If you’ve been in business for a while, whether it be on the start-up side or the venture capital side, you probably have some strong feelings about demo days. Some people love them, and some hate them, but when you’re looking for Bitcoin venture capital, the director of Ayre Media Equity Fund, Paul Rajchgod, makes a strong case for the importance of a demo.
More traditional industries have a more established understanding of the “what” and the “why,” there is a little less need for “the show” of a new product or business.
Some VCs making the case against demo days is that it pushes the pitcher into a one-sided conversation with the developer talking ad nauseam about the minutia of the product. From the VCs point of view, if your toaster has a blue LED instead of red, it’s probably not a game-breaker.
You’re not Bill Gates
One of the other traps of demo days is they turn the pitch into a sales presentation where the pitcher treats the VC like someone on a used car lot instead of a potential business partner. When you’re pitching to VCs, you’re not trying to make a single sale, you’re looking to develop a fruitful business relationship where both sides can become wildly successful.
To add to the car salesman point, even when you’re buying a car or a computer or a potentially multimillion-dollar business, no one likes the feeling of being sold in an inauthentic way. It might have worked in the 50s with a fast talker in a slick suit, but everyone is savvier now and can see through the schtick.
When it comes to Bitcoin ventures, the need for a demo takes on particular importance as it’s a relatively new and still misunderstood industry by most venture capital investors. It’s vital to show you have to be able to show investors something tangible, something more than “Here’s the idea I’m thinking of.’
That won’t be enough for most investors to get comfortable unless you’ve already built a wildly successful business. Bill Gates can say to his friends, “Here’s what I’m thinking of creating next,” and he’ll have millions of dollars in angel investment money lined up, but for someone new to building a business, that won’t get you very far—maybe just “friends and family” will support that.
There is a reasonable level of understanding among VCs in traditional industries that can’t be assumed when it comes to Bitcoin investments.
Paul Rajchgod shares his views, “For VC investors, you’ll need to show you’ve not only done your homework on the viability and the demand for your idea in the marketplace. You’ll need to show a demo product, so we can see what it might look like, how it would function and end-users interaction.
All of this will, of course, require a considerable amount of your time, effort, and monetary investment, but that’s what it takes to attempt your business launch properly.
Even then, you may not be successful, but your odds of attracting sophisticated investors will improve considerably.”
I asked him if any demo-lacking Bitcoin pitches stood out, ones that could have been something but failed to show enough to foster that life-changing business relationship.
“I recall receiving an email with a fascinating real-world business idea that would use Bitcoin for tracking, payments, and more. It checked several boxes such as feasibility, value, scalability (only through bitcoin), but the financial analysis was missing,” Rajchgod said, adding:
“When we asked for forecasts, we received two bullets of information. When we commented that we’d need more information, we got two more bullets. We decided we needed to walk away—it became clear the ‘management piece’ was missing, the ability to build this business properly. We still wish them great success and would love to see this business running on bitcoin, but we weren’t comfortable financially backing this management team.”
What are investors looking for?
Rajchgod said, “We know not everyone has the benefit of prior experience running a business, building a team of professionals, nor experience managing that team. But you can increase your odds of successfully raising capital to build your business by doing your homework, building that demo, and launching the business.
“We are intrigued by enterprises that ‘just launch.’ They build something—a new application running on bitcoin, a platform that uses Bitcoin ‘through and through,’ games that could only be created using (and featuring) Bitcoin, supply chain software that runs on and uses Bitcoin, etc. As word spreads of what they’re doing, as the product is in beta, as the founders are out talking about it—then they seek capital.”
That said, the preference for “just launched” enterprises are most intriguing for investment. CoinGeek is interested in hearing your Bitcoin ideas at all levels of development and encourage you to send your pitch deck to [email protected].
It’s a shorter column this week as we are at SiGMA in Malta where Calvin Ayre, Craig Wright and Jimmy Nguyen with be participating in a fireside chat during the Bitcoin track at the conference. We’ll be back with highlights.
Interested in making your pitch? Learn from the people, including Showpay’s Sunny Fung, who pitched their projects to a panel of investors in Seoul for the first ever Bitcoin Association Pitch Day. Watch all Pitch Day videos on The BSV Pitch YouTube playlist.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.