Court Venture Capitalist Dollars

By Maria Carter, December 5, 2014

Launching a conference isn’t so different from starting any other type of business. Events need capital too. Yet venture capital firms may be reticent to entertain these types of proposals. “Investing in a particular conference is fairly short term—it’s not necessarily a highly scalable opportunity,” says Arlan Harris, managing partner at LifeGate Venture Capital, an Addison, Texas-based firm focused on Christian-influenced startups.

Indeed, Steve Arterburn, who used venture capital to start the parent organization of the Women of Faith conferences, was met with resistance when pitching his idea in the early 1990s. “I remember one venture capitalist saying, ‘Steve, you can’t make money doing seminars for women,’” he recalls. Yet the event was a runaway success, earning $35 million in revenue and netting $5 million in cash the year Arterburn and his investors sold it to Thomas Nelson Publishers.

The bottom line? Venture capitalists are looking for a good business opportunity. It’s your job to convince them of a worthwhile return on investment. Read on for insider advice on the research, proposal and pitch tactics needed to win over backers.

The Groundwork

> Find your people. Harris says the No. 1 thing he looks for in a pitch is an all-star management team that’s worked together before, is passionate about the project and “not in it just to make a quick buck,” he explains. Connections are key. For example, Arterburn spent time building relationships with best-selling female Christian authors—potential speakers for Women of Faith. “I was confident in my pitch, because I had asked my contacts, ‘If I get money for this, would you be part of it?’ They’d already said yes,” he says.

> Crunch the numbers. Investors will want to see a projected timeline for profitability. Arterburn, whose budget didn’t allow for hiring an accountant at the time, worked out the financials on his own before pitching. “I went through each month, adding it up manually,” he says. “It took me two days to do what an accounting major could’ve done in two hours, but because of that I really understood every detail of what I was up against financially.”

> Scout potential firms. Venture companies specialize in different areas, and only a very small percentage cater to faith-based startups. Harris’s LifeGate, for example, although looking for opportunities that will make a positive Christian impact on the secular world, prefers to work with those in the mobile, social media and entertainment arenas. Arterburn’s investors were not faith-based. “They were not committed to funding anything that had to do with faith,” he says. “They were committed to ideas that would make them a lot of money.”

The Proposal

Venture capital firms are inundated with proposals. “We don’t want to read 100-page business plans,” says Harris. “We like to see a one or two-page executive summary.” This summary, according to Harris, should include:

> An elevator pitch. What problem will the conference solve?

> Team bios. “That’s probably the most critical element in any investment,” says Harris. “We’re really investing in those people, so understanding their backgrounds and what value they’re bringing is important.”

> Statement of scalability. Ultimately investors want to know how much money they stand to make on a deal. Consider, “At its peak, is this going to be a $5 million business or a $100 million dollar business?” says Harris.

> Competitive analysis. Who are your competitors and how are you different
from them?

> Explanation of the product or service.
Again, keep it brief.

> Financial overview. Present a quick rundown of potential revenue, how much capital you’re seeking and time needed to
show profitability.

The Pitch

Before the pitch meeting, do a dry run with friends, suggests Arterburn, and get feedback on how you look and sound when you’re making the presentation. Invest in a good suit, nice shoes and a watch. “You need a look that says you care about details, that you are well-groomed and would probably have a well-groomed organization,” says Arterburn, adding to avoid anything flashy, which raises red flags about irresponsibility or extravagance.

If in-person presentations aren’t your forte, get someone else to present for you.

During the pitch, Harris says he wants to hear why you’re there and your credentials. “The No. 1 thing in making the decision to invest is the management team,” he says. After that, crucial factors include scalability, competition and intellectual property concerns (for technology). Be prepared to address barriers to entry too. “If it’s that easy, as soon as you’re doing it, everyone else will be doing it,” says Harris.

Arterburn prefers to end his presentations with a promise to potential funders: “If you invest in me, you will not be disappointed.”

Return on Investment

Working with venture capitalists is like marriage, says Arterburn. “Getting married is one thing, and being happily married is another.” In other words, getting the money is the easy part; creating a return from that investment is where the real work begins. When your conference reaches its peak of success, be prepared to sell.

At LifeGate, Harris and his partners aim to sell a business venture within two to five years. They offer equity ownership, taking a percent ownership in the company in exchange for capital. From there, they work to increase the value of the company, then look for an exit through public offering or acquisition by another company.

Because venture capitalists expect to see return when the business is sold, you won’t have the burden of paying interest while you’re growing your conference. “It’s one of the advantages to venture capital versus other types of capital,” says Arterburn.

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