Beware the speculator; when did we become so popular?
(by Justin Craig, Joint Managing Director at LiveBuzz)
Recently, I’ve been receiving more and more speculative approaches from venture capitalists (VC) interested in taking a stake in our business. Maybe I should be flattered. Increasingly however, these calls are giving me cause for concern regarding how our industry risks becoming the latest plaything for the investment community, full of new companies geared for rapid build and exit and not focused on client needs.
I don’t quite know how or when the events sector became so attractive to investors. It’s probably got a lot to do with the amount of valuable, proprietary technology swirling around in the sector nowadays; something which has turned events technology into an industry sub-sector in its own right.
But when I see the number of companies making big noises about the amount of investment behind their latest game-changing technology, I get nervous. The relentless promotional blurb, backed by investment mega-bucks, does our industry no favours. I’m sometimes shocked at how over-geared certain event technology offers are and it’s been no surprise to see several of them retrenching and or being sold on at a loss.
I ascribe to the old-fashioned business model approach. Deliver a product or service that somebody needs and do it in a profitable fashion. If an event-related technology is good enough, it will be profitable within a year or two. Yet investment funds are now propping up new technologies which I think are struggling to be profitable.
I understand the approach; VCs are speculators looking for the latest sector on the cusp of a growth explosion. But I fear that their presence could upset the equilibrium of our sector. Confidence in existing, proven technologies could be undermined and valuable smaller players within the industry could feel the pinch. And all because event organisers’ heads may be turned by substantial amounts of promotional activity for technologies which have never yet turned a profit.
If some of these technologies do subsequently benefit from the investment and manage to establish themselves in the mainstream events consciousness, then fair enough. I think they will struggle on two fronts though.
Firstly, a pure technology play can find the events industry hard to crack. What appears a simple, straightforward, linear process on the surface – announce event, invite people, host show – is an incredibly complex discipline with so much going on behind the scenes. You can buy a technology but you can’t buy the required industry insight and experience to land it successfully. At the intersection of technological wizardry and industry know-how is where you make your margin.
Secondly, with a VC paymaster, timings and ambitions change. Investment – and the requirement to deliver a short-term return - brings a whole host of pressure with it and changes the decision-making process. Doing what’s best for the business at an accelerated rate becomes the priority, rather than doing what’s best for the client.
When I look back, we built our LiveBuzz technology proposition at a pace which suited us. We had to innovate and invest while managing cash flow (although we’re still spending over 30% of turnover on our research and development activities). We made it work and we made it profitable, in no small part because we never had to put ourselves in an awkward position merely to keep a third party happy.
Resisting the investment dollar is hard; I get that. But do we risk creating an events technology investment bubble which, when it bursts, has serious ramifications for the quality of the events we all help to deliver? Possibly.
Still, the saving grace then would be the presence of a few bargains around for interested trade buyers once the investor community’s funds and goodwill begin to run scarce.
I’m not trying to talk down the prospects of all investment-backed firms in our sector. Some will make it work – and good luck to them. But there’s going to be a lot more noise in the market about the latest shiny technology offerings. Event organisers will have their heads turned, especially some of the newer ones. All that glitters is not gold though; keep an eye out for the technologies which have already proved their worth. That’s just good old-fashioned business sense.