Demo Day

Posted on February 13, 2007. Filed under: Uncategorized |

Ok so yesterday I went through what was possibly the most terrifying experience of my life so far – Y Combinator demo day. Demo day is when each of the Y Combinator groups does a ten minute presentation to all the other groups demo’ing what they have done so far (5 weeks into the programme). That might not sound like a big deal – it’s only the other groups (and the YC partners) that you’re presenting to – and indeed I had generally been relaxed and not worrying about it much. That was until this weekend when the fear suddenly hit me and I realised – this was DEMO day and NOT presentation. Presentations Kul and I can do – we’ve made so many presentations and pitches to investors that I’ve lost count. We have it all nailed down, practiced and presented – from the opening “this is the problem we’re solving” to the “here’s how we plan on going after the market”. You’d think that presenting to VC’s and angel investors would be far more nerve wracking than to a group of hackers right? Wrong. Very wrong.

Demo day pretty much sums up the difference in attitudes to tech startups out here in the Valley and anywhere else. Out here people aren’t interested in your Powerpoint slides and the typical “The market we’re in is an X billion dollar/pound industry so we only need to take 1% of it to be worth a lot” lines. They want to see what you have done – they don’t want you to explain what you’re doing, they want you to show them. In all our time running boso in London (granted it wasn’t very long, 6 months full time for me and 10 months for Kul) not once were we asked to demo what we were doing. Sure we had plenty of longwinded conversations about our idea and what we wanted to do but not once did someone say “whip out a laptop, connect to the wifi and show me what you’re all about”. Believe me if people had that attitude we would have paid 100 times more attention to every single nook and cranny of our site.

To put it quite simply, when you demo your product there is no scope for bullshit. Either you have a product that works well and is impressive or you have a piece of crap that breaks every two seconds and it’s obvious no one would ever use it. There is no scope for fudging around the edges and making excuses – for those ten minutes you’re presenting the audience is not interested in how hard the fight to raise angel money has been or how you can’t find the right people to join your team. There is only one thing they are judging you on and that’s the projection on the wall that’s hooked up to the laptop from which you’re running your site. That’s a scary thing – peer pressure is a powerful thing and I was amazed at just how much I wanted to impress these people, who are all the same age as me and at the same stage in start-up life.

Well it all ended well, the demo went ok and we were voted as one of the top three most promising companies in the current YC batch (by the YC partners and fellow YC founders) which was quite nice. But it’s got me thinking a lot about the power of actually sitting down and taking someone through what you have built. The three hours before we had to leave for Mountain View (where the YC offices are based) were by far and away our most productive hours since being out here. We’ve been working hard but when you have the pressure of a demo it forces you to raise your intensity up a notch that you didn’t know existed. Kul and I spoke about this on the way back – if we had the mentality that we had to demo at the end of every day life would be a lot more stressful but it would also make us raise our game a whole new level. Maybe every day is too excessive but at the very least – I think getting into the habit of actually demo’ing things when you meet someone important i.e. someone you really want to impress is a powerful one. It also makes the meeting more productive, as the saying goes a picture paints a thousand words and that can be applied across here. A five minute demo gives a much clearer understanding of what you’re all about than half an hour of revenue projection and market research talk (that stuff is obviously very important but I think it’s more later stage – the first five minutes of a meeting are when you really need to engage and make people interested in what you’re doing. If you have a working product to demo you’re already one step ahead of the rest of the pack who are just talking). I’m going to suggest to my friends at Zenopy that they hold regular demo days for each other as I think it will have a big benefit.

Ok so besides demo day this week we also went to the Powerset Series A funding party. I find Powerset to be a very interesting company – they’re going after what is an incredibly hard problem to solve, they’ve raised a lot of money (from very smart investors) and have generated a lot of hype around their prototype. It’ll be interesting to see what happens but I did have the feeling in the back of my mind that perhaps I was going to my first bubble party and would look back in a few years and think about the free food and drink that was offer and say that’s when the crash all began. Time will tell but people like Reid Hoffmann and Peter Thiel don’t invest in average start ups so I’m sure the Powerset guys have something special under the hood.

At the party though I ended up meeting a load of Facebook people – including Mark Zuckerberg himself which was pretty cool. It probably sounds a little pathetic but I was actually kind of star struck, I’m still adjusting to the fact that the guys who have started all these amazing start ups actually live in the same neighbourhood as me now and I’m going to bump into them every now and then. I was met Aditya (one of the first engineers at FB), Ruchi (another early engineer) and Jeff (who I knew from a house party in my first week out here). The first thing that struck me is just how young these guys were – they’re managing teams, making recruitment and strategic decisions and they’re only a couple of years older than I am. When you think of Facebook as being one of the most exciting companies in the Valley right now and then you realise it’s being driven by a young team it makes you question a lot of assumptions. So my “intended” career path had been law – where your pay and rank is determined purely by the number of years you have worked at the firm for. When you hit a certain age maybe you make partner and maybe you don’t. But the point is that age and experience rule in that culture and not raw ability. Why do we have to assume that we can measure the ability to perform well purely by the number of years someone has worked in a particular field? Mark Zuckerberg doesn’t have 10 years experience of running companies worth $1 billion but he’s doing a pretty good job of it so far (he obviously has an awesome team around him but he’s the one who put them together in the first place).

And that tapped into something else I’ve noticed since being out here in the Valley – age is nowhere near as a big a deal as it was in the Uk. I remember one of our first conversations with a Financial Director we brought on board for boso in the early days – it revolved around our next hires. Apparently we needed to get some grey hair on the team to give us credibility and make sure we didn’t make rookie mistakes. No. What we need were grey haired investors who would lend us their resources (of which money is only a small part) and leverage their experience where we needed it without trying to run the show. The management of the company had to come from us and so what if we’re just out of university/college. Why does someone who has spent 10 years analysing financial markets have a better chance of making a success out of an idea we live and breathe everyday? The attitude in the Valley is that your age is determined by the number of startups you’ve gone through – there are people here my age who have already started and scrapped a couple of companies. That gives them experience and all the “grey hair” they need.

If you want to replicate the Valley and develop and ecosystem you really need to start believing in young people. And believing in young people isn’t patting them on the back or giving them an Enterprise Week where they can network. It’s giving the money and telling them to go away and make something happen with it. Even the VC’s (the most risk averse of all investors) in the Valley do it (Sequoia invested in Loopt, of which the CEO Sam Altman was still in college at the time and the Youtube guys weren’t exactly planning their retirements when they raised VC).

It’s also why the Y Combinator set up is special – it focuses on smart young people and gives them just enough to go away and build things. It’s not complicated. What I’m realising everyday is that a lot of this stuff isn’t complicated. Building a startup is not rocket science and it doesn’t need 15 business analysts. It’s all the peripheral distractions (raising money, budgeting, investor relations, sales, etc) that are complicated and hard. The actual part of just building something and tweaking it until you’ve made something people want and need to use is actually fairly simple. You sit down and work and focus all your energy on that. Knowing what to do is not the hard part, actually doing it is. That’s why you can get away with Powerpoint slides but you can’t bs your way through a live demo.

Right we’re running low on food and I need to shower so catch you all soon.

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4 Responses to “Demo Day”

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Harj,

As always I enjoy reading your well thought out posts and it is great to live vicariously through your experiences. I’ve got a long post here so bear with me. I agree with you on demos. For us, demos actually came first and when pursuing any relationship they are still the first thing we do. But more important than a demo is letting your audience control the product. Demos at the end of the day are another pitch. It is when your audience is actually in control that you learn,say, that the navigation isn’t as intuitive as you first thought.

I have to slightly disagree with you on the comment ‘It’s giving the money and telling them to go away and make something happen with it’. Sure, there is no denying the ‘bright young things’. And yes, I couldn’t agree more that business analyst type analysis isn’t so necessary from 0 to X customers (you better have done your homework to convince yourself to plunk down the $ and commit the time but beyond that you aren’t allocating time well pulling together a plan bigger than anything you can put on a napkin). But true defensible long-term businesses really take a lot of experience. It also helps when there is some form of channel access. Generally, experience and channel access come with age. It is just hard to get around that. Even Web 2.0 businesses, to be profitable and defensible (how many are), most likely require some combination. For example, a company like Revolution Health will be successful on the simple fact that Steve Case and Co. will forge relationships with the right people in the offline world. That’s guaranteed. I do like your comment that people are measured by the number of businesses they have been involved in/started as long as it carries the caveat an adequate depth to the business. To learn from a mistake or success means it has to have been impressionable. Hopefully that means some hard lessons about executing on profitable customer acquisition, managing resources, and building a defensible brand.

I think it is great that we youngins by and large are a large part of the web entrepreneurial base. But, before reading into it that the Valley promotes this because it is ideal or that ‘smarts’ can trump experience, we all might do well to consider that structurally this is bound to be the case. Few 35+ with two handfulls of experience under the belt are going to pursue a web-startup full-time unless they are independently wealthy (from serial entrepreneurship or whatever). Web businesses are a room full of natural gas when someone flicks the light switch on. Generally, to be worth someone’s while who has high opportunity costs, they have to have the potential to hit really big to have an expected value that merits the effort. Most web business are marketing concepts with no salvage value. They rarely are unique defensible technologies so its only the young who are crazy enough (don’t have a family risk) to pursue the path. There are older entrepreneur’s who build great businesses. Most VC funding goes towards these businesses, be they biotech, hardware, consumer products, or physical services.

The VCs are exacerbating the structural nature of all of this with the recent shotgun approach to investing. More entrepreneurs come out to play (in many ways that’s great) but without defensibility it undermines the position of first movers. Hey, that’s life, tough love and all, but there is a cycle putting investments at risk, because there are entrepreneurs without track records, because (argue you as you may versus Web 1) there are still unclear paths to profitability, you have to invest broad and thin. You don’t find VCs investing in this style in any other industry. And with thin investments the common (eg non-Google) startup can only hire young, let alone be started by the non-young.

Defensibility and low capital barriers to entry are fundamental to the age demographic in web businesses making it all the more special when someone does latch onto something defensible or someone older does take the risk.

Harj,

Some of your observations with regard to the SV and UK comparisons may be rooted in the differences in education traditions. I have gone to school under both the British style system and the US system. I have noticed the remarkable differences. In high school under the British system, all I did was study to pass exams. That means I took a book and studied the hell out of it until I was fully prepped for an exam. My concern was not really about the application of what I was studying, it was on passing the ‘O’-level or ‘A’ level exams. On the other hand, under the American system, students are not really pressured by exams. They are given the freedom to think more about the application of the knowledge rather than pepping just to pass exams (Note: Exams also called Standardized testing are controversial in the US, so some people may not agree with me. I am not pro-exam after a certain number of years school). With regard to myself, I noticed that I started to think more out of the box when I stared to attend school in the US that I did prior to that under the British system. It also helped a great deal that my teachers took my ideas seriously; they treated my own ideas as if they meant something, which really boosted my confidence.

I have kept a 2006 article from USAToday that attempted to explain the success of SV in the US as opposed to other countries. I kept it because some of the reasons that they used, coincided with my experiences. Here is an excerpt:


Andrew Hu, the Asia/Pacific chief of U.S.-based tech company Wyse, says China’s education system is one reason it has too few world-class entrepreneurs. College admissions are based on exams, Hu says. Unlike in the USA, it doesn’t help to be captain of the soccer team. And the way to get high exam scores is to learn by rote and obey instructions. The young people who excel at those traits get into the best universities, which graduate an elite class of brilliant followers, Hu explains.
Similar problems get in the way in much of Asia. Singapore’s citizens have key ingredients for tech entrepreneurs: top science and math scores, a prosperous economy, access to capital and a high broadband penetration rate thanks to Singapore One. But the nation has seen little entrepreneurship.
“Singaporeans are good at taking orders, but they don’t think outside the box,” says Usha Haley, a professor at the University of New Haven and author of five books on Asian business. She blames the exam-based, rigid education system and an authoritarian regime that tells its people to think creatively but not about government or the nation’s way of life. “It’s like saying, ‘We want you to develop a sense of humor between 2 and 4 in the afternoon,’ ” Haley says. “It doesn’t work that way.”

It came from here: http://www.usatoday.com/tech/world/2006-06-27-silicon-culture_x.htm

Interesting comments from a UK guy(s) heading to the Valley. Wondering if the ‘commentary’ will still be valid in two years when u look back on it.

I’ve worked both sides of the pond so have my own views.

I like the exploring of US v’s UK and what it will take to get the same openness in the UK especially for startups. Certainly the last few years has increased the media coverage within the startup arena which is good but its still hard work with lots of ups n downs.
Having the chance to work under the “wings of the Y” guys will add a tremendous amount of wisdom and maturity that often can take years of your own graft (and normally by that stage u’ve gone under).

good 4 ye guys – hop it works out and I’ll keep an eye on what u’re up 2. Idea is good just have to ‘execute’ (small word but …)

Lal

[…] Demo Day “To put it quite simply, when you demo your product there is no scope for bullshit. Either […]


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