The young Bay Area accelerator NFX Guild hosted its third “demo day” yesterday at the Computer History Museum in Mountain View, and the attendees were a veritable who’s who of venture and angel investing.
It wasn’t necessarily a surprise that roughly 200 top investors were sitting elbow to elbow to see the presenting companies. NFX Guild prides itself on being different that most accelerators in numerous ways, including that there’s no publicly available application process; startups are instead referred to NFX “scouts,” who happen to mostly be VCs. The last class, which passed through the program earlier this year, saw referrals from 42 people; this class involved 68 scouts.
NFX was also founded by a trio of well-regarded entrepreneur-operators, including James Currier, Stan Chudnovsky and Gigi Levy Weiss, who provide NFX companies with $120,000, along with 30 hours of programming, mentoring and investor introductions. NFX in turn gets 7 percent of their company. (If the company has already raised more than $750,000, NFX asks for 5 percent.)
Investors also seem drawn to NFX because its startups and teachings center around a narrow idea with very broad implications: the importance of network effects, a phenomenon when a product or service becomes more valuable to its users as more people use it.
As far as NFX is concerned, any company, at any stage, can “add” network effects to multiply the value of their company. And Brian O’Malley of Accel Partners, who was in the audience yesterday, suggested afterward that he agrees. “Network effects aren’t just for social applications. We’re seeing this across our portfolio, but it was highlighted in today’s demo day that blockchain, SaaS, labor markets and more can benefit from core network effects embedded in product.”
NFX-backed companies like the home remodeling and design platform Houzz and the event planning platform Honeybook are “nailing this model,” added another attendee, Jeff Richards of GGV Capital, saying, “We as a firm are betting big on this trend as well.”