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Josh StephensCTO

How to Prepare for a Product Demo Ahead of Fundraising

In his early days as co-founder of a marketing software startup, Robert Falcone found himself presentingand botchinghundreds of product demos. He knew his product inside and out, but he would walk through the features, deliver his script, and finish to an awkward silence or, worse, a vaguely polite “okay, thank you.”

Determined to figure out what was going wrong, Falcone watched himself on videos, A/B tested different tactics, and studied great storytellers such as Malcolm Gladwell and Simon Sinek. One key lesson he learned, as compiled in his resulting book “Just F*cking Demo!”, is that there’s no such thing as a one-size-fits-all product demo. Success requires knowing your audience and crafting your presentation accordinglysomething that’s often harder to do the more immersed you are in your product.

“It occurred to me that I was an absolute expert at the product I was pitching … but people still didn’t seem to really get it,” Falcone told First Round Review in this useful summary of his findings. “It became abundantly clear that knowing your product doesn’t make a demo successful.”

How a product demo fits into the venture capital process

As CTO and head geek here at Elsewhere Partners, I spend the majority of my time auditing the technical underpinnings of early-stage software companies during the venture capital process. I’ve been on the receiving end of countless demos and have found that Falcone’s experience is common: Too often, founders will just click through product features without thinking about the overarching narrative of their presentation.

For us as potential investors, the product demo is a crucial chance to get into the weeds and understand how well the product will support a sustainable, healthy business. We don’t want a sales pitch, a pre-canned monologue, or a buzzword salad. We do want a thoughtful, straight-shooting conversation about your product roadmap, the degree to which you’ve achieved product/market fit thus far, and whether or not you’re optimized to scale.

In my mind, the “perfect” product demo takes about 45 minutes, and covers three key areas:

  1. Product-market fit: Analyze and document product-market fit, by which I mean a referenceable list of customers for whom the product is solving a problem they are desperate to pay you to solve, in a way that makes them successful and fosters a continued use of (and payment for!) your product
  2. Demonstration of product capabilities: What does it do? How? What makes it different and better than competitors?
  3. Architecture: This can be as simple as some quick slides or a drawing illustrating how the product is built and why, providing insight into how it will scale

With the caveat that I probably “nerd out” and go deeper on technical details than your average investor during a demo, these are specific elements we look for in your product demo during our diligence process.

A strong and simple narrative

We need to know how your product solves real problems for your customers. Guy Kawasaki calls this “doing the last thing first” and Falcone calls it starting with the “macro” rather than the “micro.” This means, rather than trying to build up to a crescendo, you need to paint a clear picture of how your product makes people’s (work) lives better.

To be clear, this is very different from Silicon Valley-esque hand-waving about making the world a better place. We need to know you have a strong story for a concrete reason: A weak explanation in a demo to a VC likely means your product is too convoluted for prospective customers.

Ease of UX

Seamless onboarding is essential for B2B software companies, and can make or break a company’s ability to acquire and keep customers. While we don’t need to see every element of the customer experience, we do focus heavilyand want to walk throughhow easy the product is to download, deploy, and use from the get-go.

Clearly laid out product ecosystem

Unlike a sales pitch to a prospective customer, which should zoom in on the customer’s specific needs, in a demo as part of the venture capital process, you need to zoom way out. Your story should clarify the “what” and “why” of your business, but we also need to understand the “who” and “how.” Our top-of-mind questions are:

  • Who are your buyers?
  • Who are your end users?
  • How does the ROI and value proposition differ for the buyer vs. the end user?
  • How are you thinking about your product roadmap over the next 12-18 months?

Most importantly, we’re looking to assess whether all of the above indicate a cohesive product strategy for your business. This strategy must go beyond functionality and good design, which have become table stakes in the rapidly evolving software market. It should show a strong product-led growth strategy designed to solve end user pain and drive customer acquisition, conversion, and expansion.

Evidence of scalability

Early-stage businesses often have promising products that may not be fully optimized due to growth stage or capital restraints. While we don’t expect you to have already built a rocket ship, we do want to know that it’s technically sound. It’s tough to invest in a product that will have to be rearchitected within the first 12-18 months to scale.

In other words, when getting a demo, we are asking ourselves: Was this built in such a way that it’s possible to scale? Or when we add the next 1,000 customers, will the product break? This is why we recommend spending at least 15 minutes on the architecture of the product. Be prepared for some tough questions!

Product demos matter

While some investors don’t put much stock in a product demo, we consider it a key part of our due diligence. As often as 50 percent of the time, we pass on a company due to a delta between the current technology and how it will need to evolve, or a too-convoluted story that won’t gain traction with a large number of customers. Leave plenty of time at the end for questions and discussion. It’s our belief that the more collaborative we are, the better the end result will be.

Finally, remember that your business does not exist in a silo. It’s part of a larger market and (hopefully) falls in line with technical and product trends that appeal to users. When demoing your product, make it clear how you fit into the larger technology ecosystem. Highlight both what makes you unique and different, but also how you integrate with other products, add value to common workflows, or enrich the offerings in a given industry. The better you can tell your product story in the broader business context, the more likely a VC is to invest.

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About the Author

Josh Stephens

Josh is CTO at Elsewhere, supporting the investment pipeline and providing portfolio companies operational and domain expertise beyond capital investment. He has been an Elsewhere Operating Advisor since 2015 and advised numerous companies including Vyopta, ActivTrak, BurstIQ, and others.