Startups are cherry picking totally random metrics to show off to would-be investors
These "demo days" as they're called in Silicon Valley launched some of the biggest companies in tech, like Airbnb, Dropbox, Reddit, and Twitch.
Over the past week, I spent three afternoons listening to startup pitches, back-to-back-to-back, as the latest graduating classes from 500 Startups and Y Combinator - two "incubators" for young tech startups - took to the stage.
These Demo Days saw more than 150,000 slide views in the audience network, 45 percent growth in conversations day-over-day, and a retention rate of information at around 15 percent.
Those metrics don't make any sense, but they were par for the course at Demo Day, as startups cherry-picked the metrics to make them look best.
Letters of Interest. There was a spike in startups who were touting the number of "Letters of Interest" they had received from companies, rather than the number of contracts they had signed.
These aren't actual commitments from companies, but likely generic PDFs saying they were interested in looking into it more. However, once a startup had extrapolated that 20 letters of interest meant a $20 million annual revenue, then that became the largest number on the slide.
Market opportunity. Then there's the problem of trying to address the market opportunity. These stats can seemingly be pulled out of thin air. For instance, one startup calculated that 25 million business owners would place eight candidates with their service each year. Each candidate nets the startup $100, so suddenly this is a $20 billion opportunity for investors.
Currency tricks. One startup advertised that it had done 1 billion in payments processed - in Indonesian Rupiah. The current exchange rate would put that around $72,000 in US dollars, although they did note in a parentheses on their slide and during the presentation that this was in a foreign currency.
There is a certain expectation for startups to show a dramatically increasing graph paired with growth numbers.
But the many investors Business Insider spoke to at Demo Day were surprised by how many were showcasing their "Letters of Interest" when they're not guaranteed sales.
That's one metric where investors may hope to see zero growth in the future.