Like many of you, I attended my first virtual conference a few months ago and while the content was great, I missed the networking that I value so much from conferences. 

Now, I’m planning my second virtual conference of my own and I’m prioritizing not only implementing technology that supports networking, but making sure that I create a culture in the conference around actually using it.  What follows is some advice for both conference organizers and attendees to get the most networking out of an event.

Principle #1:  Talking heads put people into “passive mode” and they check out.

Solution: Mix up engagement models throughout the conference. 

Sure you can have keynotes and panels if you must, but then have breakout sessions where people are encouraged to talk, question and share.  Build in plenty of “white space” – time where people can engage with the networking opportunities your virtual conference has provided.  And finally, provide opportunities for both one-on-one networking and small group interactions.

My first virtual conference had built in networking functionality, but I really couldn’t figure out how to use it, and when I did reach out to others, they apparently couldn’t figure out how to respond either.  Online networking is as much a “warmware” issue as a software challenge.  Conference organizers need to not only have software that facilitates networking and collisions, but they need to train users to make sure that they understand how it all works and that using this functionality is expected of them.

I started planning by thinking about how networking happens at face to face conferences.  There were six main ways that I connect with my peers at conferences:

  1. “Collisions” where I run into peers in the hallways at events.
  2. In session connections – it can be rude, but finding someone you know and sitting next to them and chatting when appropriate.
  3. “Clusters” where three to five people meet up casually in-between sessions and chat.
  4. Meals and Cocktails where you seek out people you want to meet with and have lunch, dinner or cocktails with them.
  5. Trade show style booths are also a way to meet with vendors you’re hoping to connect with.
  6. Pre-scheduled meetings are a more intentional way to make sure that you meet up with the people you need to see at an event.

All of these are based on finding a physical space or place to connect which seems to run counter to the structure of a “virtual conference.”

When planning for my upcoming conference, I thought of it not so much as a website, but as a physical event space.  Here’s a blueprint I came up with to designate the reception and checking area, hallways, breakout sessions, plenary sessions, and vendor booths. 

By breaking all of the different ways that people would interact with each other into a physical space model, it makes it easier for conference attendees to get a feel for how they are supposed to interact in this unfamiliar virtual conference space.  As an attendee I can see the expo hall options, the network drop-in sessions, one on one opportunities and the presentation spaces.

To make this work, we ended up doing something a bit unconventional.  We used Hopin as the reception and networking areas for the conference, and Zoom for the Plenary and Roundtable sessions.

We did this because Zoom is well established and familiar to everyone.  We needed a platform that our speakers could plug into easily and that would have familiar interfaces for presenters to share their screens while viewers had the ability to connect via chat.  But Zoom means talking heads and we wanted to break out of that mold. We really like the concept of Hopin and it has some of the best networking options we’ve seen, but the Main Stage is quite difficult to navigate and getting someone backstage is tricky.  Once they’re there, sharing screens and seeing what you’re presenting is not so easy.  Rather than risk a disaster, we opted for the dual platform.

Hopin’s networking allows us to facilitate multiple types of networking on the platform, which is really great.  Here are the ways we used Hopin to facilitate connections at the conference:

  1. Hang out rooms – We created Hopin “sessions” where participants can join in with smaller groups to get to know each other.  These sessions are open during the entire conference, so attendees can stop by any time and see who’s in the rom.
  2. One-on-one Networking is a great feature in Hopin.  This zone automatically pairs participants who opt-in to be connected with each other for three minutes (or longer if they want to extend) and then the platform facilitates sharing contact information if they want to connect later.  I found this function to be fun and to be a great way to meet people in a way that I wouldn’t easily have available to me at a typical in-person conference.  It is similar to speed-dating networking sessions I’ve seen at certain events, but not typically at conferences.
  3. Wine-Down:  We’ve created an end of day small group networking opportunity for participants to grab a glass of wine, beer or cocktail of their choice and connect with others at the conference in a casual setting.  We supply sample discussion points to get things going, but those are strictly optional and people can chat about whatever they like.  We set up a wine sponsor who sent discounted gift boxes of high quality single serve wines to participants who opted in for that. 
  4. Trade Show Booths
  5. Impromptu Sessions with one or more participants

For the Roundtable sessions, we opened up Four Zoom Rooms so that each of the different breakout topics would have their own room.  With this structure, we were able to allow all participants to be able to turn on their video and microphones and actually engage in discussion.  (Of course, microphones go on mute when not speaking.)  We could host between 100 and 500 people in each of these sessions.

Plenary sessions where everyone is viewing keynote speakers or, in our case, venture capital pitches, were also done in Zoom.  This allowed us to switch rapidly between presenters and everyone was already familiar with the platform.  The key, though, is never to have more than sixty minutes with any one kind of interaction.  Keep it moving by switching up how attendees interact and their brains will be stimulated.

Final advice for attendees:  be proactive in how you approach a virtual conference.  If done right, attending a virtual conference with a good networking platform can provide you with MORE rather than fewer networking options! 

Look through the registrations (if available) and identify who you want to meet with in advance.  Learn the connection options and reach out to make connections with one or more people at a time.  Make sure you get contact information to follow-up with people you’re interested in.  If you have to miss a panel or two in order to make great connections, don’t worry.  Most virtual conferences record the sessions, so you’ll often have a chance to catch up on the content later while focusing on relationship building during the conference.

Shameless Plug:

If you’d like to see all this in action, and get great startup content about resiliency during the pandemic, be sure to check out the Colorado Capital Conference.  Even if you’re not from Colorado, this event is open to anyone and the speakers and pitches apply virtually anywhere.  We’ll have Brad Feld from Foundry Group to talk about many types of resiliency and some of the themes in his new book, The Startup Community Way: Evolving an Entrepreneurial Ecosystem  We’ll have Denver’s Mayor Michael Hancock sharing the unique resiliency the city has shown in responding to the pandemic.  Join us! 

First of all, you shouldn’t create an exit strategy for an investor – it’s actually the first question you should answer for yourself if you’re thinking about a startup.

The Exit Strategy – Cornerstone of Startup Success

You see, the exit strategy is about understanding who your customer is. Not the customer who buys your widget or app that you make, but the customer who buys your customer. The value proposition for this customer is different from the value proposition that you may have for your “first” customer who buys your product – the “second” customer who buys your company is much more important.

The second habit of the Seven Habits of Highly Successful People is “Begin with the end in mind.” This is more true for startups than anything else I know. Startup founders who understand their exit strategy are able to align all their strategies and people towards that single value proposition.

So how do you articulate a great exit strategy? There are six things you should think through carefully.

  1. Look at that past. Who in your industry is acquiring companies. Why are they acquiring them, and what patterns can you find in their acquisition activity? Specifically, if you can find 1) what is the average acquisition amount for companies, 2) what is the revenue multiple (how much the company was acquired for, divided by the trailing twelve month revenues for the company), 3) what drove the strategy behind the acquisition? Following these patterns will let you know who the likely acquirers are and how big you need to grow to be in the “sweet spot” for acquisition.
  2. Look at the future. What are the trends in your industry that point to your solution being a big solution to gaps that the big incumbents in your industry will need to fill? This is the Wayne Gretzky point to learn “where the puck is going and not where it is.” If you can be ahead of the incumbents and innovate, then you’ll be ripe for acquisition at a high multiple.
  3. Understand your values and the values of your acquirer. More than half of acquisitions fail because of values misalignment. You’re passionate about what you’re doing, so you want to make sure that your acquirer is also passionate about carrying on what you’re doing, but with ten times the impact in the communities you sell into.
  4. Build a team. I don’t mean the team on your “team slide” on your pitch deck. You need another team for your exit that includes direct employees who have been through acquisitions before, investment bankers, M&A transactional attorneys, and CPAs familiar with audits, valuations and transactions. You’re going to be acquired by professionals and you can’t take an amateur approach.
  5. Timing Strategy. You can’t define when you’ll be acquired, so you should always be ready for acquisition. I know a company who was acquired for $20 million before they ever had a customer, or an investment round. The two founders pocketed $10 million each for seven months of work. Early exits can be awesome, so long as you understand your early exit value proposition. Later, your value proposition evolves as you prove product market fit and gain many new customers which might be attractive to growth stage VCs or strategic acquirers. Even later you’ll have positive cash flow that may be attractive for Private Equity acquisition. The point is that you should know your value at each inflection point, know who you’re valuable to, and how much your company is worth at that stage.
  6. Know your acquirer. If you’re going to be acquired, it helps if the acquirer knows you exist. As you go through your timing strategy, you should define the potential acquirers and how their company is structured. Some acquirers drive M&A through the CEO and CFO, others have Business Development teams, others have M&A departments that execute the wishes of the board, and still others will drive acquisitions through product managers who bring in acquisitions to build out their product lines. Remember, companies don’t acquire companies, people do. You need to define who in the company does the acquiring and get to know them. Connect on LinkedIn. Write blogs and include them on the distribution lists. Go to trade shows they go to. Do podcasts, guest visits, and reach out via email introductions. The more well known you are as a thought leader and innovator in your space, the more likely you’ll be considered for acquisition. Don’t even think of being in “stealth”mode for more than a few months while you develop your MVP.

Investors don’t make money on your cash flow, so make sure you’re developing a capital strategy designed for growth. Investors only make money when you exit, so if you don’t have a great answer to the “what’s your exit strategy” question, then you’re not ready to raise capital since you can’t answer the question they’re really asking – how will I get my money back?

Interested in learning more about exit strategies, capital raising, valuation, term sheets and more? Check out the Angel Capital Summit, membership for both angels and founders at Rockies Venture Club and upcoming classes, workshops and accelerators for BOTH angel investors and entrepreneurs!

Many professional organizations have a certification test of competency that members must pass to demonstrate their knowledge and ability to perform at a high level.  Doctors, Lawyers, CPA’s and other professions must also take continuing education credits as well.

The criterion for being an angel investor, however, has nothing to do with knowledge and does nothing to provide the knowledge that an accredited investor needs to know to both make good investments and to exercise prudence with regard to their portfolio strategy.  Accredited investors qualify to be angels simply by wealth (having assets in excess of $1 million) or income, (having annual income of $200K per year or more, or $300K for married couples)

The SEC has proposed recently that a knowledge based criterion for accredited investors be added.  This would allow people with expertise to participate in angel investments.  The proposal, however, suggested that existing certifications such as a FINRA Series 7 might be a good benchmark.  Having passed the Series 7 test myself, I can assure anyone that the knowledge one acquires to pass that test, though it is significant, has nothing to do with what someone needs to know to be an angel investor.   Angel and venture capital investing has its own set of language and guidelines that have very little overlap with what a Series 7 certificate holder would have.  If the goal of accreditation is to protect the investors from themselves, then providing a certification that tested knowledge that was relevant to the asset class would be most useful.

A good certification test for angel investors would include several parts.  Here’s an overview of what it might look like.

  • Portfolio strategy. The presumed reason for the accredited investor guidelines is that people of high wealth have excess money to lose and can withstand a complete loss.  Just having money to lose isn’t really a great way to build a portfolio strategy.  Smart investors will allocate approximately ten percent or less of their investable portfolio into the angel investing asset class.  Within that ten percent, they will be invested in a minimum of ten deals and preferably twenty or more.  That means that a marginally accredited investor with a $1 million in investable assets will create an angel investing portfolio of about $100,000 which will be in at least ten $10,000 deals or even twenty $5,000 deals.  Someone with a $5 million investable portfolio will put $500,000 to work in angel deals, perhaps with twenty deals at $25,000 each.  Some angels really spread out their risk with fifty or more deals and it’s generally agreed that the more deals you can get into the better.  Finally, angels should understand the difference between making a “one and done” investment in a company vs. follow-on investments and how they can benefit a portfolio.
  • Exit strategies. Angel investors have only one way to get their money back and that’s through an exit. Anyone investing in this asset class should have a sophisticated knowledge of how exits work, how to analyze the market for exit potential, what typical exit multiples are and what the typical exit amounts are for startups in any particular industry.  An angel who doesn’t understand exits will not likely do well as an investor and may end up investing in a lot of great ideas that never see a liquidity event.
  • There are some who say that “valuation doesn’t matter”.  These are the VC hacks who think they can make up for any valuation by investing only in “unicorns” ( private companies that reach a valuation of $1 billion or more).  That’s a great theory until you realize that only one in several thousand deals results in a unicorn deal and most that exit at all will exit for under $50 million.  For these, understanding valuation and putting together a fair deal is critical.  A smart angel should have a valuation toolbox under their belt with several different valuation methods available to them.
  • Due Diligence. Smart angels know that the more diligence you do, the better your chances for investment success.  Just having lunch with a startup CEO and getting excited about their passion and commitment is not a good way to do diligence.  Investors should thoroughly investigate the market, the team, the product, IP and legal landscape, valuation, comparable transactions, financial projections, competition, exit potential, key documents and agreements and much more.
  • Term Sheets. Investing requires good knowledge of the terms used in negotiating the deal.  These terms are far from obvious and many that sound similar can result in a difference of millions of dollars when the company exits.  g. “preferred liquidation preference” or “participating preferred”.   I’ve seen angels who have caused serious problems for themselves and the companies they invest in by creating situations that make follow-on investment by VCs all but impossible.
  • Securities and Tax Law: Angels should be familiar with the various points of securities law to understand the registration exemptions that offerings are using, and to know the boundaries of proper securities offering processes. They should understand the difference between Regulation D 506B and 506C registrations, the proper filing of Form D, numbers of investors allowed, and verification of accredited investor status.  They should also understand tax law as it applies to angel investment including Section 1202, 1244, and 1045 as well as state breaks for economic development and federal breaks for research and development.
  • Proformas and financial analysis. Like it or not, there’s a lot of finance knowledge required to be a good angel investor.  Being able to look at a proforma and understand if it’s believable, or just a “hockey stick” graph someone put together to make it look good.  A proforma is a treasure trove of information about the company, its strategy and how it expects to operate.  Even though it’s never going to be right, the way that the information is presented gives the investor a window into how the CEO and team thinks.  Finance risk is significant for most companies and understanding how many future raises will be required, how big they will be and what the cumulative dilution to both founders and investors will look like is critical to assessing the potential for the deal.
  • Market Analysis. Understanding the trends in a market, competition, actual pain points and return on investment for customers is one of the most important parts of understanding the viability of a deal.  These require sensitivity to the particulars of specific industries and are not easy.  Many startup founders are technical wizards and they may have some insight into the needs of their markets, but many have no idea about how to create a go-to-market strategy, assess which channels are appropriate for their market, or how to allocate scarce resources to create the lowest Cost of Acquiring a Customer relative to the highest Lifetime Customer Value.  Many startups are blind to their competition and claim that they “have no competition.”  This should cause any investor to run from a deal.  Creating “virality” is an art that is lost on many tech or healthcare founders and angels should be able to assess the viability of the market strategy.
  • Post Investment Management and Serving on Boards. The work of the angel investor is just beginning after the check clears.  Managing the investment after the check requires expertise to help ensure alignment and to guide the CEO towards the best exit opportunities.  Serving on boards carries fiduciary responsibilities.

Unlike the questions for the FINRA Series 7 exam, most of the knowledge required for angel investing certification centers more around principles, definitions and best practices rather than distinct points of law.  Only about 10% of the angel certification test is about specific regulations and point of law, yet the knowledge the test represents is what angel investors should know.  This ratio represents the ratio of technical to legal know-how in other professional exams and would represent a step-up in the professionalism of angel investing.

The SEC has set income and asset limits to the definition of accredited investors with good intention.  Unfortunately, simply having wealth does not make one qualified to make good investments and there are plenty of stories of wealthy people making imprudent investments that resulted in disaster.  Better to allow a criterion based on knowledge, so that investors understand how to balance risk and opportunities through diversified investments and well accepted principles of successful angel investing.  We hope the SEC will consider this certification as a means to becoming accredited, and open up angel investing to a broader audience while accelerating American economic development through greater investment in our job creating startups.

 

Peter Adams

Managing Director, Rockies Venture Fund I, LP
Executive Director, Rockies Venture Club, Inc.
 Buy Venture Capital For Dummies on Amazon