Village Capital is ditching Demo Days
techcrunch.com
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I consider it one of the biggest waste of my time ever!
I'm hoping the program has grown more and I know Ross works hard and I congratulate him on keeping the program going. If you're an international company, perhaps their programs outside of US are more valuable since there are no other options for you. But if you're US based, I would do my homework before joining them.
Why? 1 - the program was so disorganized. We were forced to follow this automated Powerpoint slide progression. If you needed it more time on one of your slides you copied the slide twice, to give yourself double the time. So basically we spent 3 months optimizing our pitches around this auto powerpoint process.
2 - we were used to build credibility for Village Capital. They would shuttle us around to their potential LPs to show it was a viable program. That's not bad in itself, however, it felt like we were providing more value to Village Capital, than Village Capital to us.
3 - Very founder-unfriendly terms. As I said we were one of the two top finishers. However, their financing term (which we only learned the details pass the half-way into the program) was nothing short of usury. We were forced to do a down round (by 4x) OR do the revenue share financing, where we would pay back 3X the money they loaned us.
I decided not to write about our experience, but given the reach of HN, I decided for the first time to publicly speak about it to warn other founders who might be interested in their program.
Your question made me search my email to see if I missed something. I had't it just mentioned the amount and no details.
Other reason was, in their interview they did a great job selling us on how they have a network of investors as well as the largest hospital system in the world (partnering with them) where it will give us access to so much more than just their capital.
At the halfway point, we had a Webex call when their finance person took us through their financial terms. We still thought we were okay, since they indicated they would follow up on our existing seed terms. Well, they renegade that when the time came! Telling us, this would be a new term since our old term closed a while back.
Afterwards, I remember arguing with them when it came to their term sheet and using YC as the benchmark. It didn't persuade them.
So, the learning lesson for young founders who read this. Do your due diligence for the lessor known accelerators. Not just on financial terms. But overall benefits of the program.
It became very political. Basically we had 4 major sessions each 3-4 days alternating between Salt Lake City and Houston. At the conclusion of each session, we would rank each company on a set of criteria. The total score would rank each company. However, the last ranking would determine the final winners.
We finished #1 after the first session. However, I soon realized giving feedback (even privately) became rather contentious. People could easily mistake a genuine feedback for a political move to downgrade a company for scoring reasons. As a result, the value of cohort feedback diminished a lot.
The mock board meeting, was probably one of the more valuable things in the program. But the problem was the time with the mock board members was short, these "board" members had very little context about the company (so not very realistic). As a result, you had to spend most of the "board meeting" time educating them about your business before getting into the actual practice of a board meeting.
If you're in a remote location or city, with very little resources, then the program might be somewhat valuable. But if you live in any big cities, especially silicon valley. Then there is no value to it.
YC puts A LOT OF EFFORT to build the community in the right way.
Seems like the author might be learning a lesson based on Village Capital's apparently unsuccessful demo days and applying it to all demo days. As someone who's gone through YC's demo day and who's attended it a few times since, I can tell you that startups meet a lot of great investors there. That some demo days add no value to either startups or investors is not in doubt. That doesn't mean the structure of a demo day makes no sense.
One thing YC recently did to address some of the concerns he has is introduce "Investor Day" immediately after their demo day. Will be interesting to see how that experiment plays out. https://blog.ycombinator.com/investor-day/
All that said, his points about pitch day formats exacerbating existing biases is quite interesting. Would love to see more data on that.
Notably, the article doesn't call for others to abandon Demo Days. They're just giving a case study on their logic and their startups.
But the writer has some good points, including demo days favor men more than women, as well as extroverts:
For entrepreneurs who don’t pitch well — or who don’t fit investors’ mental image of a successful entrepreneur — Demo Days may hurt more than they help. The preparation teaches entrepreneurs to focus on transactions more than relationships (when, in reality, an in-depth conversation after the pitch matters a lot more than the pitch itself).
The Demo Day format is not ideal for investors, either. If you’re picking who pitches best, not who runs the best business, you’re not getting the best results.
What I have seen happening at accelerators, universities, and startup events in the Boston area is this intense focus on pitching. It's all about showing off the team, presenting a problem, sharing market or usage stats, prepping a slick video, and getting the deck just right. This approach emphasizes superficial qualities over the product or service being built. Product demos are almost an afterthought, and information about build progress or actual discussions with customers are turned into a couple of bullets on slides 4 and 5.
So yeah, by all means, ditch the demo days. But don't assume that focusing on "building relationships" will solve the problems of investors favoring certain types of people, or glossing over product and customer discussions. Extroverted founders and talented salespeople can project empathy, ask the right questions, and send other signals that are more likely to suggest a "good relationship" to investors. These qualities/skills will not determine who runs the best business.
Any interview/test/discussion without overwhelming objectivity will be subjective by nature and therefore subject to emotional bias.
I've definitely seen smooth talkers with great resumes get through any other filter, but I've never seen a false positive with the technical interview.
I've seen way more than a few false positives from tech interviews, along with tremendous amounts of false negatives: People with backgrounds of being transformative to teams and organizations that just couldn't look good enough while solving random algorithm problems to save their lives.
It's just hard to see the kinds of things a company misses when they keep insisting in asking people about graph algorithms and implementing red black trees, because those same companies just never get to see the kind of people that you get when you do things differently.
I currently work for a company that does relatively traditional tech interviews and does 95% of sourcing from big schools and ver well known tech companies. I fail to see a major difference between my coworkers here vs my coworkers at places where your average dev went to a midwest state school and was never asked an algorithm question during interview.
I guess you could counter that you need to have a 10x longer technical interview that covers all these aspects, but a long interview process is going to filter out all the candidates who are good enough not to have to put up with one.
I am not sure why you think women and people of color are extra bad at whiteboard problems. In my experience the applicant pool for technical and engineering fields is heavily biased towards white, asian and Indian males, but that happens way before the stage of the whiteboard interview.
How does this prepare founders for the eventuality of needing to sell their protect in a similar way that they are pitching their demo?
Unfortunately, start-ups don't function like normal businesses. If they can't get their name out there sufficiently, they'll die before the market takes its sweet time "figuring it out."
Demo-day results are suggestive, just like SAT scores. It's a measure of the founder's ability to sell (which is arguably the most important task for a CEO).
It doesn't matter if it's a great product. Amazing products have been created and destroyed when the founders couldn't market it to an audience.
Much like your inclusion of this typo, maybe it's the criteria for the "eventuality" that is problematic. Does the VC industry have a means by which to take imperfect people seriously? Before they're a CEO with $10B in funding, that is.
To me, demo days feel like they are mostly PR events for the accelerator. It is a very easy way for an accelerator to get people to notice it, since it is one of the few events an accelerator is usually hosting, where they have significant presence and they can attract a lot of reports with the startups. Apart from that, it is very hard, especially for smaller accelerators, to even be mentioned in an article of one of the startups they funded.
Did they ever have demo days in the first place ?
At the end of each program, the entrepreneurs assess each other in an open and transparent process. The two highest-ranked ventures receive seed capital from VilCap Investments and co-investors. In 2013, this peer-selected investment model won the Harvard Business Review/McKinsey M-Prize for innovation.
Is a survivor-style fundraising mechanism better than a demo day in front of investors, who are probably well experienced to look beyond stagefright?
Being able to defend any given perspective quickly and easily is just a learned skill. People who took years of debate have a massive advantage.
Do investors who target women and unattractive men have less competition for the same product?
Or does the effect last through all rounds of funding, customers, going public and so on? In that case the investor would be rational to mimic the preferences of the market.
I suspect it lasts through a few rounds of funding but at the point the company is large and can afford PR, and so on, it no longer matters.
This might mean that the smart investor should target the ignored company if the investor has enough money to get them to the point that they are self-sustaining.
https://en.wikipedia.org/wiki/Keynesian_beauty_contest
(What I'm saying here is that if an investor believes other investors won't fund the founders, even for stupid reasons, they should pass too.)
Not to say that showing a proof of concept should be ditched entirely, but making a marketing pitch is not always the same as having a good idea.
From politics to selecting an air conditioning contractor and beyond, presentation and engagement matter a lot. It's not that people are stupid or superficial, these things (and others) create impressions and confidence. And, in some cases, they are crucial to the success of the venture.
When I first launched into the world as an entrepreneur, decades ago, I was too much of an engineer. One key element that was missing is I sucked at selling. You can engineer an amazing product but, contrary to the popular saying, people won't beat a path to your door unless you are good at selling it. The history of business is paved with the carcasses of great products that never got off the ground because the people involved couldn't sell them.
In my case I recognized this from the very start and actively sought help in the area where I was most deficient. The first few months after we started to sell our hardware product were terrible. I'd mess-up presentation after presentation. Yet, with constant coaching I eventually figured it out. Within about eight months or so I was so comfortable selling that I could actually sell a product without saying a single word about it during a demo.
These presentations to potential investors have a far greater purpose than simple product demos. They serve to communicate to the audience a range of information about the entrepreneur. Important data points. One of them being whether or not the person can actually sell what they are making. If you can't sell and are going to hire someone to do so, you might be better off having them do the presentation. Folks who understand selling can sell anything, including a startup looking for funding.
To paraphrase an observation made decades ago by Smokey Yunick, a famed race car designer:
"When all the smoke and bullshit clears out you have to sell the damn thing".
If the founder is indeed going to be in a position of standing up to a group of potential customers and selling something to them, whether it's a car or an expensive software package, then I can see the importance of such a presentation.
If, however, the sales takes place in a store, on a website, or in a catalog, then a different set of skills are needed--developing sales funnels, setting up distribution partnerships, converting online visitors, and writing stellar marketing copy. Yet I have never seen a demo day or investor pitch session that focuses on those skills, even though they will have a huge impact on the success or failure of many types of ventures.
If you can't sell and are going to hire someone to do so, you might be better off having them do the presentation.
That makes sense. Serious question, though: but do demo day organizers encourage it? How would investors or audiences react?
Folks who understand selling can sell anything, including a startup looking for funding.
I know this is true, yet I find this disappointing. It means that great salespeople can sell a turkey, which not only hurts investors but takes money away from more capable enterprises.
I understand what you are saying. Still, selling hasn't really changed in a long, long time. People were doing what you listed back in the days of mail order catalog selling. The technologies are different today but a lot of the same skills apply.
Selling isn't about technologies, it's about people. Of course, anyone can spend thousands of dollars a day on AdWords, blast a product out and generate tons of traffic. That doesn't sell. Generating good copy that sells and excellent landing pages and maybe even videos requires understanding how and why people buy. If someone can't sell themselves in an in-person demo they are not going to do well in any other medium. Are there corner cases? Of course. Yet, they would be better if they could sell in person. Writing copy or making a great video don't happen in isolation of an understanding of interpersonal dynamics.
Why doesn't Coca Cola just say "Our product tastes better and it's $1.23 per bottle. Buy it"? Instead they create these elaborate commercials with cute computer generated bears or groups of people dancing, etc. They understand they need to sell on emotion, not logic.
Most products, even something as dry as penetration testing software, have an emotional element. In some cases it might be more overt than in others, still, it's there. In the case of penetration testing software you need to convey strength, confidence and experience in order to generate one of the most powerful emotions: Trust.