Projecting Confidence

While everyone seems to have their own definition of thinking outside the box, it often turns out to be a euphemism for desperation, and amounts to endless testing of half-baked ideas. When someone acts outside the box, they deserve recognition for the strength of their convictions and willingness to accept risk. Such is the case with STRATACACHE CEO Chris Riegel, whose company today was revealed as the owner of the enVu Mall Media network in a post on The DailyDOOH. The move seems to provide some insight into Riegel’s overall strategy and is worthy of examination.

Almost exactly two years ago, STRATACACHE announced that it had a $25 million fund at its disposal for the purpose of acquiring technology and media companies in the DOOH space. The company openly solicited inquiries from candidate companies. I am not privy to their process, but I would guess that they received plenty of interest from fringe operators seeking an exit across the spectrum of DOOH. Probably not the targets that Riegel and his investors had in mind. Given what has transpired in the two years since then, it looks like the company chose to invest in itself.  Major announcements have included the acquisition of a pretty significant piece of real estate in hometown Dayton, product and business development focus on the banking space, and now enVu.

Most executives would treat a $25 million war chest as a mandate to quickly spend it on the types of deals that were flying around the boardroom table, whichever those were at the time. Given the wording of the announcement, it sounds like the mission du jour was to begin the consolidation of the digital signage software space. To his credit, Riegel presumably passed on acquisitions that weren’t going to be either strategic or accretive. Instead, it appears that the war chest was used to first significantly upgrade the infrastructure of the company; second, to enter a vertical market where there was opportunity and vulnerable competitors; and third, to go into the network business in a non-traditional way. The ROI on the real estate deal will almost certainly be positive over time. I am not aware of how the banking focus has gone, but they are still at it in partnership with Bloomberg. There is little to quibble with in taking a vertical focus. The third investment, enVu, is notable for its risk profile.

Essentially, enVu is the next incarnation of the ill-fated Reactrix. They are deploying very expensive projection and interactive technology and delivering content on swatches of floor in high traffic mall concourses. One must assume that homework was done on the epic failure of Reactrix before this one got off the ground. At least one Reactrix alumnus, (Jon Keller, ad sales) is on the executive team. The two other executives mentioned in the interview share BroadSign DNA on their resume, indicating that they understand scale and know each other, if nothing else. Given the high capital costs for deploying the technology, the keys to success will be managing and minimizing the revenue share and/or rent paid to mall owners (a huge contributor to Reactrix’s failure), and actually selling ads. The proper steps will be taken to provide a good media kit. Jumping that gun a bit, “5 billion” has already been used to estimate annual viewership at rollout. Whether those are gross, net or unique viewers matters little, as it is just PR hype. Either the network will attract a viable, measurable demographic, allowing them to sell ads, or it won’t. Assuming that STRATACACHE is the primary financier, it certainly looks like a very significant chunk of the war chest will go toward enVu’s startup costs. A bet has been placed, and it is not at the $5 table. if they win their bet, they can sell the network at a premium, and retain a software and services customer in the process. Or they could keep the company if that makes more financial sense. We are a long way from that fork in the road, but it will be interesting to observe.

Risk free? Certainly not. But the fact remains that our industry suffers from a dearth of risk capital and risk takers. Riegel amassed the former, and showed patience and creativity in deploying it, taking a portfolio management approach. For that alone, respect, kudos and well wishes are due. Like any portfolio, there will be winners, losers and average performers, and only time will tell how things turn out. In the mean time, it is refreshing to see someone decline to whine and expect to win. We need more of that!

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