Scene7 - History - Reorganization


After spending several years operating at a loss, reorganized as Scene7, which formally launched on January 23, 2001, with $15 million raised from investors that included Hearst Interactive Media. The new company focused on helping companies prepare interactive advertisements for consumers. Mack, the Broderbund executive who had decided to spin off the company, reflected on the decision to reorganize and relaunch: "We got a year into and the whole B2C (business-to-consumer) market tanked, and we realized we could not build a successful business as a portal But the whole time we kept having people approach us to license the technology, and finally a light bulb went off when we realized we were sitting on top of a great technology we could sell." Scene7 raised a round of financing on July 12, 2001 that totaled $11.3 million, which helped stabilize the company. The deal was led by venture capitalists from several firms, including Louis Bacon's Moore Capital Management and Xcelera of the Cayman Islands, with cash investments from Cooley Godward and Perkins Coie. After the latest round of financing, Mack planned for Scene7 to have 15 clients and a burn rate, or negative cash flow, of less than $700,000 a month, stating, "What we learned was to stick to your strategy, and don't get nervous when the competition is adopting a strategy to spend their way to victory." At the time, the company's revenues were well below its peak of $1 million a month, but Mack intended to increase revenues past that point in a few months.

Scene7 moved from San Rafael to Hamilton Landing in Novato, California in September 2002 to accommodate more employees. On July 9, 2003, the company acquired all of the assets of workflow provider and advertising software company Engage for $1.2 million and assumed its $650,000 debt after Engage filed for Chapter 11 bankruptcy. Engage was the parent company of both Cascade and MidSystems, which were two of the first companies that tried to automate prepress production for newspapers and large printers. On August 15, 2003, Scene7 acquired its top competitor, TrueSpectra of San Mateo, for an undisclosed amount of cash and stock. On June 15, 2004, Scene7 raised $7.5 million in another round of financing, led by home shopping company QVC with some of Scene7's existing investors. At the same time, Jeffrey Branman, President of Interactive Technology Partners at QVC, and David Rubenstein, co-founder of the private equity firm The Carlyle Group, joined Scene7's board of directors, which was composed of James Caccavo of Moore Capital, Andrew Wright of RealNetworks, and Mack.

Since the early 2000s, the company's growth has been fueled by an increase in broadband Internet access, which loads virtual catalogs faster than dial-up Internet access. When catalogs first appeared online in the late 1990s, the graphics took too long to load. After high-speed Internet access became more popular, virtual catalogs quickly grew to become a popular feature of online stores. In addition to faster Internet connectivity, a study in 2000 noted that an online presence for brick and mortar businesses increased offline sales by an average of 27%. Mack also pointed out that having more product information disseminated helps play a role in increasing sales: "We have the ability to provide consistent information. One of the advantages of selling furniture online is the hyperscript; you always have the original specifications on a product."

Read more about this topic:  Scene7, History

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