building the Elevator News Network, which puts screens that carry news and
advertising in elevators. ENN based in Toronto is merging with its American
rival, Captivate network. The combined company will operate screens in 4,000
buildings all over the continent. The resultant rationalization will mean a profit in
2002. It will also mean eliminating most of the senior management jobs at ENN,
including Irwin's.
"I am an operator," Irwin says. "I like the dynamics. I like working with people and
building a team." Now he's looking for "an existing business with some cash flow
that I can acquire, or an equity position in a company that is growing and needs
new management."
When he joined ENN in 1997, it was, he says, "a concept on a desktop," developed
by founders Steve Amo and the Lacheur brothers, Neil and Dan: mount flat-screen
TVs in high-traffic elevators and give the upscale consumers trapped there for
about 45 seconds something to look at other than the floor indicator. Intersperse a
short burst of headlines with 12-second commercials. The network claims an
available audience of close to a million viewers and its research shows between
90 and 95 percent of them watch the screen during an elevator ride.
Getting to that point was difficult. When it started, raising VC money for an untried
notion was long and slow. Eventually, ENN got $50 million in a series of deals, but
during the delays between capital infusions, the competition gained ground.
Captivate's takeover of ENN is one result. Installing the hardware was difficult and
expensive about $15,000 for each elevator. That meant heavy spending upfront
with no guarantee advertisers would buy the idea or any commercials. "The money
was critical," Irwin says of those initial VC deals. "We had to have our network
deployed before we could even start to sell ads."
ENN's founders scraped together about $350,000 from family, friends and one VC
before hiring Irwin. But that barely covered the cost of starting up, hiring a team, and
building a beta site to prove the concept. The partners calculated they'd need more
than $100 million to build the network across North America. Last year they raised
$39 million in two separate deals their biggest yet.
"We were just a little too slow getting into the U.S. market," says Irwin. "That
allowed the competition to get a start, so we lost some of our first-mover
advantage."
In the second half of the year, the company launched in New York, Chicago, Dallas
and Los Angeles. Captivate had launched its competing product and, because it
was able to raise more capital more quickly in the U.S. venture capital market,
quickly overtook ENN. By mid-year, Captivate had about twice as many elevators
serviced in the U.S.
"By November it was time to do a deal," says Irwin. "Neither of us really had
enough elevators to fulfill our business plans." Recognizing that both companies
were after essentially the same advertisers in both countries and that the U.S.
market was the key to success, they agreed to a merger.
Irwin says he was not happy to lose control, or to see the Canadian management
team broken up. Vice-presidents Ed Voltan and Dave Haines have already left the
company, and Brian Boyce will depart in January 2002, as will Irwin. "But when I put
on my shareholder's hat it is clear that the company doesn't need two
management teams."
