Phoenix Hopes Investors Soar To $5M Offering

With 30 recording artists signed onto its music label and $1.6 million in angel financing under its wings, Phoenix Media Group is launching into the institutional private equity market, hoping to sign venture capitalists and strategic partners on to a $5 million deal.

“We’ve made a very conscious effort toward a business that is un-sexy – no new media strategy right off the bat, the ownership of copyrights, establishing a brand name, creating a marketing and rep system [and] very tightly controlled burn rates,” said Founder and Chief Executive Tad Flynn.

After leaving Wall Street early in 1998, Flynn hooked up with the founder of King Biscuit Records to form Phoenix Media as an acquisition with $225,000 worth of angel financing. Two years later, Phoenix now owns 425 professionally recorded live concerts from between 1972 to 1987 with artists that range from Aerosmith to Frank Zappa.

Those recordings are distributed through the Phoenix Gems label and sold to bigger labels for reissue. Sony Music Corp., for example, used much of Phoenix’s collection in its release of The Clash’s From Here to Eternity.

In May 1999, the company received additional seed financing. By that time, Flynn had brought live recording engineers Sam Kopper and Larry Braverman on board to head the company’s sales and marketing efforts.

At that point, Phoenix Media had released its first album and was preparing to debut Phoenix Presents, its venture into the live music scene that features regional artists, who perform a minimum of 150 nights per year, circuiting through the live music scene.

Almost $550,00 of additional bridge loans has carried the company since its inception to its latest $525,000 round of angel financing, completed last month. The company projects $1.2 million of revenue at the end of this year, moving up to $5.25 million by the end of 2001. The stability of its cash flow is what Flynn hopes will draw investors.

“We’ve been consciously obsessive about controlling our burn: $1.6 million spent in two years and generating an operating profit,” Flynn said.

Although Flynn said the company could become cash flow positive with only $1 million of additional venture financing, Phoenix will begin shopping a $5 million round in July. Along with traditional venture firms, the company wants to sign on strategic technology partners to fuel Phoenix’s e-commerce plan, build its online community for artists and create its music portal.

“Money is money and everyone’s is the same color. Ideally we’d like our investors to have a skill base to leverage what we’re doing,” Flynn said.

The round should close by October, and Flynn said the company is unlikely to dip back into the private equity market after that.