VC Fairs, or Vanity Fairs?

On the heels of VC fair week in Canada (Ottawa, Banff), and with the National Angel Organization's annual event upcoming, we've heard a number of founders lamenting the lack of actual investment conversion stemming from these kinds of things. Sometimes that can seem like a fair comment, especially as I looked out among the audience in Banff on Friday mid-morning with institutional investors focused principally on shaking off modest Thursday night hangovers and cradling Blackberrys and iPhones like long-lost friends. Are the investors in it for real, or do they regard VC fair participants with the attention my mini-van driving wife might give to passing, picked over roadkill on the road to our cottage?

My answer is absolutely the former, but with a catch that most of the pros in the business seem to catch and use to their advantage. Basically, selling to investors is no different than selling to customers. Unless you get lucky (and it happens), the sales cycle requires research, a committed and self-conscious campaign and the gentle building of a momentum story over a number of different engagements. You won't nail the deal from the presentation podium. Rather, the quality work will be done before or after the event. As a result, founders should be realistic about expected outcomes before you agree to spend the time and resources to participate: do you just want to start the process with a range of players? is the VC fair a good forum for providing a general update to your story to previously engaged investors? do you have an internal round in hand, and are taking one last kick at the new lead investor can?

Taking the VC fair organizers off the hook, the lack of actual deal flow begs a couple of questions. What can well-meaning organizations like OCRI and Infotech Alberta do better? One thing is to recognize the realistic outcomes, and create a wider and perpetual range of engagements among founders and investors (and perhaps among co-investors) both during and after the event. These organizations have started with this with startup-focused events, and I've also seen folks like Michelle Scarborough do incredible work at the OVTS cocktail party making introductions among founders and investors. I think more of this stuff will contribute to building quality engagements, and I also think that the government, service provider (read accountants and lawyers) and other attendees should be actively encouraged to take their role seriously in supplementing efforts to create actual deal flow from the event.

More importantly for many founders (at least those that have not led a VC-backed company to exit in the last decade), if the VC fairs aren't about term sheets, what then is the secret sauce for quality engagements with the new VC contacts you might run across at such an event? Over the course of the week, I quizzed the guys/girls with the chequebooks (or, given the state of perpetual closing of VC funds, those that know the guys/girls with the chequebooks and may or may not get a cheque from enough of them in order to cut you a cheque...you get the idea...). What elements led them to commit the mental and other resources to moving from prospect to qualified lead for a startup founder? Here's what you need in order to make it happen:

Game: As Spartan Bioscience's Paul Lem and I discussed this past Tuesday evening, it maybe goes without saying that you have to bring "game" to the table. It's a hard thing to describe, the investors suggest, but they seem to know it when they see it. Founders that know their industry cold (especially everything about their competitors), are unabashedly sold as to their company's potential, and have a little mental strut that goes with being a thought leader in business segment - these people get that second look.

Time: Of course, you need time to move investors from interest to diligence. Most everyone in the game seems to advocate the "it's never too early" school of thought as to when to engage the community, whether at a VC fair event or otherwise. Getting a meeting from an angel or institutional investor that leads to some good advice, or an introduction to a helpful contact, is a genuine investment in the business, as well as the founder's career. It's the kind of thing you can build on, and that's all the start you should look for.

A Plan: Every engagement with investors, as with customers, should have a purpose and desired outcome, and put you in a better position to close than prior to the engagement. Creating a "momentum" communications plan implemented over the course of many months seems to be the most effective strategy. Often, investors will provide those milestones for you (call me when you get the carrier deal, or when the product has been tested, or when you have 100,000 UIs per month). Connecting and reconnecting, and connecting again, that seems to be the only to move the hearts (yes, VCs do have hearts...) of this "show-me" community.