Events Tickets Co RazorGator Raises $26M Series A For Expansion

By Marine Cole, Dow Jones VentureWire Reporter
Published 5/25/2005

RazorGator Inc., a four-year-old online company that sells tickets for sold-out sports and entertainment events, said it has closed a $26 million Series A round of funding.

New investors Kleiner Perkins Caufield & Byers and Oak Investment Partners co-led the round, which closed at the end of March.

David Lord, president and chief executive of RazorGator, said the company began fund-raising for the round about the end of October. "We were oversubscribed but the business model was evolving," he said. "There was a great deal of interest." He said when the company first went out to raise funding, it was seeking less than half of the amount raised.

Proceeds from the round will be used for expansion, including development of further partnerships with other ticketing companies as well as with ticket providers such as sports teams, leagues and artists, including Broadway shows. RazorGator will also invest in its infrastructure. "First and foremost we're focused on building our infrastructure," Lord said, when asked about possibilities of expanding through acquisitions. "We're going to be opportunistic as opportunities arise. All is open."

RazorGator, which was previously "funded through cash flow," is profitable, but Lord said the company will invest heavily in expanding its business and won't be profitable for a year or so. He anticipates RazorGator will reach profitability again in the fourth quarter of 2006. "We don't believe we'll need any more funding," he said, adding that he anticipates the company could go public in about two to three years. "We need to have a scalable infrastructure and we need to maintain our growth rate." Lord noted RazorGator has grown its revenue 60% to 100% each year, but he declined to disclose actual revenue figure.

Founded in 2001, RazorGator is a Web site where consumers can sell and buy events tickets for sold-out sports and entertainment events worldwide on the secondary market. Events include the Super Bowl, Final Four, Masters, U.S. Open, Kentucky Derby, NASCAR, U2, Paul McCartney, Broadway's hottest shows, including Monty Python's Spamalot and Wicked, The Olympics, IRB World Cup, FIFA World Cup, European Championships, FA Cup, Wimbledon, French Open, and top-billed London theater.

RazorGator has distribution partners like Yahoo Inc., Fox Entertainment Group, Inc.'s Fox Sports Networks, Microsoft Corp.'s MSN, and Inc. The company is also the exclusive travel partner of the New England Patriots and Philadelphia Eagles for the NFL's 2005 Super Bowl.

"One of the goals for all our partnerships is to provide a benefit to our fans; we feel like we have accomplished this with RazorGator," says Mark Donovan, senior vice president, business operations at the Philadelphia Eagles, in a press release announcing the funding.

RazorGator is also composed of two other subsidiaries, including OpenField, which manages the RazorGator platform from a software standpoint. PrimeSport International, the company's other subsidiary, targets corporations, offering them the possibility to take customers and employees to events and to receive red-carpet treatment, Lord said. He noted that RazorGator currently accounts for roughly 75% of the company's revenue, but "the gap is starting to narrow. PrimeSport is growing quickly." PrimeSport counts the San Francisco 49ers and Seattle Seahawks among its partners.

Russell Siegelman, general partner with Kleiner Perkins Caufield & Byers, told VentureWire that RazorGator already has a lead in the secondary ticketing business but that "the company is poised for huge expansion," he said. "The company was marginally profitable but it needed some capital to [expand]."

RazorGator competes mainly with StubHub Inc., said Lord. It also competes with sites such as eBay Inc. and craigslist Inc., which also allow consumers to buy and sell events tickets. "There are definitely other sites," Siegelman said. "There's no doubt there's other source of ticketing." But he added that such competitors represent more of a niche market where season ticket holders can resell tickets they aren't using, while RazorGator differentiates itself as it also offers tickets that were provided directly by teams and shows.

"That's the different model, with a different skills set, and which also required that amount of capital," Siegelman said. "[RazorGator is] not creating a trading hub. They're trying to be the glue that helps the teams maximize the opportunities for people to get tickets when they want and to get the best seats."

The Beverly Hills, Calif.-based company currently has 80 employees. Lord anticipates it will have about 110 employees by the end of the year.

As a result of the round, Siegelman, and Fred Harman, general partner at Oak Investment Partners, joined the board of RazorGator, which also includes Lord and Doug Knittle, cofounder of the company and chief special event officer.

RazorGator had previously raised $5 million in venture debt from Hercules Technology Growth Capital Inc., and the firm never took an equity stake in the company.

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