"Attendees looking to invest in new companies probably like DEMO because the presenters are convinced enough they have a great product that they'll come up with the funds to go there."
Or they are desperate enough to pay $20,000 for some attention from the tech blogs and one month of hype with the VCs. All those online networks with "over X many angels and VC's" prey on the same kind of startups. Pay to pitch some angel network.
"At TechCrunch50, investors can see a different sort of startup. One who has a lot of potential, but may not have had the drive/opportunity to gather any real money in the first place."
Empirically incorrect. A lot of them have raised quite a bit of money before TC50.
"From a purely investment risk perspective, companies that are already finding capital with a good idea and a good demo have more going for them than startups that merely have an idea and a good demo."
True. But if your first two premises are wrong, this one is moot.
Definitely appreciate the playing devil's advocate -- this is not a personal attack.