A New York City start-up that combines digital OOH screens and wall-mounted vending machines got a big PR bump and cash infusion the other night by cutting a deal on the US reality TV show Shark Tank.
Vengo Labs co-founders Brian Shimmerlik and Steven Bofill wangled a $2 million deal with a pair of the show’s “Shark” investors, Kevin O’Leary and Lori Greiner. They got the money as venture debt, to be paid over three years at 7% interest, with each of Sharks getting 3% equity of their company.
The investors bought in even though the company is not yet profitable and generated about $1 million in revenue last year.
It’s an interesting concept. Vengo makes machines that are small and light enough to mount on a wall in an office or a hotel hallway, and stocks only a very limited selection of product suited to the environment. Instead of a looking-glass window, the products are promoted on a networked 21.5″ touchscreen.
Payment is cashless and includes NFC, and when someone makes a transaction, and ad for that brand plays as the consumer waits for the item to drop into a dispensing slot.
The company uses the tag line: “Yep. We shrunk vending.”
Vengo, reports Ad Age, sells the machines at close to cost to entrepreneurs and businesses, and makes its money through the brand advertising ($200/month/machine) and a $20/month SaaS fee for the software that does the media and inventory management, and processes the transactions.
So if I have this right, Vengo does not share the ad revenue, with the machine owner making its money through the margin on sales of candy, and earbuds and phone chargers, and so on.
I know zippo about the vending machine business, but the one thing that might make me pause would be the cost of servicing a machine that wouldn’t appear to hold a lot of inventory, meaning someone needs to go there and re-stock it. On the other hand, the items are light so you probably wouldn’t need trucks for fresh stock.
I know a lot more about the digital OOH business, and you’d think this needs to get a much bigger in terms of scale before it gets a sniff at more than experimental buys from friendly media planners. The company describes its product as delivering immersive digital experiences, though I can’t quite picture how buying some Reese’s Pieces is going to involve all my senses???
Operating capital is no doubt welcomed around just about any start-up, but the national exposure on a popular TV is likely more valuable to Vengo than the loans from O’Leary and Greiner.
The company, reports Vending Times, has 250 machines in the field and has a target of 1,000 venders up and running in 10 US cities by the end of the year. Most of the deployed stock, right now, is not surprisingly within striking range of the company’s office in Long Island City (Queens).
Some trivia: O’Leary and another Shark on the show, Robert Herjavec, are both Canadian, and were originally on a Canuck variation of the concept, called Dragon’s Den (which is pretty much unwatchable these days).