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.
- You’ve proven you can move beyond the concept phase to implementation, ie, you’re not just an “idea person”
- You’ve shown you are someone who is likely to execute — an important trait in companies and entrepreneurs.
- You’ve demonstrated your team is technically capable of the tasks you are proposing.
- 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.