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  • Tech Boom Series: Part Three
  •   Perfecting the Pitch

    By Shannon Henry
    Washington Post Staff Writer
    Saturday, September 19, 1998; Page D01

    "Pretend you're explaining your business to an 11-year-old," advises William Gust, a local venture capitalist. Jamey Harvey, a young entrepreneur who's preparing to ask a roomful of strangers for $4 million for his online computer game company, nods. It is wisdom like this he is going to need.

    Harvey, 29, is chief executive of Digital Addiction of Laurel, a company he started in his mother's attic in 1996. On Wednesday he and 30 other company heads got eight-minute windows of time to tell -- and sell -- their stories before an audience of about 500 money people at a venture capital fair, a kind of star search for tech companies.

    An expert in CD-ROM comic books and interactive games, Harvey plans to tattoo the symbol of his first game on his derriere when his customer list hits the 1 million mark. Inspired by the white hearse that one of his programmers drives to work, he's now in the market for a company hearse, which he will paint lime green or electric blue.

    In a coat and tie, he has the earnest look of a young stockbroker. Otherwise, it seems unlikely he even lives on the same planet as venture capitalists, often straight-laced people who represent capital funds that invest in start-up companies.

    But his company needs their money. So on Wednesday, with his appearance at the Mid-Atlantic Venture Forum in Tysons Corner coming up, he welcomed to his office four experts in the game of winning these people over.

    The pitch to the "VCs" is a rite increasingly common in the Washington area, which is emerging as an important birthing station for entrepreneurial technology companies. Just as politicians must find big donors to win office, companies often must line up backing from these investors if they are to grow and mature.

    Digital Addiction makes Sanctum, a game in which players battle each other in real time over the Internet, casting spells on each other using collectible cards. It's come a long way since Harvey created it in his mother's house in Arlington: It's moved to offices in Laurel. It's got 12 employees and about 10,000 user accounts, each of which has generated an average of $50 to $60.

    It's been a fight for money every step of the way. It began with family loans -- Harvey says his parents' life savings are in the company -- and money he'd made from selling a company he had founded. When Digital Addiction was near broke at the beginning of this year, Harvey held three pass-the-hat kind of gatherings where he invited anyone he could think of to come to a "cheesy" hotel room to hear about the company and possibly invest.

    What he's about to do is in a different class altogether, however, so he prepares.

    On hand at the coaching session are Gust, who is managing general partner of Baltimore venture firm Anthem Capital, and John Konawalik, senior manager at PricewaterhouseCoopers in McLean. Also present are Doug Humphrey, a local cyber investor who has put $150,000 into the company, and his wife and collaborator, Lisa Losito, who runs a technology "incubator" facility that houses Digital Addiction.

    "The object of today is to get all my stinking up out of the way," jokes Harvey.

    Later he runs through his proposed presentation, showing screen after screen of a computer graphics presentation as he goes. Though Harvey is a born performer (he's acted on stage and written plays), the delivery is not so smooth and there are gaps, contradictions and confusing statements.

    The advisers take notes and then start the critique. It's agreed right away that Harvey's primary challenge is a big one: Venture capitalists don't like the often-volatile computer game business.

    So the coaches advise Harvey to concentrate more on his new technology that lets people e-mail games to each other. Use examples people will understand easily, Losito counsels, such as comparing the ease of Internet game delivery to the way jokes are now e-mailed among friends.

    Harvey has mentioned too that he's talking to a household-name game company and it may invest, a bit of news that the coaches are pleased to hear. "That would raise you above the noise," says Gust.

    There are words the coaches suggest Harvey not use, such as "free" because investors don't like that word, and "micropayments," because it's considered a failed technology strategy.

    Harvey asks whether he should add some jokes to the mix. Humphrey says yes, but delivery is important. "Say it very straight and if there's laughter, don't acknowledge it. If they don't laugh, no big deal."

    Humphrey also thinks Harvey takes too much time giving credit to everyone who has helped him along the way. "You shouldn't feel like you owe them equal time," he says.

    Back in his office after two hours of pulling apart the speech, Harvey stretches in his chair and says he's glad it's over. "I find the coaching sessions much more stressful than the presentation," Harvey says.

    The Big Eight Minutes draw closer. At a reception the night before at the Tysons Ritz-Carlton, where the conference is taking place, Humphrey and Losito squire Harvey around the room, making introductions to anyone he should know.

    Humphrey's influence on the company is so important that Harvey refers to Digital Addiction's development in terms of "B.D. and A.D., Before Doug and After Doug."

    "We cleaned these guys up and made them a real company," says Humphrey. "Our role is to take start-ups and make them easy to invest in." Losito adds that if Digital Addiction gets the money Harvey is asking for, it will be the first company to graduate from the incubator and move into its own commercial space.

    Harvey works the reception on his own as well. Though he doesn't drink, he ends up after the reception in the bar of the Ritz-Carlton with a group of investors, before heading out at 11 p.m. to a Kinko's shop to copy his presentation. "I'm trying to get people to say 'at 10:20 a.m. I've got to see Digital Addiction,' " he says.

    The day of the forum, Harvey looks both wired and rested in a dark suit and red and gold tie. It's one of four suits he owns and hardly ever wears.

    Ideally, the fair will attract a "lead investor" who will pledge the first chunk of money and spur a few more firms to invest a total round of $4 million in Digital Addiction. As his cue draws near, Harvey feels the pressure. "My parents have invested their life savings, I put in my life savings, my grandparents put their life savings in," said Harvey. "We're doing this. There's no other way out than success."

    Then the pitch goes off with hardly a hitch. Harvey gets a good laugh from the line: "One of my coaches told me to explain it like I would to an 11-year-old." He barely gets a chuckle from "Children, grandparents, even venture capitalists know how to use e-mail." But he takes Humphrey's advice and doesn't pause for the laugh, or the silence.

    After the presentation, Harvey walks is immediately surrounded by friends and potential investors, offering cards and congratulations. Says Evan Smith, a lawyer with Greenberg, Traurig in McLean, "You lived up to your buzz."

    Later 10 dark-suited men walk one after another into a private reception room, where Harvey awaits them. They sit down and ask tough questions, such as how he gets people to pay for games when there are so many free ones on the Internet, how he avoids being hacked and how, exactly, the game works. He answers slowly, carefully, patiently.

    "I like the concept," says Terral Jordan afterward. He is vice president of T. Rowe Price Associates in Baltimore and one of the inquisitors. Digital Addiction is one he'll watch. He has asked for a CD-ROM copy of the game and says he'll have his teenage son test it.

    No on really expects that a VC will write a check on the spot. In fact, Harvey thinks that seriously interested investors would more likely call than show up at the post-presentation session, because they tend to dislike any public show of interest in potential deals.

    At the end, Harvey has gathered 25 business cards from VCs, 10 of whom he figures are serious prospects.

    Harvey says he is surprised that several Boston area firms expressed the strongest interest. He had thought a Washington group would be the lead investor because venture capitalists often like putting their money nearby. But, he said, most area firms either thought the game industry is too risky or didn't like the size of the deal.

    "This is just the beginning," observes Harvey. "We've generated a whole lot of interest. Now there are meetings to set up, pitches to make. A lot of work."

    © Copyright 1998 The Washington Post Company

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