Venture Deep Dives: FaithTech

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  Hey, everybody. My name’s Grant Demeter. I’m an investor at Yard Ventures, which is a Harvard Network-empowered VC fund and part of the AV family of funds. And today I’m gonna be taking you through a deep dive on a topic that’s near and dear to my heart. It’s called Faith Tech, which is kind of a, perhaps, overlooked part of the venture ecosystem—businesses which target faith-based individuals and faith-based organizations.

  And, you know, many people when I brought this up have asked the question of whether this is really an investable space. And I would give a kind of trite answer, which is that religion has been the stickiest and most retentive human institution of all time—thus probably the most fundable startup ever, if we were to fund, let’s say, Christianity. A large portion of the economic value created in human history has been in some way affiliated with religion.

  Not just architecture and art, but also social organization and government—even some of the first professions which didn’t involve farming directly tied to food production and which were professional in nature were religious posts. So, my response would be: why is this not an exciting and interesting space to invest in? There’s a lot of stickiness here. There remains a lot of growth here, and this is significantly under-penetrated by tech today. So, I actually find this to be a very interesting space to be talking about with you today.

  Quick lay of the land—I’ll walk you through my definition of the space and my thesis on investing in the space. I’ll take you through what I view to be favorable and kind of unfavorable aspects of startups which are investable and not, some high-level trends, opportunities in the size of the market, some validating or invalidating signals to my thesis playing out in the market over the ensuing years, some companies which I’ve been following, and some resources that I’ve been following.

  On the resources front, I actually, on my personal blog, have done three in-depth market analysis pieces on this space to actually go a little bit more in-depth than today’s deep dive will. So, I will direct you to those later on.

  So, let’s jump in. How am I defining the market? Well, you could define this market very broadly, and there are some market studies which define it as a trillion-dollar market based on affiliations to charities or, you know, organizations like Chick-fil-A which have some kind of religious lean to them. But I define it quite conservatively, I think, as a $130 billion market in the U.S. in terms of annual turnover.

  And this market is digital products and services for individuals of faith and organizations of faith—so, consumers and businesses. And I’ll use this visualization here to kind of break down how I think about the market’s verticals.

  So, starting from the top—you’ve got two customers: you’ve got organizations and individuals. And these products for religious organizations and individuals are often for these individuals and organizations, but focused then on themselves or on the other individuals and organizations which comprise their religious community, because these are human institutions. So, the products that we’re talking about are either: for organizations for internal organizational use, for organizations focused on engaging with their community, for individuals focused on engaging with their community, or for individuals focused on internal individual use.

  So, I’ll go left to right here. On the organization side, you’ve got stuff like keeping the lights on—vertical SaaS focused on finance, talent, real estate, etc. Then you’ve got in the organization-community side, congregation management. So, the way that an organization would have a CRM and marketing platform, churches, synagogues, etc., also have those. They have to engage with their congregations, and there are products which enable them to do so and host events digitally, for example.

  On the individual-community side, you’ve got obviously religious dating apps and religious social media and events, and there’s a lot of them. And then on the individual-individual side—individuals focused on themselves—this is where the bulk of the venture funding has been as of late. And it’s focused on apps which enable spirituality, digitize religious texts, prayer apps, meditation apps, etc. And of course, all of the commerce, all of the food tech, and a couple of other categories as well.

  And then on the bottom you’ll see that I’ve highlighted a little blank space for horizontal products. And this is gonna be a hot topic for analysis and discussion as we go through the presentation—which is: why create something that’s verticalized specifically for a faith-based organization or faith-based individual when another product that exists already in the market might be able to do something just as well?

  And that’s a question that I’m gonna interrogate throughout this, and also that I interrogate in detail throughout the pieces that I’ve written on my Medium account.

  But for now, let’s talk about my thesis. So, I mentioned that this is a big market—but it’s a giant market. This is one of the world’s largest addressable markets, and I’m gonna talk about this later in the slide. And it’s significantly under-addressed by modern digital tech solutions today—both on the consumer and the B2B side.

  My thesis on the B2C side is that these are incredibly sticky people for whom this is a core source of meaning. So, the opportunity for retention here is huge. For some people, there’s a discomfort about kind of business-lingoing religion, as I’m doing now—which if anything, kind of speaks to how important and central it is to many people’s lives.

  If you’re able to facilitate value for people’s religious lives, that value and what you’re doing for that consumer will be able to carry you through multiple years of continued engagement—compared with, I don’t know, Facebook or something like that. You know—who churns off the Bible? Fewer people than you may think. So that’s an example of what I’m saying there.

  And then on the B2B side—tech innovation has in many ways left this market behind, but consumer preferences remain high. People are used to having the latest in tech. Some religious organizations are finding that they are lagging in adoption, and as a result, losing congregants. So, tech adoption is, in a way, an existential requirement for the B2B side of things.

  And on the bottom, you’ll see two quotes from Connie Chan, who’s a partner at Andreessen Horowitz and thinks about the space similarly to me. To summarize the one on the left—this is my one on consumer retentiveness, which is: if you look at communities that people strongly identify with, that’s where they spend most of their time, and that’s where you get longer-term retention.

  And I would take that even further—I mean, religious communities are not just where people spend most of their time and thus generate retention because of mindshare. They are where people attribute most of their personal and life meaning, which means that the mindshare is more stable.

  An interesting fact: there’s a Bible app—you could look it up on your phone’s app store. It’s called the YouVersion Bible App. It is basically the Bible app. It’s got more than 500 million downloads, which is pretty wild. It’s tough to find any other consumer business startup at all that has 500 million downloads. Facebook is one of them, but there are very few others.

  So if this was a for-profit company, it would be a unicorn many times over, in Connie’s words. And I think that’s absolutely true. But think about it: this is a very simple digitization of a text. It’s not very feature-rich, willingness to pay is low, and still it would be a unicorn. What if you’re able to serve this same 500 million person market with a more feature-rich tool which generated higher willingness to pay? That’s kind of my thesis on the space.

  So, here’s how I would evaluate a startup in the space. I’ll first talk through the left side—which is what you would seek—and then I’ll talk through the right side, which are things that I would avoid.

  First, something that I would seek is customer-before-product. If you’re going to create something that’s verticalized for a specific subset industry, like faith-based organizations or faith-based individuals, you really—beyond another business that’s operating in the same space—have to know your customer. So, it starts with a deep understanding of your customer, not kind of a cool feature that you’re hoping to find product-market fit for.

  The second point is business-first, religious content second. If this is a venture-investable thing, I would say that it’s kind of a for-profit focused business with a thesis on this being under-penetrated and underserved, rather than an impact-focused business with a secondary kind of focus on making a little bit of money in the process.

  It’s something that you hate to say, but in a venture investing context, it’s something that I would be thoughtful of, because these are values-based organizations, and a lot of the individuals who are seeking to serve values-based organizations are values-based themselves.

  And then finally, willingness to pay. A lot of people in, I guess you could say, religious markets have been used to getting stuff for free. It’s surprising when you have to—if you’re going to buy a religious text—that you have to pay for it. It’s surprising that when you go to a religious service, you have to pay for any aspect of that.

  So, successful businesses will not seek to monetize things which were not previously monetized and hope to get away with it. Instead, they do one of two things: they either sit where the money already is—so, where are the financial transactions taking place already in religious communities—or they highly optimize and stand between a customer and a burning need that they have which is under-addressed, generating true willingness to pay.

  So that’s something that I’ll be very thoughtful of as we go through this slide deck.

  And then a few things to avoid: meaningless verticalization. This is my point on what if a horizontal solution could do this just as well? So, yeah—if you’re going to verticalize religious individuals or organizations, it has to be meaningful and it has to provide much more incremental value than the horizontal solution does.

  Excessive segmentation. Obviously, when you say people who are Christian, Muslim, Hindu, etc., there are hundreds if not thousands of individual communities underneath each one of those that you could hyper-focus on as your customer. Once you do that, you start to lose some of the benefit of the scale of this market. So, I would typically—as this is a nascent kind of market to the venture ecosystem—focus on broader focuses rather than specific customer segment–focused businesses.

  And then finally, as for everything in today’s market, be wary of significant capital requirements. Two lenses for that: number one, market downturn; number two, VC herd/flock mentality. This is a space which VCs haven’t historically invested in quite as much. So it’s a space that a company might theoretically have trouble going out to raise around.

  So I always suggest following established VCs and prioritizing profitable, scalable businesses in the space.

  Some interesting numbers here, just to highlight the promise of the space. Just a couple of high-level numbers on just two religions—Christianity and Islam: 2.1 billion Christians, 1.8 billion Muslims globally. That’s a lot. That’s only two of the world’s major religions.

  The question that I get often, and that I even had before I began to look into space, is, you know—“Isn’t the world secularizing? Isn’t religion kind of going down?” And the answer to that is quite complex. I devoted one of my thought pieces to trying to answer that question.

  But generally, the answer is that religion is still increasing on a global scale. It’s increasing both in the number of adherents for every religion, and it’s also increasing in the relative religiosity of religious populations. I’ll define religiosity in a minute.

  But first, I’ll say that there’s a regional nuance—which is that the Global South is where we’re seeing most of religion take greater hold and grow in greater number relative to population. That’s Africa, South Asia, and South America. But, kind of like mirroring tech, the Global South is where we’re seeing the highest degree of growth in adoption. But the U.S. remains the largest market. And that’s true for religion as well—largely for Christianity, but for Islam as well—in terms of product adoption within religious communities. The U.S. is the largest Western economy with the highest degree of religiosity. So, it’s a good place to start a business.

  And then religiosity—the definition of that is how many people say that religion plays a very important part in their daily lives. So, taking that YouVersion Bible App as an example—500 million downloads. How many of those are daily active users? That’s a proxy for religiosity.

  And then finally, speaking to the chart on the right, VC funding has been skyrocketing. It’s not huge in numbers yet, but it’s certainly getting there.

  Okay, so—some things to note which will prove or disprove my thesis on the promise of this market.

  On the left are things that I feel—if you observe them in the market—you’ll see that my thesis is coming true a little bit. That this is becoming a very investable space, or proving itself to always have been an investable space. And on the right, some negative trends which might kind of disprove my thought on this being a VC-investable space.

  So, I’ll just highlight a few of them starting with the left side. Anecdotally—and there are a couple of news stories on this—there have been religious organizations which have been formed and operated entirely on the metaverse. I think it’s a fascinating development. If we continue to see more anecdotes about this happening, that shows promise on the space.

  One thing I mentioned earlier on is a tech-driven consolidation of religious organizations. So, organizations which fail to adopt tech become subsumed by organizations which do adopt tech. I.e., megachurches continuing to grow—as an example for Christian organizations.

  The continued digitization of religious content and more religious content businesses coming up. One thing which is very interesting is a formalization of sales channels in religious organizations. As I’ve looked through the space and talked to founders and other VCs who invest in the space, one of the things that comes up is that folks who you meet at a synagogue or a temple, etc., and try to sell tech to—the buyers of your B2B SaaS tech—typically tend to be a little bit resistant to a traditional sales motion, because they’re values-based, they’re not experienced buyers, etc. There needs to be kind of a lubricating and formalization of the sales channel in order for tech to be broadly adopted and for the market and the CAC to be low enough to be attractive for new entrants.

  And I think that can happen in a number of ways. One way that will be kind of a proxy for the promise of this starting to happen is the small army of service providers enabling the transition. Like in every nascent market, it kind of starts off by service providers emerging to help people understand the market and leverage it—as we’re seeing in Web3, as an example.

  And then a miss—some of the horizontal applications and incumbents proving to be more valuable than any of the individual vertical plays. And I’ll talk about that later on.

  We may see more of a strong pushback from consumers and buyers of adopting profit-focused businesses for aspects of their lives which they feel are better left alone and are sacred, and should not be penetrated by tech innovation.

  Actual mainstream cultural secularization and a generational divide widening are two areas that we also should be thoughtful of. I like to say, if we continue to see digitization of religious assets, NFTs, and online communities, etc., we’ll see that religion has sufficient stickiness to be generating kind of modern economies in today’s digital marketplace. So, that’s something I always have my eye out for.

  So I’ve made this market visualization which I introduced Faith Tech with into a bit of a market map, to kind of break out how I think about and how I segment individual subspaces within the broader market.

  Not only are they broken into four verticals, but each vertical may have a sector or two that I want to highlight on the slide. So, I’ll go left to right and then I’ll cover the bottom.

  Under Organization—this is vertical SaaS stuff. As an investor, I love vertical SaaS. Other investors—they caught onto this about 10 years ago, that vertical SaaS for religious organizations was a highly investable space, with a strong degree of customer recurrence, incredibly high profit margins—as traditional SaaS businesses have—stickiness and a very large market for expansion and a strong opportunity to cross-sell into additional products once you have a relationship.

  Ministry Brands is a roll-up that’s based on that. It’s a roll-up of vertical SaaS businesses for churches. It’s been so successful that it has $100 million in EBITDA on an annual basis as of the last time it announced results—which I think was a year or two back. It was recently sold and acquired for billions of dollars. This is kind of validating the role that vertical SaaS can play—or modernizing vertical SaaS can play—in this industry.

  Under Congregation, I split it up into four sections:

  • Virtual Events and Services: This is kind of like building a more feature-rich version of Zoom, which adds religious-focused interactivity to digital church services conducted virtually.

  • Comms and Engagement: This is kind of like congregation CRM. So, outreach for emails, etc., tracking all that stuff of individual congregants.

  • Giving and Donor Management: This is kind of sitting where the money is and facilitating financial transactions, which is one of the early strategies that has gotten a lot of venture interest in this space—quite obviously, because you sit where the money is and you take a take rate. It’s a very simple model.

  • One interesting one—which I’m going to dive into in greater detail later—is tech that’s focused on evangelism or religious conversion. This is fascinating and highly controversial.

  Under Social—two categories:

  • Social Media and Dating.
    • Social Media: A lot of people have tried to create what I dub as Faith Tech—which is kind of like a religious-specific version of Facebook (or “Faithbook”). I don’t view this to be a compelling strategy for a number of reasons. But I view some more use-case focused social applications to be somewhat compelling. But generally, I don’t view this to be a particularly investable space.

    • Dating has shown to be an investable space, although it’s crowded. There are a number of religious-specific dating apps available today. The argument or the question remains as to whether this is a filter or it should be an entirely separate product in itself. And I think that is a question that could be answered by analyzing the underlying religiosity of these populations—to understand whether a religious-first is something they’re looking for in a potential partner, or whether it is truly just a filter.

  Under Individual—four more categories:

  • Prayer and Meditation: This is where all of the venture funding has been over the past three years, pretty much. So, this is not only digitizing religious texts, but kind of merging with the Calm/Headspace kind of model of creating daily practice around those religious texts by facilitating prayer or meditation.

  • Holy Text Engagement: This is creating more feature-rich digitization of holy texts.

  • FinTech: There’s a lot going on in the FinTech space. The most salient trend is religious law–compliant investing for consumers. This is particularly salient for Islam, where there’s Halal/Sharia law, which influences the types of returns you can seek and the types of companies you can invest in.

  • Commerce: This is just a giant space which I haven’t honestly done that much looking into. But there’s a whole lot going on here. There’s a lot of consumer retail focused specifically on modest clothing. There are specific food marketplaces—everything in between.

  And then on the bottom, you’ll see the very commonly and well-known startups and giant incumbents which are actually already targeting all these spaces.

  It might theoretically be able to do the same thing that one of these vertical solutions might. In my thought piece that I’ve written, I do more of a case-by-case analysis of whether the horizontal or the vertical wins out. But I won’t belabor the point in this slide.

  Cool. Now onto some companies here. So, here are three companies which have very similar business models, which have raised a whole bunch of venture capital from really prominent VC firms. They’re all Christian prayer apps. So, a very similar kind of focused narrow use case, one might think. But of course, there’s 2.1 billion Christians on Earth, and a lot of them pray. Glorify, Hallow, and Pray. Glorify and Hallow are a bit newer—I think they’re Series B—and you’ve got strong investors across the board of all three of these: Andreessen Horowitz, SoftBank, General Catalyst, Kleiner Perkins, Greylock, Spark Capital, etc.

  There’s been a lot of attention here. The traction has really proved out, and I think these startups are opening the gateway—the floodgate, rather—for more venture investing in this Faith Tech space.

  And then here’s some more business models which are more unique, which have attracted venture funding albeit a little bit less. So, I’ll just walk through a couple of them.

  Zoya is an example of the Muslim Halal/Sharia investing app for consumers.

  The Lox Club is kind of like a next-gen dating app for a selective elite Jewish—or Jewish-leaning—community of members.

  Tithe.ly started with sitting where the money is and doing church transactions, and now it’s more of a modern play on vertical SaaS for churches, which is pretty cool. They’ve proven that you can expand your feature set around a customer once you’ve acquired them.

  This one, Shubh Puja, is for Hindu teleceremonies and services. So, what was previously conducted in person is scalably conducted virtually all across the world, which I think is a really cool model.

  And then Gloo is an example of this web data-driven—it’s actually AI-scraping-driven—evangelism and conversion. It’s fascinating. It’s kind of like Gloo will scrape your social media and all of your cookies data basically to find signs of whether you are convertible—i.e., you’re either experiencing financial stress or you’re looking more at religious content, or there’s been a significant life event in your life, either positive or negative. And based on that, they will provide your information to a religious organization in your area, and they’ll use you as a lead for their outreach and conversion efforts. Very fascinating. Very controversial.

  The Wall Street Journal did an exposé on them somewhat recently, which I’ll mention in the later slide here.

  So here’s that slide. Selfishly, I encourage you all to read my more detailed thought pieces on the space, because I’ve spent a fair amount of time here and I’ve built a fair amount of relationships. I always welcome feedback and new ideas.

  Beyond that, the Pew Research Center is really the foundation of this religiosity and religious data globally. They’ve been collecting data on world religions for decades and decades, and they’re kind of the source of truth here.

  Two examples of incubators, investors, accelerators that specifically focus on religious companies and startups are Praxis Labs and Missional Labs, and they’re always putting out interesting content and taking on the space with a little bit more nuance than the overview that I’ve given today.

  And then two interesting specific articles. The New York Times did a piece on Facebook, and Facebook actually has this giant initiative to capture churches and Christians and have them operate their businesses and communities on Facebook’s—or Meta’s—metaverse. Super fascinating. They’ve already partnered with Hillsong, which is one of America’s biggest megachurches, and a couple of others to develop feature sets that are specifically built for churches and find ways to acquire them and everything like this. It’s a fascinating effort.

  And then finally, The Wall Street Journal’s piece on Gloo, which I mentioned earlier. It’s an interesting exposé on web- and data-driven evangelism.

  Alright, so finally time to wrap things up. I’ll say Faith Tech is one of the world’s largest markets. It’s significantly under-addressed by tech solutions today, and customers are sticky and engaged. There’s a high degree of customer retention, which speaks very, very well to the lifetime value of an individual customer.

  And then what am I going to keep my eye on in this space? I alluded to some of these things before, but these are generally the business models which I think could be investable, or the signs which could be positive for other investable business models.

  So, one is vertical SaaS for religious organizations.

  Another is content companies. I’m an avid content investor as it is, so religious content is just another example of content that can generate more frequent readership.

  B2B platforms which can kind of create the sales channel—so on one side of a platform are companies which sell to religious organizations, and on the other side are religious organizations.

  Food tech is another one, which I haven’t seen a whole lot of—food tech based on dietary restrictions and beliefs.

  The FinTech model, which I alluded to before.

  Platforms which can ease the formation of religious organizations or operation on a metaverse.

  And then finally, monetization of Web3 assets which are tied to religion and creation of religious DAOs and online communities.

  So, that’s it for now. As I mentioned, I’m always open to hear your thoughts, ideas, feedback, agreement, disagreement, flattery, etc., on this particular subject matter area. But I will leave it there for now, and I thank you for taking the time to listen to me.