In the annals of forgotten tech, few artifacts feel as abruptly obsolete as the DVD rental kiosk. But in 2005, as Netflix was still a mail-order service and streaming was a buffering punchline, the battle for the $7 billion home-video market moved to the parking lots of America. Two names emerged: Redbox, backed by the deep pockets of Coinstar and McDonald’s, and DVDPlay, a plucky, privately held competitor from Portland, Oregon.
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
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. In the annals of forgotten tech, few artifacts
No round occurred.
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. Phillips raised one final round: from a group
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.