re·con·nais·sance re·con·nois·sance (rĭ-kŏn’ə-səns, -zəns)  n.
An inspection or exploration of an area, especially one made to gather military information.

[French, from Old French reconoissance, recognition, from reconoistre, reconoiss-, to recognize.]

Venture capital is best practiced in the field, not in the office. An investor can’t sit behind the desk and read business plans, analysts’ reports, news etc. and make good investment decisions. In a similar fashion, investors must work with their portfolio companies in the field to add value and ascertain the progress of the company. Conference calls are no substitute for a look-them-in-the-eye meeting. Following are some illustrations of venture capital in practice.

Trade Shows and Conferences

These are great places to learn what’s happening in the marketplace, network with entrepreneurs and public companies. By ‘walking and stalking’ exhibit halls, an investor can gain first-hand knowledge of market trends, competitors, and new technologies. You’ll notice a substantial number of these on the calendar every year. It’s a great place to meet an investor away from office distractions and focused on reconnaissance. Investors can also do portfolio work here thru business development and industry contacts. Often, attendees will bemoan the value of a trade show or conference. When that happens, ascertain how much preparation went into the event before the plane landed. Did they have meetings set up? Did they have a plan of action, research or networking? Were there companies or customers they intended to cold call? Like the old saw says, ‘you get out of it what you put into it.’

Meeting with Companies

Meeting with companies at their offices is seeing the animal in the natural setting. Investors get focused, unfiltered exposure to inventors, founders and management teams. Often, little things do make the difference. For example, I visited a company making batteries many years ago. As we toured the pilot manufacturing facility, I noticed there were no manuals, flow-charts, procedures or documentation to be found in any of the manual assembly areas. The emphasis then is on ‘prototype’ not ‘pilot’ as has been suggested by management.

Meeting with Entrepreneurs

When we invest, the expectation is we will work with this management team for years – so trust and chemistry is crucial. The due diligence process is an exercise that evaluates not only opportunity but also the effectiveness of the investor and management team working together. Another major reason for meeting with a lot of startup leaders is to gain knowledge in a particular area of interest (albeit second-hand), to make sound decisions about differing technical approaches, market forces and competitors.