Organizers and participants at the Big Sky Venture Capital Conference say that the event is helping put Montana and its entrepreneurs on the map.

By Nicole Rosenleaf Ritter

August 28, 2007

Since its founding in 2001, TechRanch--the Bozeman incubator that helps Montana-based entrepreneurs grow their companies from idea to reality--has played host to plenty of venture capitalists. Turns out a lot of them like to fish.

"I tell them, 'If you come out and spend a day with our entrepreneurs, do a brown-bag seminar over lunch about what you do, maybe spend some time with some of our later-stage companies like Zoot or RightNow, spend a little time at the university. You do all that, and I'll take you fishing,'" TechRanch founder John O'Donnell says, describing part of his traditional pitch to lure venture capitalists from places like New York and San Francisco to Montana.

The only trouble is that O'Donnell doesn't actually get to fish with them very often. While the trout streams beckon, the business opportunities prove to be the real catch.

"On many occasions, we've had the guy come to us the next day when it's time to go fishing and say, 'Well, gee, I'd rather go back and talk to one of your other companies. I'm not sure I want to go fishing,'" O'Donnell relates.

It's a situation that O'Donnell and his TechRanch colleagues saw writ large when they helped organize the first Venture Conference for the Northern Rockies, held in Jackson Hole in 2005. In 2006, the conference moved to Big Sky, drawing 185 people--including more than 60 venture capitalists and angel investors--and showcasing 34 companies in search of funding. This year's conference--held last weekend at Big Sky--was even larger, though the presenting companies were trimmed to 22.

More than likely, some of the investors who came the first time were drawn in by the publicity materials, which featured some of the best of Montana's natural majesty and another nod to the fishing. But that relaxed setting has proven beneficial not just for attracting participants but also for enticing their return--and making their time in Montana profitable.

Mark Dobeck, a longtime entrepreneur best known as the founder of DynoJet, went to the event last year to pitch his latest venture, Dobeck Performance. He says that the surroundings made it easier for presenting companies like his to get undivided attention from big guns in the venture capital (VC) industry.

"Any other time, everybody's life is complicated. The BlackBerrys are going off," Dobeck laughs. "At this particular event, everybody shuts down."

The attention proved useful for Dobeck, who says that he has an ongoing relationship with two of the VC companies he met at the conference. "I made awesome contacts," he enthuses.

Bill Klem--the Bozeman-based co-founder of Sokets, Inc., a residential energy management startup that is one of 22 companies presenting at this year's conference--is hoping for similar access. He attended last year's event, but not as a presenter, and says that he was very favorably impressed.

"It's a great forum--very well done," Klem explains. "You get a really high caliber of investor and a really high caliber of participating companies. We're really honored to be a part of it."

MAKING THE GRADE

Sokets and Dobeck Performance were chosen to take part in the conferences through a competitive application process. TechRanch's Gary Bloomer, a main conference organizer and a member of the committee that selects companies to present, says that the process crosses states and industries in search of the enterprises best positioned to benefit from the conference.

"We have a selection committee...spread out through Idaho, eastern Washington, Colorado and Wyoming," Bloomer elaborates. "They're looking at the opportunities that come in and grading them with respect to the management team, the projections that the entrepreneurs are putting into the application, how interesting it is from a financial perspective and what stage the company is in--for example, are they doing their startup round or seed round, or have they been through three rounds of financing? We want to have a selection of companies at different stages."

While the chosen companies in 2007 work on projects as varied as biotech, IT and sidecar motorcycles, they in fact represent the very small segment of business for which venture capital is viable.

"As much as we make out of the Big Sky Venture Capital Conference, we have to be clear that venture capital is not an appropriate financing vehicle for most companies," Bloomer notes. "It's only appropriate for a very narrow sliver of companies, no matter where they're located."

That means specific benchmarks for potential and industry type, O'Donnell adds.

"One of the things that is almost an absolute is global markets," he explains. "For example, RightNow Technologies and PrintingForLess.com derive less than one-tenth of one percent of their revenues from within the state of Montana. Companies that only serve the local community or region are probably not a fit because there's not enough market for them."

That global reach can mean higher revenues--and better returns for investors. "Typically, if your company isn't going to be dancing around the $50 million revenue number in five years, that may be a great investment for a local angel (investor), but this conference is geared more for the companies that can really scale up because they have global markets," O'Donnell says.

Reliance on intellectual property--rather than, say, product manufacturing--is also a key component. "Not necessarily but oftentimes, the core asset is intellectual property," the TechRanch founder indicates.

'THE PERFECT STORM'

For those companies that do fit into that narrow market niche, the rewards of the conference can be considerable. O'Donnell and Bloomer acknowledge that tracking actual investments made as a result of the conference is very difficult--some companies may have been in contact with VC firms previously, or later deals could result in significant investments--but say that attendance tells part of the story.

"We prefer to track the number of investors who are coming to the conference and those who come back, and the number of investors and the qualities of the firms that those investors are coming from is increasing," Bloomer asserts.

Pressed for a quantifiable investment estimate, O'Donnell says that he is confident that "the 34 companies that presented last year have collectively raised over $10 million since the conference, and probably more."

Former presenter Mark Dobeck notes that the feedback and opportunities he has had as a result of last year's presentation have been extremely valuable. "The conference for me was really about getting my business plan critiqued and getting to really understand the investment mentality--how and what they're looking for," he explains.

He adds that the frequent opportunities for networking outside the sessions made it easy to meet people who otherwise may not have given a Montana startup the time of day. "There were guys there who were huge (in the VC industry) and (as a result of meeting them at the conference) I was able to have email correspondence with some of them who were willing to help with information, even if they weren't interested in investing," Dobeck relates.

That kind of access is at the heart of the conference mission, according to O'Donnell. "It's very, very difficult to raise money in a place like Montana," he says. "It's far easier in, say, Seattle or Denver because there are venture capital firms there, there are conferences there, there are established angel (investor) networks there...there's a whole network."

The successful Big Sky events are playing a role in changing putting Montana on the map, according to local entrepreneurs. "The Big Sky Venture Capital Conference is a great way to show everybody the kind of talent, the kind of ideas, the kind of solvent companies we can build in this area," Soket's Klem says.

O'Donnell agrees, adding that his travels in the VC world have shown him that the Bozeman area is making it on to the radar of investors.

"The reality is that we live in this gorgeous place, with a major university right next door, an airport nearby and a lot of affluent people moving in from all over who cut their teeth in other markets. And we've got incredibly smart, hardworking people who are looking for good, high-paying, clean jobs," he says. "It's kind of the perfect storm."

Nicole Rosenleaf Ritter is the managing editor of Business to Business.