Comparing the big tech conferences

This year I attended three large startup tech confabs--Launch!, TechCrunch Disrupt and DEMO. These conferences are a combination of startup pitches, thoughts from industry leaders, and networking.

Launch! is the new kid, started last year by Jason Calacanis, the maniac (in a good and bad way) who originally partnered with Michael Arrington to put on the TechCrunch conferences. I have been to every TechCrunch conference, but as I explained in an earlier post, this year's may be my last unless I can get cheaper tickets.

DEMO is the longest running, and was the target of the original TechCrunch conferences, which were even held at the same time. DEMO has caught a lot of flack for charging startups to present--up to $20k. That is a lot of money for a young startup, but the exposure can be worth well more than that. Attendees still pay as well, and plenty.

TechCrunch turned that business model on its head by allowing startups to present for free, and running a lower cost conference to make up for it. Instead of holding it in a swank conference center, it is held at the San Francisco Design Concourse, which is basically an empty shell of a building designed for furniture shows. Launch! used the same facility.

So as not to bore you, let me rank them by my criteria:
1. Launch!
2. TechCrunch Disrupt
3. DEMO

My criteria are based on what benefits me as an angel investor. I want to see interesting seed stage startups, chat with VCs and other angels, and hear new insights into the world of early stage companies.

All of the conferences feature a live stream of the presentations, so what you are paying for ($1k-$2k for tickets) is face to face access.

Launch! is the clear winner because they have stayed true, so far, to the original formula of the TechCrunch conferences. Cheap and cheerful, with a lot of thought about who gets to present and a roster of luminaries. The wifi works most of the time, and there was plenty of food available, even if it was pizza after they ran out of sandwiches.

TechCrunch Disrupt has become a cash machine, and the quality of the conference has suffered. Some of the talks are just straight up commercials. VCs appear on stage, but rarely out on the conference floor any more. Kudos, btw, to George Zachary of CRV and Vinod Khosla for walking the floor and talking to entrepreneurs. They sell more tickets, and have so many startups exhibiting that they clear them out every day for a new batch. It has made the experience overwhelming. It has gone from a curated experience to a melee.  Just finding a place to park was tough.

DEMO, as the old man of the three, is also the most polished. But it clearly suffers from a cash flow orientation as well. The presenting companies were of lower quality than Launch! or Disrupt. Some of them were just junk. This is to be expected when you charge a lot of money. The top prospects can go to the free options and be selected. That leaves the B players and a lot of foreign companies who don't have the access to get selected to present for free. The speakers at DEMO were also less distinguished, and did not have anything to say that has not been beaten to death by the blogosphere.

DEMO has at least figured out the logistics. All presenters laptops were already on stage and routed into a sophisticated video display system, so there were very few technical issues with the presentations. The wifi was slow but worked, and lunch was fairly efficient. Free parking was easy in the huge convention center lot. These are the perks of having a large budget.

DEMO has also figured out something that I have known for a long time--your conference badge should not hang at navel level. I usually tie a knot in the string upon which the badge hangs, so that it hangs as high as possible (while still fitting over my head). It is just awkward to have people continually stare at your belly button to figure out who you are and whether you are worth talking to. The DEMO badges come with a locking slider that adjust the length of the string.

Have you been to all three conferences? Leave your thoughts in the comments.

Does buying a Prius make you stupid, or do stupid people buy Priuses? (Prii?)

The Toyota Prius has become the bestselling car in California [LA Times]. It makes a bold fashion statement that the owner is eco-friendly.

Of course, it also makes the statement that the owner is not facile with basic ROI math. Even at the currently outrageous gas prices, it will take more than 6 years to make up for the approximately $5,000 up front premium over an equivalent non-hybrid vehicle [Edmunds].

But this rant is about driving skills, not math.

Even now, the Prius is less than 4% of new car registrations, and so much less than 4% of cars on the road. And yet, about 20% of my experiences with bad driving involve a Prius, whether in my car or on my bicycle.

Incidents include drifting into the bike lane, turning without signaling, driving ridiculously slowly, being overly cowed by speed bumps, and generally driving like a turd.

Doesn't anyone notice this!? I feel like I am taking crazy pills!

On the plus side, Prius owners park well.

Now, the Prius demographic does trend toward the ancient citizen. Old people, in addition to smelling funny and wearing diapers, are not renowned for good driving. As if to give a wrinkly finger to youngsters, they periodically drive into a crowd of children while claiming they stomped on the brake pedal.

Prius owners may suffer from "moral licensing", where feeling like they are saving the planet causes them to act less altruistically in other ways [source]. The same phenomenon is observed of people who buy organic foods. In a recent study, hybrid drivers were less likely than most to yield to pedestrians in a crosswalk.

Prius owners (and hybrid drivers in general) get more tickets [I can't seem to find the original source, but it is referenced often].

But, the original question still stands. Does buying a Prius make you stupid, or do stupid people buy Priuses.

The dearth of innovative ideas

I get to see a lot of startup ideas these days, mostly thanks to AngelList and the conferences I attend.  I have noticed a significant trend that is understandable but troubling.  We seem to be running low on truly original ideas.

Almost every startup describes themselves as the "[Hot Company] for [Big Market]", or "like [Hot Company 1] meets [Hot Company 2] and [Hot Company 3]".  This is, of course, somewhat natural, as it helps your audience understand what you are doing if you can "anchor" it to known concepts.

But I can't help but wonder how Twitter described themselves.  Of course, they did not have to go out and raise money in their early days, since it was built out of the ashes of Odeo.

I am a big fan of things that take an offline process and put in online, adding efficiency and utility to the process.  So I like to hear comparisons to brick and mortar companies or processes. This also makes it more likely that you are not asking the carbon-based windbags who you hope will eventually give you money to materially change their behavior.

Automobile nav systems

This is another one of my random rants, triggered by this article on the proposed NHTSA guidelines on distracted driving.

I have decided that the nav systems in cars have little to do with navigation and everything to do with padding margins for automakers.

To sum up, the built-in nav systems are expensive and crappy. The "non-deletable option" costs upwards of $2,000 while providing less functionality than a $100 Garmin Nuvi.

I am particularly annoyed by the system in my Lexus, which does not allow input while the vehicle is moving. The lawyers clearly got to the engineers before the customers did. Ever heard of a passenger? Sure, it handles voice input, but not from my voice or anyone else who has ever tried it. Maybe you have to speak in Japanese.

To add to the insult, Lexus recently offered to sell me an updated map data DVD for $150. Gee, thanks guys, or maybe I will just buy 2 Garmins that work better anyway.

Some of the latest systems seem to at least have better interfaces.

I generally use Waze instead of the built in system in my truck. In addition to navigation, Waze shows me traffic and hazards along the way using crowdsourced data. If I need to go to a hotel, I can just put in the hotel name and search instead of having to know the address. If the car is moving, it will tell me to have a passenger do the input, which is sensible, and a better option than just crippling the system.

Of course, Waze has a minor problem--the navigation sucks, but that is definitely improving. Android users can use Google Maps for turn by turn directions. iOS users can use Apple Maps, but who knows where you will end up.

The ideal solution would seem to be to just have a relatively future-proof interface in the car for the owner to connect to their tablet or smartphone. I just got a decked out new iPad for less than half of what the in-car nav options cost. Ford and others are moving in this direction, but they seem loathe to give up the fat margins of yesterday's technology.

Has TechCrunch Disrupt jumped the shark?

I am hanging out at the TechCrunch Disrupt conference this week at the Design Concourse in SF this week. I have attended the conference every year since its inception as TechCrunch 40 in 2007, and it has always been top notch in terms of seeing exciting companies and speakers.

This year, though, has been a disappointment so far. Every year, it has grown, but this year it has finally gotten too big. Too crowded, too hot, too many exhibitors. Basically, too much focus on making money and not enough on providing value to the attendees.

This is the most expensive conference I attend, with a rack rate of $3,000 for the three days. Exhibitors also pay a lot to be here. Sponsors like Ford pay a lot to park a car in the hall. Meanwhile, most of the staff are volunteers, anxious for exposure to the magic startup ecosystem.

But this year, that magic ecosystem at Disrupt is turning into a ghetto.

In previous years, there were a lot of VCs and other investors, and financings got negotiated. This year, it is almost more of a jobs fair and networking pow wow. There is a huge number of startups with tables exhibiting in the main hall. So many that I can't possibly interact meaningfully with them. And yet, they are paying the same amount to be there as in the past. Most of the people they talk to are probably looking for jobs or networking. The VCs here are mostly up on stage, and I have not seen them spending time amongst the peons out on the conference exhibit floor.

There are almost 100 companies exhibiting today that get kicked out in favor of a new batch tomorrow.  How can the possibly be getting their money's worth. That isn't even counting the various "national pavilions" with another 40 or so companies. Like a swarm of underslept locusts, they devoured the lunch buffet. I had cookies and salad for lunch as the chicken was all gone, as were the drinks.

It is really warm in the auditorium because there are too many bodies. Air conditioning costs money (they had it in previous years). The wifi does not work--WTF? this is a tech conference! There was no parking available nearby, even in the paid lots. Bitch bitch bitch bitch......for $3k they should do better.

Worst of all, the quality of the conference content is also down this year. In previous years, 50 startups presented; only 30 this year. Could it be because presenters don't pay? Speaking of that, there have been a number of "conversations" so far on stage that were thinly veiled commercials. I am guessing they were paid for.

Why is Jessica Alba here to talk about entrepreneurship? To give us such nuggets on as "it is really, really hard"? WTF? And yet, what do I know? The auditorium was at its most crowded for Jessica, and a bunch of people left after she finished. And, she got a free pitch for her new company.

It is not all bad. Jack Dorsey did give a great talk on entrepreneurship, and Arrington's interview with Reid Hoffman was also good. But that is like wrapping something with bacon....Arrington's interviews are always good.

And, of course, let's not forget this guy.....I am glad some of my entry fee went for tumbling clowns.

We are not quite through the first batch of company presentations, and so far, they are good. The best presentation has been by Steve Newcomb of famo.us, a 3D app framework. He channeled Morpheus in voice and style. By the end, I thought he was going to offer me a choice between the red pill and the blue pill. Of course, it was no Tonchidot.

Hopefully over the next two days the quality of the companies presenting will change my mind, but at this moment, I don't think I am coming back next year. If I do, I am wearing shorts and bringing a cooler of beer.

[Update: the dancing robot has partially redeemed the conference experience.]

[Update: apparently the air conditioning is broken, but will be fixed by tomorrow.]

Why are there still 800 numbers?

Toll-free numbers are de rigeur for most incoming sales and customer service lines. This used to make a lot of sense, say 20 years ago, when people actually paid for an outbound call. You did not want to throw up a barrier.

Now, though, nobody I know pays any differently for a toll-free number versus a normal toll number. Indeed, the very concept of long distance is mostly dead as well. I don't know what the stats are, but I would guess that most people have an all-inclusive plan either on their mobile and/or their landline.

So, toll-free is a great money maker for the phone companies. The caller is paying the same as they would anyway, and the receiver is paying extra for the privilege. With SMS slowly on its way out, the phone companies need a new high margin cash cow.

For the companies themselves, it seems like they could drop it unless they cater to those with lower incomes or no clue.

How much money should I raise?

I get this question a lot. The answer is easy--take as much as you can get.

Why? Let's think this through.

Entrepreneurs resist raising more than they think they need because they are worried about dilution. There are two fallacies here. (A) They need more than they think they will. (B) Dilution is an illusion.

The result of this behavior is that entrepreneurs radically improve their chances of failure. Instead of optimizing for how much of the company you own, you should optimize for the company's success. This is the old saw of owning a small piece of a big pie instead of a large piece of a small one. The additional corollary for startups is that, usually, there is no pie when the music stops.

Let's talk about the fallacies. You will need more money than you think. Entropy is the most powerful force in the universe, and it guarantees that most surprises are unhappy. Also, your business plan is wrong, almost certainly to the downside, because as an entrepreneur, you are blind to risk and more enamored of your baby than others. If you weren't, you would never embark on such an adventure.

Most of the software companies I know do not hit their milestones as quickly as projected. That is not to say that they will not ultimately be successful. But shit happens, and many companies raised money assuming merely imperfect execution, as opposed to one or two complete shitstorms along the way. They run out of money just at the point where there is some visibility that they are getting traction. But, they do not have enough traction to convince a Series A investor to take the risk.

This will get even tougher in the current funding environment, where there is a glut of seed financed companies chasing a shrinking pool of Series A investors. This makes the Series A process longer, and you are competing against a lot more companies for that money, some of whom will have better evidence of traction. You end up trying to do an inside round, which is tough at the seed stage.

Taking less money because you are worried about dilution is just dumb. Very few startups succeed to achieve significant returns to founders and investors. You should do whatever it takes to maximize your company's chances of success. That means choosing the right investors, even if it means a lower valuation. That means taking as much money as you can get with a reasonable amount of effort--there are declining marginal returns here as you divert time to raising money instead of executing.

In the current environment, where seed is relatively easy to get and Series A is hard, it means getting as much as you can in the seed round. You generally don't get a second chance to do more seed funding, because most seed investors will not re-up for an inside round.

So, if you did not raise enough and are running dry before hitting real milestones, you are toast. If you did execute like a rock star and hit the plan, there is good news. You have more money in the bank than you thought you would need. That means putting off the A round for a few months, during which time you will continue to improve and your Series A valuation will be higher as a result, countering some of the "extra" dilution you took in the seed round.

Most importantly, your company still exists, and you still have a chance at eating some pie.

Is innovation dead?

I have been meaning to write this post for a while, and listening to Mike Maples of Floodgate rant about the issue tonight at the Founder Showcase finally got me off the stick.

As an investor I hear a lot of pitches. A disturbing trend in the last 18 months is that most companies can succinctly describe themselves as the [insert hot company] of [insert underserved enormous market]. That almost always means that they are just an iterative solution as opposed to something revolutionary.

The really big ideas are ones that seem like madness. Things that you could not even imagine a few years ago. You could not describe Facebook or Twitter as the X for Y market. They were enabling new behaviours.

Investors are somewhat to blame for this explosion of me too companies. An area gets hot, and investors pile in and fund copycats and "inspired by" companies hoping for an easy hit. But the big money is made by staring into the abyss.

Where this model works consistently well is in foreign markets. There are companies dedicated to cloning business models that work well in the US and applying them in other locales, and then selling them to the US company when they are ready to expand abroad.

Someone told me that the companies to invest in are the ones doing things you could not even have imagined 3 years ago--I like that filter.