Even to outsiders, the inner workings of startup accelerators has become familiar: pumped up on camaraderie and energy drinks, scrappy founders do product demos onstage before a room full of buzzy journalists and investors.
Fast-forward two years into a pandemic and, even a stint with the return of hacker homes, much has changed about the way launch pads for startups look, feel and show value today. The earliest investors are rethinking signaling risk, dilution and, most surprisingly, the worth of a traditional demo day.
Pro rata
Let’s start with a juicy topic: pro rata.
Signaling risk happens when a VC chooses to not do pro rata, or follow-on investing, in an existing portfolio company. The idea is that investors who know you best — the ones who bet on you earlier than others — are choosing not to invest in you in your next phase of growth, which must mean that the deal isn’t that g …
