Avoid getting over-excited at demo days and investor gatherings

When I first started attending trade shows as a product vendor, I would get excited by all the new business we seemed to be generating at the show.

New prospects would flood our booth asking about our products. Some were clearly looky-loos, many just there for the free candy. But half needed our product, a quarter understood they needed our product, and one out of ten wanted a quote immediately so they could order it tomorrow.

We’d usually come home with 200 prospects to follow up with, including 50 hot prospects and 20 marked as ready to purchase. For a startup that sold $100K pieces of IT equipment, I was ecstatic at so much new business in the pipeline.

How many new orders did we actually get? If we were lucky: one or two. Those 20 hot-hot-hot prospects? It turns out they weren’t so hot. The boss didn’t approve. There was no budget. They had other priorities. Mostly, they just ghosted us after the show.

Newton’s First Law of Purchasing

The first five times that happened, I thought I was just a bad salesperson who couldn’t close deals. (I am, but it turns out that’s irrelevant.) Eventually I learned from other salespeople this is just the nature of tradeshows.

You meet prospective customers and the product is a perfect fit to solve their problem. You expect them to order immediately. But they don’t. There’s a process. There’s other priorities. There are budget constraints. It’s always easiest to do nothing. That’s Newton’s first law.

Newton’s first law of purchasing: a customer will continue doing the exact same thing until forced to do something different.

I call the high that comes from talking to customers who need our product all day “tradeshow europhoria.” As I walked around to meet the other booths, it was easy to tell the excited noobs from the jaded veterans.

Once I realized the key wasn’t making immediate sales but introducing the product so potential users would call us when they were ready, I was able to relax. I changed my strategy. I focused more on education and less on sales. But mostly, I didn’t get excited when someone said they were ready to purchase. Instead of a 90% chance of a sale in our CRM, I marked them as 10%.

We’d get a few sales out of the show, but they’d come slowly, after a lot more questions, demos, and price negotiations. It was impossible to predict which of those prospects would eventually buy. It often wasn’t the most excited customers, nor the ones with the greatest need. It was mostly about being at the right time and right place with the right product when they needed it. And the same is true for finding investors.

Newton’s First Law of Investing

When I talk to founders fresh from a demo day or investor gathering, I hear exactly the same excitement. I call it “investor europhoria.”

They’d meet 50 VCs at the gathering and at least half were excited about their startup. A quarter asked for a pitch deck to circulate, and some already scheduled a pitch. At least five asked to see the term sheet — they were ready to invest!

The founders were sure their entire round had just been filled. Their biggest problem seemed to be deciding how much to oversubscribe. Even their next round seemed full from the big funds that were interested but only wrote large checks.

The startup was taking off! Their funding worries were finished. The VCs even offered to introduce them to big customers. They were at the inflection point of the hockey stick. They were on their way to becoming the next unicorn.

I hate to be the party pooper (though I am quite good at it.) Take a deep breath. Get some perspective.

You’ve made good contacts with potential investors. Great. Now the work begins.

You’ll need to follow up, you’ll need to pitch, you’ll need to answer the same stupid questions a million times.

Half of those investors who seemed excited will ghost you. Sorry, that’s just the way it is. No matter how many times you follow up, you’ll never hear from them again. It’s nothing you said, it’s not your body odor (though showering regularly can’t hurt.) It would be nice if they gave you some feedback, but most never do. They get thousands of applications and need to focus their time on the ones they’re moving forward with (their words, not mine).

The ones who seemed ready to write a check today, well…in the cool light of the morning, when the alcohol has worn off, they’re not as excited.

Perhaps they realized your startup is not quite a fit for their thesis. Perhaps they’ve invested in a competitor. Perhaps the associate passed it around and the partners pooped on it. Perhaps the fund doesn’t actually have any money to invest. There’s no way to know.

And those big funds that want to write you a big check? Believe it when they send you a term sheet. When you hit their milestones and check in again to see if they’re serious about investing.

Newton’s first law of investing: an investor won’t write a check until forced to.

The pitches are great, the company looks certain to succeed. Talking with the founders in the networking session afterwards, it’s easy to get excited, especially after a few drinks. It’s easy to say send me a deck. It’s easy to say this is a great fit for us.

But when it comes time to actually write a check, it’s easier to say no. It’s easy to say too early. It’s easy to say come back when you have a lead investor, or meet the next milestone, or add a key employee to the team.

It’s hard to write a check and place a bet that’s more likely than not to fail. It’s hard to write a check until everyone else has, too. There’s no reason to be the first to write the check; better to wait until the round is nearly full.

The investors that are truly interested will begin a formal process: pitch, review, terms, diligence. They’ll see who else is investing and talk to your customers. The process will take months. Along the path to funding, many will drop by the wayside.

But once you get past the euphoria and unrealistic expectations, you’ll see what you’ve actually accomplished: you’ve built a great funnel of potential investors.

Most won’t invest, but that’s okay. Because the few that get it, that believe in you, will write a check and become your greatest supporters. It’ll only be a few, and it will take a while, but you’ll get there.

It can’t hurt to be just a little jaded (though not too much.) Take the demo day promises with a grain of salt (and a couple of aspirin). The checks won’t materialize overnight. It’s part of a long process. But you’ve made good progress in finding the small handful of investors you need and you only need a few.

Enjoy the euphoria for a night, then put it away and get to work with follow-up to turn those leads into investors.

SüprDüpr, the teleportation startup, raised $1B from two VCs in their Series A round, making them the first-ever virgin unicorn. But what will happen if their public demo fails? And why is their Chief Elephant Officer missing? Find out in the award-winning Silicon Valley mystery novel, To Kill a Unicorn.