Paper prototype can mean a lot of things. Most online sites/apps, for example, have real-world analogs. Why not try running your tech startup concept/algorithm/business process as a live/in-person/brick and mortar solution, even for a few weeks?
Record video, get testimonials and detailed feedback during the "paper-testing", and afterwards. Show how your processes improve efficiency or customer satisfaction levels versus another "old school" analog process, or even your future tech competitor(s).
And as everyone else said, if you can find a way to generate actual revenue while doing this, that will go a VERY long way toward convincing investors – at least those with more open minds and wallets.
deano.com 
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