From The Bulletin in Bend, Oregon
The start-up funding contest Venture Out Festival brought attention to the outdoor products industry, but making sure big money follows the winners hasn’t been easy.
The Oct. 18 event features three cash prizes, ranging from $2,500 to $10,000. The opportunity to land six figures will come from the state economic development agency Business Oregon, which has committed $100,000 in revenue-based lending for one or more qualifying Oregon companies. That’s a change from Venture Out’s first year, when the top award was structured as a private investment, similar to the Bend Venture Conference, which pulls in millions for competing companies, mostly in software.
Venture Out co-founder Gary Bracelin said the event organizers have learned that equity financing, in which investors take a stake in the company, isn’t necessarily the best model for outdoor product designers. Their companies aren’t valued as highly as software firms, and their capital needs might not justify giving up a stake in the firm, he said.
“It’s not that we’re not trying to engage that,” Bracelin said of the venture-capital world. “We’re just not trying to force it. It’s not what it’s all about for these companies.”
That was the case with Venture Out’s inaugural growth-stage winner, SnoPlanks LLC, a Bend-based maker of bamboo snowboards. Co-founder James Nicol said SnoPlanks didn’t take advantage of the top award, which was a $100,000 investment.
“We’ve bootstrapped this thing from day one,” he said. “We decided to keep going down that road.”
Through participating in Venture Out, however, SnoPlanks encountered another, unnamed investor, whose terms were more in line with the company’s needs, Nicol said. Venture Out also led to sales opportunities and business partnerships, he said.
“The exposure through Venture Out is what made a huge difference to us,” he said.
Venture Out is held at the Tower Theatre the day before the Bend Venture Conference, which starts Oct. 19. This year the outdoor-focused event drew 40 entrants, including several from outside Oregon.
Participants have been narrowed down to nine finalists in three categories: Digital Ascent for technology-based recreation companies, Break Out for early-stage companies and Ready to Roll for growth-stage companies. The $2,500 Digital Ascent and $10,000 Break Out awards will be determined by audience vote, while a panel of judges will determine the $5,000 Ready to Roll award.
The Business Oregon financing could go to any one of seven finalist applicants, said Tom Schnell, business finance officer. Because the loan money is state-funded, only Oregon-based companies are eligible, he said. Companies also must be generating revenue, he said.
The Small Business Expansion Program that’s being offered to Venture Out participants is designed for companies that lack collateral or other guarantees that would qualify them for a bank loan, Schnell said. “It’s a lot higher-risk loan,” he said.
Unlike venture capital, which expects 10 times its investment in return, Business Oregon will be looking for a rate of return at 1½ to two times its money, Schnell said. The loans are repaid through a portion of future revenue, he said, so companies that are projecting high sales growth and a high profit margin are a good fit.
“Almost all of the Venture Out companies would fit within this program,” he said.
The Small Business Expansion Program is four years old, but it’s still considered a pilot program within the Oregon Business Development Fund, Schnell said. Last year, Business Oregon made $400,000 in loans to companies participating in the Bend Venture Conference, he said. Local companies that have taken advantage of the program include DrinkTanks, The No-Bake Cookie Co. and Cascade Wellness Technologies, which automates hot-and-cold treatment for injuries.
Not all companies are a good fit for venture capital, or traditional banking, but that doesn’t have to be the end of their quest for capital, Schnell said. “This is what we’re trying to do is raise awareness there is money out there,” he said.
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