Venture capital investment firm Summit Partners, Boston, will pump at least $10 million into privately held direct marketing and Internet services company Fry Multimedia Inc., Ann Arbor, MI.
Though the exact amount — characterized as a minority investment — was not made public, it was a large enough infusion of capital to warrant giving Summit Partners a position on Fry Multimedia's executive board.
According to Summit spokesman John Carroll, the firm's investment managers saw Fry Multimedia earlier on as a uniquely organized services company. “You're talking about a business that has moved from being technology-oriented to one providing a completely integrated line of creative services and marketing solutions. It's usually the other way around,” Carroll said.
Summit Partners said its investments — which total over 3 billion — tend to focus on business services companies like Fry. Though the company would not disclose the amount, it said its investments always exceed $10 million. It's other popular holdings include financial interests in Network Associates, Santa Clara, CA, (formerly McAffee & Associates) and Hyperion Software, Stamford, CT.
Carroll said Fry's early foundation in the Internet services arena is predominantly what made the company such an attractive investment for Summit. However, Fry's powerhouse leadership and proven industry prowess surely weighed heavy in Summit's decision as well as its prospects for more direct marketing clients and eventually enough muscle to go public.
Fry Multimedia, founded by David Fry, president, is responsible for the development of such online marketing powerhouses as 1-800-Flowers.com, Eddie Bauer, and the recently launched Crate & Barrel.com Web site. From his headquarters in Ann Arbor, Fry said he's not ruling out going public.
“I would say that going public is a natural progression, and going public would afford us further opportunity for growth, but for now, it's very important for us to strengthen the company and what we are doing.”
Fry said when his company was first started — like most of the industry — it was focused on information. But over time, he said, he's realized that he's not just in the information business or in the technology business. “We had to learn how to incorporate creative, marketing and strategy skills within what we are doing. Our primary competitors have been the usual gang of suspects like US Web, Razorfish and Rare Media, but we see our competition coming from both sides of this industry as well as bigger shops,” adding that that's where he sees the future going — “expanding on the technology side as well as the creative side.”
Fry is clearly a maverick among a new breed of hybrid technology and direct marketing services leaders who have awakened to the fact that large advertising agencies are beginning to feel the heat of smaller shops like his. “I know from conversation we had inhouse and with others that they're not only feeling the heat from people like us, but I think they're also wondering how long they are to be part of the conversation. What we are really talking about here is a change in much of the business model. Most of our customers think so as well.”
Fry said his company currently estimates the cost of developing and launching a stable well-designed Web site for any major direct marketing merchandiser to run at the low end around $350,000 and on the high end well over $ 1 million.
Tom Roberts, a general partner at Summit Partners, said Fry's track record is exceptional and the company will exceed the service and innovation requirements of its marketing clients as their sites evolve and multiply in complexity.