Entrepreneurs, how stupid does Jason Calacanis think you are? Pretty stupid, apparently. We recently pointed out how he and partner Michael Arrington were going back on their word by charging startups $1,247.50 to demo at TechCrunch20. Now, Calacanis has been going around claiming that the DemoPit program "[b]asically this wipes out any profit we would have from selling those slots." Nonsense. It's hard to know where to start in debunking this notion, but let's do it by the numbers.
How much are Arrington and Calacanis making off of DemoPit? $124,750, for 100 two-for-one tickets allowing startups to demonstrate their products in a side ballroom. And what are the real costs? Renting out a ballroom and, if one wanted to be generous about it, feeding the ticket-buyers two lunches.
According to a former San Francisco hotel manager I spoke to, a ballroom at the San Francisco Palace, where the conference is being held, costs about $8,000 a day to rent. Two lunches for 200 people? Even at exorbitant hotel rates, $24,000 tops. Generously, add another $10,000 for providing Wi-Fi and other incidentals. So that's about $50,000 in hard costs attached to DemoPit. Which leaves $75,000 in pure profit for Calacanis and Arrington to rake in from the startups they've charged to demo.
Add to that, of course, the sponsor revenues they're safeguarding by delivering on the promised crowds. How do conferences make money? Largely from selling sponsorships. And what do sponsors want? Butts in seats. Selling tickets, albeit discounted, to startups desperate to show their wares at TechCrunch20, even if it's not on the main stage, is a brilliant way to fill the room without cutting ticket prices. And for that matter, those companies' hangers-ons — PR people, venture capitalists, and the like — will buy full-price tickets, too.
In theory, I'm sure Calacanis and Arrington could have made even more profit by selling those tickets at regular prices. In theory. But I know Calacanis, and the scrappy Brooklyn-born huckster would never pass up an opportunity to make a buck. The only reason he ever would have greenlighted DemoPit, I believe, was that the conference was having problems selling full-priced tickets. As I've said, it's an ingenious plan to make money off of startups' desperation to get into TechCrunch20. Why not just take credit for it, Jason?