Thoughts from an Angel at Last Night’s 500 Startups Demo Day

Overall, I was quite impressed.  Dave McClure and the folks at 500 Startups have done a good job vetting and mentoring applicants.  You meet a lot of talented entrepreneurs on demo day — it’s a networking event on steroids.

As an angel investor, my key takeaways are:

Market rate for terms

The typical company that presented not only boasted a strong team and a working product, but also demonstrated some kind of traction.  For example:

  • Twitmusic has over 8,000 musicians registered with 32,000,000 Twitter followers.
  • TenderTree transacted $20,000 in revenue in June.
  • TeliportMe has been downloaded over 450,000 times

Most of the companies were trying to raise $500K – $1M on convertible notes with caps in the $4M range.

So — whether you’re on the raising or investing side of the aisle — that’s your market rate.

Overall trends

Of the 27 companies presenting:

  • 5 were child or education related.
  • 5 were fashion related.
  • 7 were led by female founders.
  • 6 were foreign.

Some Standouts

  • Network replaces you phone’s contacts with a smart, networking app.  It promises to do away with business cards, and add contextual information to contacts.  This idea will either work spectacularly, or fail quickly.
  • Chalkable is building a platform to sell educational apps to schools.  I like the education space.  It’s just itching for major disruption.  Chalkable’s approach is to work top-down, by selling to schools.  That’s a challenge, but also a great barrier to entry if they succeed.  And they already have several schools using their product, so early indications are good.  I’m not sure if the “app store” model is right, but they could capture enormous value if they are simply a modern web 2.0 platform company that provides distribution through schools to children.
  • Wanderable is a honeymoon registry for couples who want experiences, not stuff.  From a financial perspective, I like ideas associated with weddings, since you’re capturing people at a very price insensitive moment of their lives.  And the scuttlebutt on Wanderable is the two founders (who have been close friends for a decade) are a particularly strong team.
  • Happy Inspector is probably the least sexy idea, and the one I judge “most likely to exit”.  They have an iPad app for property managers to perform inspections easily.  They already have 300 users paying monthly subscriptions.  They are in the enviable position of having customers paying them to develop more features.

 

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