2 reasons why demo days are dead – TechCrunch

And one way to keep deal flows alive

Startup accelerators are increasingly putting the brakes on demo days. The often flashy events reserved for founders to connect with investors have long been part of the likes of Y Combinator’s program, seen as the “graduation” of startups’ journey.

But demo day is not a good use of founders ‘or investors’ time.

Many VCs who sign deals with the top startups from YC actually do so before demo day. The commotion around the event means that investors are so eager to seal an early-bird deal, they jump ahead of the queue and undermine the need for the event in the first place.

In an investment landscape that has changed drastically over recent years, the demo day is an outdated tradition. With capital flows surging, founders are more selective about the investors they bring on board – they’re not looking for deep pockets or a fast close; they want mentorship, emotional support and investors’ undivided attention.

Simply getting rid of demo day won’t help founders find, or let investors offer, that value. A direct alternative (ie, a differently formatted event) will not be effective either. What we need is to better understand why demo day falls short and how to source deals on a much more intimate level.

Demo day dilutes investor engagement

Demo days are performative. A founder stands on stage and pitches themselves and their companies in the best light for 30 minutes or so. But having the most impressive pitch or being the most charismatic founder isn’t the same as having a real business solution or an efficiently run company.

An opinion piece on TheNextWeb already claims that VC funds are “just like Ponzi schemes,” because investors too often think along the lines of, “Will this person make me money?” In a demo day setting that’s run on hype, investors are further forced to care more about companies’ growth potential and later funding stages than their actual mission. The emphasis on showmanship and the concept of betting on people turns investment into gambling.