Dvdplay - Funding [exclusive]

The kiosks themselves were ground into plastic pellets. But the funding term sheets—the liquidation preferences, the ratchets, the vendor notes—remain, preserved in SEC filings, a quiet monument to the last time anyone thought renting a disc from a parking lot was a winning bet.

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.

The funds were earmarked for one thing: . DVDPlay ordered 500 new kiosks from a manufacturer in Ohio. They hired 50 part-time “route drivers” to restock discs. By Christmas 2006, they had 600 kiosks in 19 states. Revenue hit $8 million. Losses hit $2.1 million. dvdplay funding

No round occurred.

“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.” The kiosks themselves were ground into plastic pellets

In January 2012, DVDPlay filed for Chapter 7 liquidation. Total capital raised across all rounds and debt: . Total recovered for secured creditors: $3.1 million (mostly from selling kiosks for scrap metal and disc inventory to a liquidator in Texas). Unsecured creditors, including the Oregon drivers who had been paid in stock options, received nothing. Epilogue: What the Funding Bought (and What It Didn’t) The DVDPlay story is a textbook case of misaligned funding cycles . They raised equity when they needed debt, debt when they needed a strategic partner, and a growth round when they needed an exit.

Enter , a Seattle-based VC firm focused on digital media. In February 2006, DVDPlay closed a $4.5 million Series A . The term sheet was brutal: 8% preferred liquidation preference, a full ratchet anti-dilution clause, and a board seat for Voyager’s managing director. By 2008, the financial crisis was freezing VC wallets

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).