Dvdplay Funding — Verified

“We didn’t know what venture capital was,” Mark Phillips told a local business journal in 2007. “We just knew that Blockbuster had late fees, and people hated them.”

Phillips raised one final round: from a group of angel investors in Portland. The terms were a Hail Mary: 20% discount to the next round’s valuation, but if no round occurred by December 2011, the notes would convert at a $0.25 per share valuation (down from the $4.50/share of Series B). dvdplay funding

DVDPlay’s story is not one of technology or consumer habit. It is a story of —of desperate rounds, convertible notes, and the brutal math that happens when you try to out-spend a giant selling dollar bills for ninety cents. This is the anatomy of a capital war. Act I: The Bootstrap Years (2002–2005) Long before the kiosk wars, DVDPlay was the side project of Mark and Sharon Phillips, two serial entrepreneurs who had made a small fortune in the Oregon wine distribution business. Their first machine—a clunky, beige box that held 300 discs and required a customer to swipe a credit card and manually return the DVD to a slot—was funded with $80,000 of their own savings. “We didn’t know what venture capital was,” Mark

The initial funding model was almost quaint: . Each machine cost $12,000 to build and $500 per month to service. If a kiosk pulled in $1,200 a month (roughly 40 rentals at $1.50 per night, plus late fees), Phillips plowed 90% of that back into building the next machine. By 2004, DVDPlay had 47 kiosks in Oregon and Washington. They were profitable, but tiny. DVDPlay’s story is not one of technology or consumer habit

The funding had bought growth, but not profitability. By 2008, the financial crisis was freezing VC wallets. Redbox, backed by McDonald’s real estate and Coinstar’s cash flow, dropped rental prices to $0.50 for a limited time. DVDPlay’s average revenue per kiosk fell from $1,100/month to $600/month.