Thursday, September 16, 2010

Are DEMO's days numbered?

Has DEMO lost it's luster and relevance in 2010? I spent the past couple of days at the conference and certainly felt like it. There wasn't a lot of buzz in the air. This was the 20th Anniversary and possibly the last.

DEMO has always been one of my favorite tech conferences. All product, all the time. You can always check out the current and prior product demos at the DEMO site. The conference has launched a number of great companies including Tivo, WebEx and Palm, and historically draws top press and investor attendees. Also puts a ton of pressure on the CEO's to have a well rehearsed 6 minute pitch and hope that they don't end up in Demo Hell. One poor guy completely blanked on what his company did and after stammering for 20 seconds, pleaded with the crowd to come to his booth and find out what they do.

With all of the new ways to see early companies such as TechCrunch and YCombinator, I had a feeling that much of the luster was gone and debated whether it was worth the time to attend.The last time I went to DEMO was in 2005 for the launch of one of my companies, iControl Networks. It was the 15th anniversary and they made a big deal branding the event as Demo@15. This year, there was no swag to be had, although did bring home a couple of vuvuzelas from the nice guys at Loud3R. No conference bag, fleece jacket or even a t-shirt and the only mention of the 20th anniversary was a small sign off to the side by the entrance. The conference has also become a hand me down, passed from Stewart Alsop to Chris Shipley and now to Matt Marshall. This year, for the first time, the conference was in Santa Clara (rather than the normal dessert resort location), close to home, so decided to attend.

My fears were met on Day 1 with many presentations being unpolished, several me-too ideas and a general malaise. To be fair, the Day 1 categories were primarily infrastructure companies (Enterprise, Cloud and Mobile). Day 2 featured the consumer and social media, which were more interesting for me and much of the audience.

Everyone tries to have a memorable demo, often with a musical number, quasi celebrity or skit. Didn't see YCombinator fans Ashton Kutcher and Demi Moore in the crowd, but one of the presenting companies, Integrate, a customer interaction platform in the enterprise category had co-founder Jeremy Bloom give the pitch (picture on left) Bloom is a former NFL football player, Olympic and World's #1 freestyle skier and star at the University of Colorado. I guess if you've run a pattern across the middle with Ray Lewis waiting to knock your head off, a 6 minute pitch in front of a bunch of geeks is a piece of cake. Didn't get the chance to ask him if managed to visit Berkeley while he was in town and see the 52-7 whupping that the Buff's took at the hands of Cal. Go Bears!!

Day 2 was much more interesting. Jeffrey Mullen of Card 2.0 was the opening act and ended up grabbing the $1M People's Choice award along with one of the five DemoGod awards. You can watch all of the presentations at the DEMO site and can see if you agree with my favorites:

Card 2.0 - A very cool credit card with a programmable magnetic stripe that requires a password entry on the card to show the full card number (for card not present transactions) and enable the card to be swiped at retail locations.

Bump - These guys got my vote for the People's Choice. is a social network based on license plate numbers as the identifier. Imagine the satisfaction of sending a nastygram to the guy who just stole your parking space or texting that hottie you saw for a second at the traffic light. Ok, does enable a whole new way to stalk and lots of privacy issues. I got a chance to ride in the backseat of the car as it drove through the convention center parking lot and logged in license plates at 5 per second (see picture above)

Needly - A cross between Craigslist and Ebay - a better way to sell your stuff and services.

Scayl -A slick way to email huge files, including HD Video.

VoiceBase - Transcription and search of voice communications (presentations, conference calls, etc.)

TuneUp - iTunes plug-in that cleans up your music library.

FootFeed - The only Day 1 company on my list. A check-in aggregation platform. I'm anti check-in and have been a conscienious objector in the whole category. However, liked the team, and Dennis Mink, FootFeed's CEO, convinced me of the value in check-ins as a white label service for brands to market to their customers. They also gave an entertaining pitch, with biz dev guy Kemp Mullaney playing the role of a harried guy about to enter the 12-step Check-In program before discovering FootFeed.

Back to the question posed up top. After an enjoyable day 2, maybe DEMO still has some life. I'm not going to write off DEMO completely, but will be surprised if it makes it to 25.

Thursday, September 2, 2010

Angie's List or AngelList?

An excellent question to ponder as the school year begins, but the answer depends on whether you are looking for a plumber or an angel investor.

The fall semester at SJSU started this week and had the first class meeting of my Entrepreneurial Finance class, which was overflowing with students standing, sitting on the floor and begging to get in. I'd like to think that work of my excellent teaching has made it's way around campus or that the Entrepreneurial fervor has reached new heights, but I've seen my ratings on Rate My Professor. Still wondering who that student was loved the course, but said I was a dork with a voice like Steven Hawkins. More likely the reality is that many students are trying to fill that last elective to graduate, which has not been easy with all of the budget cuts resulting in fewer class offerings.

Many of my students are finance majors, so I spend the first class with a (very) brief corporate finance review with the hint that very little applies to start-up finance. In corporate finance, students are taught that capital markets are efficient and this is an underlying assumption for valuing stocks, bonds and other financial instruments. The theory states that all ifnormation is publicy available and it is not possible to earn returns above average on a risk-adjusted basis. Whether you buy this or not for public equities, the market for early stage private companies has always been wildly inefficient. Entrepreneurs struggle to find investors and investors struggle to find the best start-ups. When they do, it is often a competitive situation and the hot start-ups end up oversubscribed and instad of adjusting price and other terms to optimize the deal, they are forced to leave some interested parties out.

While VC firms have been easy to find from the old school days of Pratt's Guide to Venture Capital, to the early web presence of the 1990's and the current web sites, blogs, twitter feeds, facebook fan pages and sites such as The Funded, angels are still a bit harder to track down. We do have certain angels aggressively marketing themselves (Good to see my former student, Dave McClure, making a name for himself as part of the PayPal Mafia and "Super Angel" crowd), many others have no interest in publicizing their net worth or investing activities.

According to the Center for Venture Research at UNH, there are over 260,000 angel investors. How the hell are you going to find and ptich the one who is going to invest in your deal??? These angels invested $17.6 billion in 2009, which matches the amount invested by VC's. However, angels invested in 57,225 ventures vs. 2,795 for VC's. It goes without saying that a much higher percentage of the angels deals are seed than VC, so you are likely looking at a 1 in 50 shot of getting your company's initial funding from VC's vs. angels (if you are among those that are able to raise either!). And the 1 in 50 is a team that has already made that VC money. While the supply-demand equation will never be completely fixed, the information and accessibility to angel investors is only getting better.

There are several efforts being made to make this process better and will mention a couple below:

  • Angel Capital Association Collaboration Committee - I was a charter member of the this group and the goal is to facilitate syndication among the angel groups via education and tools such as Angelsoft. One of the issues in angel group investing is that any one group often doesn't have the investor interest level to provide the total capital required for a round. At Sand Hill Angels, our initial investments are in the $100 - $500K range and rounds are typically $500K - $1.5M. The goal of cooperation is theoretically very interesting, but practically difficult. There tends to be a strong groupthink mentality in the angel groups, and once one group has decided to invest, the others still need to run through their process, which can take weeks to months. This is a brutal process for entrepreneurs and many have no interest in the angel groups for this reason. At SHA, we have instituted a fast track process where companies that have already lined up committed investors (including some SHA members), can expedite the process. We recently led a financing for AppBistro, that had a great group of investors committed, including Dave McClure and Alfred Lin. I joined the board and am looking forward to working closely with the team.

  • The AngelList - a service where entrepreneurs can connect with angel investors an dangels can share interesting opportunities with other angels. I recently became aware of this list and just joined and have started reviewing some of the start-ups and looks like an excellent resource for both entrepenurs and investors. I'll follow-up in a future post on how it has worked for me.

Now back to the original question posed in the title. For angel funding, my choice would definitely be AngelList. Of course, if you are looking for a plumber, Angie's list would be better. However, you never know, you might find a start-up that has a cool mobile app to fix your leaky faucet...