The Demo that Really Matters

Posted on August 11, 2008
Filed Under BS-Free Advice |

Last week, TechCrunch reposted an email that Jason Calacanis sent to his email list. It provides a number of tips to entrepreneurs who will need to demo their startup’s product. Calacanis wrote:

These tips are applicable to presenting in front of an investor, a partner as well as a demo style conference.

TechCrunch’s Michael Arrington prefaced his repost of the email with:

If you are pitching a company to the press, a conference, a potential employee or an investor, bookmark this. You’ll be glad you did.

Calacanis’ email provides common sense tips that anybody engaged in a presentation or public speaking would/should know. Of course, common sense isn’t so common and therefore Calacanis’ email probably contained information valuable to many recipients.

But the problem with Calacanis (and Arrington) is that because of their Silicon Valley perspective, they have a warped view, in my opinion, about the demo (and pitch) that really matters - the one to you make to your prospective users and prospective customers.

Over the years, I’ve become a strong believer in the notion that for most entrepreneurs, if you can’t build a product, launch it as a business and start working to grow that business on your own, you probably shouldn’t start a company in the first place.

This belief is borne of the fact that the Silicon Valley Model (as I like to call it), typically embodies the following process:

1. Build a functional prototype or alpha/beta version of your product.
2. Raise money.
3. Launch.
4. Execute your plan to grow your new business.

Ask yourself this: how many entrepreneurs flock to Sand Hill Road every year much as wannabe actors and actresses flock to Los Angeles? How many of these entrepreneurs are actually successful in raising investment?

The numbers I’ve heard bandied about indicate that VC firms usually fund around 2-3% of the companies that pitch them. That obviously means that for every 100 startups, only a few get funded.

As such, of the entrepreneurs that choose to proceed using the Silicon Valley Model, only a handful will ever likely get beyond the artificial “gatekeeps” they’ve created in VCs so that they have the opportunity to “sell” their creation to the rest of the world (read: prospective customers).

Is this improving probabilities for the entrepreneur? Of course not.

As Henry David Thoreau said:

The man who goes alone can start today; but he who travels with another must wait till that other is ready.

This applies to entrepreneurs who are reliant on outside investment and who are forced to focus on “pitching” VCs before they can even “pitch” prospective customers.

When looked at from this perspective, Calacanis’ advice, no matter how accurate and potentially valuable, is still misguided in my opinion because it encourages entrepreneurs to focus on people who really should matter the least.

As I see it, the entrepreneur who focuses first and foremost on performing demos for people who probably aren’t going to use his product in the first place (potential investors, members of the press, bloggers, techies, etc.) is liable to lose focus of the people who really do matter - prospective customers. And liable to waste valuable time doing so.

This, of course, is not to say that potential investors, members of the press, bloggers, techies and the rest of the usual suspects may not be important to entrepreneurs, but when starting a new business, they’re usually not the people who count.

After all, none of these people can do much for a new business if that business is incapable of turning prospective customers into customers. In other words, putting potential investors, members of the press, bloggers and techies before prospective customers is akin to putting the cart before the horse.

As such, I believe entrepreneurs are far better off when they are capable of getting a real business off of the ground themselves - one in which they can focus entirely on demo’ing and “pitching” to prospective customers.

Those are the people on which successful businesses are built and this process assists entrepreneurs in validating the viability of their concepts and determining what it takes to “close” a “sale.”

You can wow the pants off of investors, members of the press, bloggers and techies, but to most of them, you’re just the latest in a long line of entrepreneurs trying to wow their pants off. And you certainly won’t be the last. After all, the next entrepreneur is on stage in 5 minutes.

So my advice: read Calacanis’ advice. But then ask yourself - do I prefer to “pitch” investors, members of the press, bloggers and techies or do I prefer to “pitch” my prospective customers?

At the end of the day, all business comes down to “sales” in some form or another and who you focus on selling to makes all the difference.

As sales professional Jim Logan observes, “selling to the wrong person is probably the greatest sales mistake made by new and seasoned sales professionals.”

I think entrepreneurs make a huge mistake when their approach has them on stage at Demo or TechCrunch50 instead of “on the road” or “on the phones” talking to prospective customers.

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One Response to “The Demo that Really Matters”

  1. antje wilsch on August 11th, 2008 11:01 pm

    depends on the VC firm of course (some are easier to get in and see and pitch than others who are more picky) - less than 1% of all companies who seek funding ever get any (i’ve heard this wayyyyyy too many times to not be able to quote this)

    Not relevant to this article, but of that 1%, only like 5% are women too :(

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