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Coming of Age Among the Venture Investors

Editor's Note: This piece was originally published by Greg Costikyan on November 28th, 2007 and dealt with his experiences raising funding for Manifesto Games. I think it's a wonderful piece that still rings true today, and I'm reblogging it with his permission here. As a teenager, my subculture wasn't "punk rockers" or "hippies" or "young Republicans," but science fiction fandom. I tend to view other subcultures, therefore, from a sort of anthropological standpoint, noting similarities and differences from my own "native" culture. I understand "the science convention" as one of the cultural practices of my own tribe, and therefore perceive other similar cultural practices--such as the trade show, the industry conference, the acadamic conclave, or, in the case of today's post, the venture conference--as interesting cultural variations on that basic motif.

Earlier this week, I attended the New England Venture Summit--my fifth conference of the venture-investing tribe as an attendee, my third in a money-raising capacity, and the second at which I presented.

As with conferences in other cultures, the focus of the event, which takes place typically over one or two days, is the agenda, a series of speeches and panel discussions. Unlike most other such events (e.g., the science fiction convention or the industry conference), the Dionysian aspect is downplayed--there may perhaps be private dinners sponsored by one VC firm or another after the day's event itself, but the conceit of the participants is that they are there purely in the Calvinist pursuit of worldly wealth, so that open partying would diminish their own respectability in the eyes of the participants with whom they most desire to build social credit.

The organizers of these event are profit-making enterprises, who charge fairly stiff fees for participation, and target three sorts of potential attendees: entrepreneurs seeking capital; venture investors; and service firms. Under the rubric of "service firms" are included lawyers, accountants, headhunters, providers of outsourced HR services for small businesses, and the like. My impression, in fact, is that half or more of the revenues that such events produce are derived from service firms, both from the (higher) attendance fees they are charged, and through sponsorships.

The events on the agenda are of two types: panel discussions, usually among VCs, and usually moderated by someone from a service firm (who presumably has paid for a sponsorship in another context); and investor presentations.

Panel discussions are common to the conferences of all of the subcultures considered in our current study, but (in all cultures) they vary enormously in how interesting they are. In the worst case, you have as a topic for discussion something that has already been thrashed to death repeatedly at previous events, and a moderator who poses excruciatingly dull questions, eliciting rote answers from the panelists. Whatever your subculture, I'm sure you can bring to mind any number of these, from events you've attended. In an SF convention context, I would be very happy never to attend another panel on "Gender in Science Fiction" or "Breaking Into Print." (Although even in these cases, creative panel members can overturn the conventions; I am unlikely ever to forget Michael Swanwick [writer] on a "Breaking Into Print" panel discussing his relationship with Gardner Dozois [editor], and saying "There's a reason they call it 'submission.'")

The basic problem with the venture conference panel is that the conditions under which they are created mitigate against anything of the slightest interest ever being said. They exist to motivate the attendance of VCs, who may be flattered to participate; to reward service firms for contributing money (by allowing them to provide the moderators); and to attract the interest of entrepreneurs, who may reasonably be expected to find what potential investors say of interest. But the choice of topic is inevitably anodyne ("Emerging Trends" -- can't pass that one up!), and since the moderator is from a service firm, which has an interest in sucking up to both investors and entreprenuers, he is extremely unlikely to ask challenging questions, and is likely to stick to the equally anodyne. E.g., "Which is more important when you're looking at a company--the finances or the team?" -- a question at this actual conference, to which the only honest response is "Which are you, a moron or an idiot?"

(Oh, if you care --So let's do a gedankenexperiment. 1. My team is Bill Gates, Thomas Alva Edison, and Henry Ford, and my business models is, we sell hot dogs at a loss and make it up on volume. PASS!

(2. My team is three heroin addicts who haven't bathed in a week -- but -- wait! Billion dollar oppor... PASS!

( You tell me. Which is more important? The finances or the team?)

So from an entrepreneur's perspective, there's only one reason ever to attend these things: To put a face with a name, and know who to button-hole later.

The company pitches are the real meat of this kind of event. Typically, over the course of an hour or ninety minutes, a series of entrepreneurs get up, each allocated something between 6 and ten minutes, to pitch their company. The inevitable tool is the Powerpoint presentation (occasionally you'll see someone using OpenOffice Impress, and good for them); this is jejune in its own right, and some day I'll have the guts to do something completely offbeat, like hire a team of mimes and jugglers to provide visual representations of what I'm pitching.

There's usually a 'mandatory' training session the day before, in which entrepreneurs give their pitch to a handful of venture-experienced people and get advice and feedback; this is actually useful, in many cases, since it's surprising how many entrepreneurs show up under prepared, and quite often advice like "nobody's going to be able to read 12 point type on your slide, no more than 4 bullets per, thanks" or "I still don't have a clear idea what you do" is just what they need. For your ultimate six minutes of exposure, it's a bit of a pain to take half a day off to watch painfully amateurish presentations from other entrepreneurs, but it's still almost always worth it, even if you're pretty polished. It never hurts to rehearse before a critical audience. (I didn't take advantage of that this time, and it was a mistake not to do so.)

Watching entrepreneurs pitch is painful, because each of them has taken months of work and passionate dreams and a universe of ideas and tried to distill them down to six tight minutes. And it's painful, because so much of what they're pitching is jejune or just dumb; a minor tweak on the delivery of mobile content, a better way to sell real estate, a mechanism for making mobile games even less interesting than they are already by making them "free" and advertising supported. (Advertising supported inevitably means "dumbed down to the lowest common denominator.") "Secure DRM," hah. A mechanism for reducing cigarette theft at convenience stores.

All the kinds of things that maybe might make money, but my god; it makes you despair of capitalism. Is this the best that the Promethean creativity of the market can produce?

But to get back to the anthropological analysis, all conferences, of whatever type, have three purposes, though they vary on which they emphasize: to impart information; to build social ties; and to do business. For me as a teenager, the science fiction convention was first about information; it was an enormous thrill to hear the writers I admired speak, and I learned a great deal about writing, and the business practices of publishing. Later, it served a business purpose; promoting my work in the field, and establishing relationships with editors. And these days, on the rare times I attend one, it's primarily social--catching up with old friends.

In terms of imparting information, I would suggest that "the venture conference" is a poor medium, except for very naive entrepreneurs. If it has any value as a social event, it is for venture investors (who often cluster and talk shop with each other, even as the entrepreneurs scan badges and try to figure out how to start a conversation with them--the entrepreneurs have little to say to one another). Which leaves the business function, and since these are events built around a business subculture, that is, or ought to be, their main purpose, redeeming the fact that they don't do so well on the first two scores.

I would argue, however, that they don't work particularly well in a business context, either.

Let's start with venture investors. A typical venture capitalist spends the bulk of his days listening to pitches from entrepreneurs. Just as fiction editors are up to their eyeballs in slush, a VC has seen so many Powerpoints he has trouble remembering which is which, and probably has nightmares in which "the opportunity" and "go-to-market strategy" chase him screaming off a cliff, the jaws of negative EBITDA spreading threatening below.

Now let us say that you are, to pull things more or less at random, a VC who invests in, oh, the enterprise software space, specializing in expansion capital to already-established firms, located in Boston and almost never investing in companies farther than drive-distance.

Your expectation--and a reasonable one--is that anyone who has a company dealing with enterprise software, with some solid base of revenues, and within drive distance of Boston either knows you, or knows of you, or will ask around until he finds someone who does know you, and you will eventually see his business plan. Or if not, he can't be a very competent entrepreneur, because he damn well should be able to find you.

So you learn of some venture conference, in the Boston area, where umpty-dozen companies will given a six minute pitch.

The basic thesis behind the venture conference is that you should be all excited to attend, because here you'll get quick exposure to umpty-dozen potential investment opportunities, and all in the space of a day! Efficient use of time, yes?


Out of those umpty-dozen, maybe two will fit your investment criteria, and if they were semi-competent, they'd find you anyway.

So... Maybe you send an associate. You certainly don't go.

From an entrepreneur's perspective, the supposed appeal to the venture conference is this: I'm pitching to a room containing maybe 200 people, all interested in venture investing, and even though there's a fee attached (and maybe travel and a hotel room), and even though it's a couple of days out of my (and maybe my senior staff's) life, it's a more efficient way to reach a lot of potential investors at once!


Well--no. That room of 200 people is maybe 25% other entrepreneurs waiting their turn or listening to other pitches to get a better sense of how to polish their own, and maybe 50% service folks who actually want to sell you stuff, and maybe the other 25% are investors of one kind or another. Of whom the vast majority would never invest in whatever it is you're pitching. And of the handful who remain, almost all are so junior that unless they go back foaming at the mouth with excitement, it doesn't really help.

You would be far better off staying at home, figuring out the right VC firm and the right person there, and figuring out how to network to them, so your submission doesn't fly over the transom and land in the "slush", but gets a sympathetic read.

As Michael Swanwick said, "there's a reason they call it submission."


Which is a nice pat way to end it, but leaves two obvious questions, I think. I'll take them in order.

1. "So... How did you do?"

Ehn. I think the Powerpoint itself was pretty strong, but this is the first time I've tried to do this with a partner; Nathan took half the slides, and I the other half. We both floundered a bit, and were not as crisp, clean, and confident as you want to be in this context. We could have used another few hours of rehearsal to get it down pat. We didn't, for two reasons; one, Nathan and I live in different cities, and our time for rehearsal was three hours the night before. And second, perhaps, I'm skeptical enough about the value of the whole enterprise that I didn't make it enough of a priority for us to get together with time to do the work we needed to do. Penny wise and pound foolish; if you invest in the money and time to do this at all, you ought to do it well. I take responsibility.

Not that I think we made idiots of ourselves, but we could certainly have been better.

2. "Would you do it again?"

I think I've just made a strong argument for why this kind of thing is useless. But... Yes. And probably will. For two reasons.

First, the discipline of trying to distill what you want to do down to six minutes and a handful of slides of worthwhile--and refreshing, in its own way. More than that, distilling it down to a business case; it's obvious, I think that I'm doing what I'm doing for a slew of reasons, many of which have nothing to do with a business case, and if I were doing a six-minute presentation for an audience of, say, game developers, it would look very different. But if I can't make a strong business case, I shouldn't be trying to do this as a business--an art project, perhaps, or a non-profit enterprise. But if I can persuade myself that this makes sense in a business context, that's self-motivating--and an excellent framework to make a case to people--beyond the context of the venture conference--who are utterly motivated by monetary return, and don't care as passionately as I about the larger issues.

Second... Even if, as I've argued, the venture conference is not an efficient fund-raisng tool, if you're out looking for money... Well, it's just one of the things you have to do.

Part of the subculture, you know.

Greg's original writing can be found here.