I was recently having coffee with a friend of mine who has been making the rounds of local venture capitalists, and he told me “It’s amazing how much more traction we’ve been getting since we started showing a demo of our product.” This entrepreneur–who has a great pedigree and lots of prior success–was surprised that, even with people he’d worked with before–the demo made a gigantic difference in the interest level and calls he had returned.

I’ve heard the same thing from many, many other entrepreneurs, who are surprised at the effect that a simple demo of their product has on their talks with investors, potential employees, and others.

What most entrepreneurs do not realize, is that there is a huge line between talking about a company, talking about a potential product, and showing a PowerPoint, and a “real” company. Most investors — whether angel, venture capital, etc. — see thousands and thousands of great “virtual” products and companies. Those companies are all on PowerPoint — what one investor told me he called “dream” companies. They’re someone’s dream, but no more.

However, when you show an investor a demo — even a simple prototype — suddenly, you’ve jumped a significant gap (from thousands of PowerPoints, to just dozens of companies who are showing products). What they don’t realize is they’ve proven a number of other things to the investor at the same time as showing their product.

1. You’ve proven you can move beyond the concept phase to implementation, ie, you’re not just an “idea person”
2. You’ve shown you are someone who is likely to execute — an important trait in companies and entrepreneurs.
3. You’ve demonstrated your team is technically capable of the tasks you are proposing.
4. You’ve shown you’re willing to spend your own dollars/time/effort to move your company forward, without waiting for funding–a sign of your commitment to the idea/company/product.

It can’t be underestimated.

Filed under:
Entrepreneurship by Benjamin Kuo