CrossMedia Services (CMS)

Background:  River Cities first reviewed the business plan for SalesHound (“SH”) in November of 2000.  In its initial incarnation, SH was a destination web site that sought to aggregate in-store promotional information from retailers and present it online to customers who wanted to know “what is on sale in my local area”.  The company founder was a former VC who had maintained a relationship with a River Cities portfolio manager.  During 2000, SH was repositioned as a managed service for retailers who wanted to present their in-store promotional content on their own web sites, though it also maintained the SalesHound.com web site.  At the same time, the company was attempting to build a third-party distribution network for the promotional content it was aggregating.

Investment:  River Cities initially declined the opportunity in 2000 because the business model was too complex and the company had shown little traction to date.  However, they found the fundamental premise compelling: that retailers needed an outsourced service to support localized promotions on their web sites because shoppers were mostly using the internet to research products online, only to buy them offline at the stores.  By July 2001 the CEO had re-launched the firm as CrossMedia (CMS), having signed six clients, including a $1MM annual contract with Sears.  In October 2001, River Cities made a small bridge loan and, following the rollover of the Sears contract, closed on the rest of the investment in February 2002.  

Growth:  In it's representative's role as Director (on both Audit and Compensation Committees) River Cities was instrumental in helping CMS stay focused on the core business and providing support for key changes in management.  Due in large part to River Cities’ advice, the company focused on its service for retailers and carefully expanded to only one new adjacent segment; but the company did not invest as heavily as planned in speculative business development efforts with large internet media players and laid off the BD executive.  When bookings were not growing as quickly as budgeted, River Cities pro-actively supported the removal of the Sale VP; and when the company thought it had found an adequate replacement, River Cities persuaded the company to hold off because a better candidate would be located (which turned out to be true).

Outcome:  In May 2004, a JV between Tribune, Knight-Ridder and Gannett purchased CMS for a strategic valuation that yielded River Cities a 6x return on its capital in less than three years.