultimate breadth of their desired scope.
It’s known that there’s a ton of money from sovereign wealth funds and other big institutional investors looking to programatically get invested startups. My guess is that rather than piling into bigger and more bloated VC funds, this flood of money instead goes to work via syndicates, following the lead of CSC Upshot Fund. Enthusiastic, well-known super-angels or microVCs may become preferred to the larger VC firms, for the very same reasons many great VCs like Foundry Group and USV keep fund sizes small — the economics just work better when you’re not having to invest huge single funds. For the ecosystem to work best, you need to a) connect the right lead investor paired with the right company, and b)find more efficient ways for investors to cast a wider net for the right deals. Solution — a single, centralized global portal to review deals.
Done right, everyone wins: companies, investors, the accelerators themselves, and the community. If students can access one Common App to connect with dozens of colleges, why can’t investors do the same with dozen of accelerator Demo Days?
Nivi and Naval, please make this happen!
(Note, this originally appeared in September 2016 in Medium.