SignageWire

U.S. VCs like digital signage, but the bar is high

Author: WireSpring on 2008-04-18 12:06:34

Screens.tv is running an article about the state of venture capital for digital signage companies in the US. Here is one angel investor's perspective on today's market:

"There is a major change underway in the world of advertising and marketing," said [David S. Rose, chairman of investment group New York Angels], "and the inevitable explosion of applying technology to a historically static business [printed signage] is the kind of major market disruption that can offer interesting returns for savvy investors."

The New York Angels, a group of around 60 "angel investors" (effectively venture capitalists who invest at the very early stage of a business's life cycle and expect a higher return on investment), have put money into several digital-signage companies: MediaTile (a U.S. wireless-network specialist), SignStorey (specialising in plasma displays in supermarkets, recently sold to CBS for more than $70m) and Radiant Displays (creator of patented electronic billboards).

According to Rose, the most common mistake that small companies make when trying to secure VC or angel funding is not realising how competitive the funding market is. "Fewer than one percent of companies seeking investment from VCs or organised angel investors actually receive it. And, if you spend years vainly trying to find funding that isn't going to come, you're not spending that time doing something like bootstrapping your company that will create value."

Our take:

WireSpring has worked with numerous companies in start-up and early-growth stages, and for many of them lack of funds was a significant growth inhibitor. The cost of starting a new digital signage network is relatively high, and the time to reaching a cashflow-neutral point for ad-supported networks in particular can often be quite a bit longer than new companies plan on. Consequently, today we offer advice to these new companies about ways of minimizing cash outlays, focusing on constructive efforts to bring cash into the company at earlier phases, and avoiding the many common mistakes that tend to hamper growth and harm deployments.

As Rose notes, our experience is that the best companies are still able to get the funding they need, even in today's relatively challenging economic climate. However, many do not realize the time that it takes to complete a financing round, nor do they appreciate how much attention it can draw away from the core operations of the business.  Thus, we continue to advocate that they make the best use of their working capital by using it for operational purchases, and rent or lease as much equipment and infrastructure as their credit allows.

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