One of the nice things about industry events that occur in New York is that it is easy to make time in the city super productive. New York is the east coast epicenter of media, advertising and capital, among many other things. Last week’s trip to New York for CETW was no exception. In addition to all the activities you might associate with a trade show, I found myself taking two crosstown cab rides to meet with investment bankers on behalf of a customer. The timing of the cab rides from the Javits Center was not terrific, as they coincided with the preparations for, and subsequently the tail end of the Veteran’s Day parade down Fifth Avenue. On the bright side, walking the last few blocks provided an opportunity to get some exercise and thank some vets. And the meetings themselves were eye openers for me.
Making a pitch with or for a network operator is not new territory. In the course of building our own business, we’ve been involved at the business planning, capital raise and launch stages on a variety of network deals through the years. To be sure, some worked out better than others, but each experience provides some insight into how our industry is viewed by those in the capital markets. Here is what I learned or confirmed last week:
- They are starting to embrace our business. There are standard, rote questions you hear in these meetings, and then there are questions that demonstrate understanding. These folks, who will remain nameless, were savvy thinkers. When the questions sound like a checklist from a textbook, it is the sign of someone who either hasn’t thought through the opportunity or is looking for a reason to pass. The questions last week were deep and sparked conversation. They reflected preparation and interest, and more importantly, a real sense of where the upside and dangers lay in the plan. Not many folks in the institutional money game could have had that type of conversation two or three years ago. It was refreshing.
- Field of Dreams was a movie. Nobody really wants to talk about raising or investing money on a bet that scale will attract advertising dollars. Where discussions used to focus on the cost of site acquisition and deployment, they have turned quickly to monetization. I have seen less sophisticated financiers demand letters of intent from advertisers and ad sellers, which of course are completely worthless in reality. Now the savvy folks are digging into the value proposition to brands and agencies of the proposed network, the uniqueness of the target audience, the potential pricing, the relevance of the content, and then vetting all of that directly with people on the buy side. Only that way can a reasonable risk assessment be made, short of having a pre-launch sponsor or two in pocket, which is rare. Nobody buys into the hockey stick revenue chart, but a compelling offer can be tested as it scales. Smart money sees a potentially huge network as an end point that is attained only after 2 or 3 milestones are successfully reached along the way. Incremental deployment of capital, incremental learnings and adjustments, followed by aggressive expansion in size and scope after the model is proven.
- Digital signage may finally look less risky than alternatives. In an environment where money is coming off the sidelines in a near-hysterical rush to identify the next big thing, digital signage offers a tangible, if less buzz-worthy way to play in new media. The rush to social media and mobile start-ups is nearing the level of tulip bulb mania, while a growing, maturing and disruptive industry, digital signage, remains undercapitalized across the board. The temptation to roll-up, aggregate or otherwise create something of scale from our fragmented network and vendor marketplaces may be too tempting for some investors to pass on for much longer. It is now an easier task to identify winning models, winning companies and winning leaders than it was just two years ago. From all the chaos we witness daily will come order, and it will come from investors and corporations placing large, informed bets.
So it seems that on Veteran’s Day, I got some signals that perhaps our industry is becoming better understood by the guardians of institutional money. Despite the cacophony of hype, too many combatants and the fog of battle, we may be entering a phase of clarity… at least in the minds of investors. That would only be a good thing.
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