LYRIQ International Corporation 1991-1995
LYRIQ International Brief
- Princeton Review: Inside the SAT, GRE, LSAT and GMAT
- LYRIQ Crosswords – NY Times
- Picture Perfect Golf
- Discovering Endangered Wildlife
Situation/Background: After building The LYRIQ Group to about $1M in sales and accumulating sufficient cash as starting capital, LYRIQ International was born. It was always my vision to create an entertainment software company that would put out high-quality, unique products that would result in a fast growing and profitable company. Gary Skiba joined me from IBM, in June of 1992, as my partner and together we started LYRIQ, the software company. Gary and I were perfect partners; he was responsible for development and support, and I was responsible for sales, marketing, and administration. I came from a larger company background and wanted to push aggressively to grow, and Gary came from a small/entrepreneurial company background and was cautious about taking risks. We respected each other’s strengths and knew each other’s weaknesses, and we almost always found answers in the middle ground that suited the company’s needs.
The focus of the company when we started was to build software products based on existing published content from unique sources. Essentially we wanted to leverage existing brand and content and add value to this content by making it interactive. This approach required less capital, lower marketing, and sales budgets, required less development time, and had a faster acceptance by retail buyers and consumers. While our thinking was unique at the time (1992) we were not alone in coming to this conclusion and several companies began the rush to license unique content to be used to create electronic publishing products.
After much searching and prospecting our first relationships were with Random House and The Princeton Review, both coming from contacts in New York City. Random House was very cautious about entering into an electronic publishing partnership, and so we chose their crossword puzzle archive assets as the first project to test the waters. We could make Crosswords available electronically, there were millions of crossword puzzle addicts, and best of all, this type of product was like potato chips – you needed to keep coming back for more. Our other major relationship was with the Princeton Review, who we worked with to develop and publish the first electronic training tools for preparing for standardized tests. This effort was so successful that it created an entire category of software on store shelves with products from all the major providers.
Our real sales breakthrough came with the development of Picture Perfect Golf. This program walked in the door in the form of a phone call from Tom Farrell, an executive in the insurance industry, who had been working on the concept for a golf game and was looking for a publisher. He read about LYRIQ in the paper, as an up and coming local software publisher, and thought we might be interested. My first reaction was “no way!”, Why would we want to compete with Microsoft Golf, Access’ Links (#1 golf software), and Electronic Arts’ PGA Tour Golf. Gary Skiba arranged to meet with Tom against my “better judgment, ” and we discovered a unique golf game that would appeal to the golfer versus golf games that were appealing to “gamers.” Tom Farrell’s idea was to use real photographs of real courses and to superimpose golf shots like the virtual reality golf games that were on the market requiring a player to pay $25/hour to play. Combine this new golf game with an electronic club (developed by John Lipps of Sports Sciences), and you had the ability to reproduce the $50,000 electronic golf virtual reality booths for $200 and play in your home or office. Tom’s programming efforts were those of an amateur, but the validity of the idea was clear and we jumped on the opportunity to build a professional product based on Tom’s concepts and take it to market. Picture Perfect Golf was created and rapidly became 75% of our revenues and our fastest growing product line.
LYRIQ International stood out in the industry for its ability to develop award winning products for 10-20% of the typical software product budget and in 10-20% of the development time. We accomplished this amazing feat employing a methodology that used small, expert teams to create the products led by the efforts of Lee St.Onge and David Joslin for product interface and graphics design and the astounding production capacity of Gary Skiba who was responsible for 80%+ of all coding. Gary was (still is) a master programmer that, like Mozart with music, could sit down and write perfect code for days in to make deadlines. The company also had a network of top notch programmers that we would use as needed to create key pieces of code necessary for a project. Giving clear direction to team members, demanding that each member of the team own their results, and creating award systems that rewarded creativity, hard work, and self-motivation were core to these successful efforts.
LYRIQ International also stood out for its ability to use guerilla marketing and innovative sales and marketing tactics to create demand with very little capital and take awards from the big publishers. Howard Luxenberg and I led the efforts to create an image and reputation for LYRIQ that was much larger than its size. The number one marketing weapon of LYRIQ was an effective use of public relations. We would get very close to the key publishers of the magazines that held the most influence over buyers and consumers in the market and bring them into our development efforts and essentially make them a part of the “LYRIQ team.” This tactic resulted in great reviews, excellent repeat coverage of the company and its products, lower advertising prices, and excellent placement in their magazines in the sections that people noticed. Our product packaging, internally developed, was produced with the user and retail placement in mind and were consistently performing in catching the eye of our target buyer which led to sales. We were in over 10,000 retail locations at our peak, which put us on par with most major publishers with much fewer assets.
Please refer to the business plan in the document section below for additional background on LYRIQ and its development and marketing efforts. The plan goes into detail about the unique Repeat Customer Business Model and plans for the launch of the first Internet-based golf tournament. Both the business model and internet vision factored heavily into the purchase price paid by Enteractive for LYRIQ.
Position Objectives: The objective for myself as owner/President of LYRIQ International was to build a profitable and fast growing publisher of entertainment software and electronic publishing products with the goal of selling to a larger publisher or potentially going public under best possible circumstances. The capital put into the business was $100,000 from both partners.
Issues: Undercapitalization, partners did not have deep pockets and financial institutions do not lend to companies with little capital assets. The distribution channel for software is very capital intensive. Products must be shipped in bulk but payments are not typically made for 90-180 days, and the entire shipment can be returned. Retail channels for software demand significant investments in marketing programs as pre-condition for putting a product on shelves. Products aimed at consumers are subject to the whims and fickleness of consumers, thus resulting in turbulent outcomes.
- Lyriq Crosswords ranked as top crossword product for three years in a row.
- The Princeton Review series of software started the standardized testing software category and led the category in achieving the top reviews and sales every year.
- Picture Perfect Golf was ranked 3rd in sales in the competitive golf software category behind Access Software’s Links and Electronic Arts’ PGA Tour.
- Introduced Discovering Endangered Wildlife in conjunction with the National Wildlife Federation.
- Every product launched won awards in the areas of excellence in design, content, and playability.
- Entered into content relationships with top content providers: Random House, New York Times, The Washington Post, The Princeton Review, Crossword Magazine, and National Wildlife Federation.
- In calendar 1995 company surpassed $1M in sales and was profitable with ten full-time employees.
- The company reached break-even profitability within two years of operation.
- Distributed to over 10,000 locations worldwide through a network of top distributors and retailers.
- Award winning products produced at 10% to 20% of industry standard costs for similar products competing in categories.
- $1.6M in revenues in last 12 months of operation; $3M+ run-rate in sales before acquisition by Enteractive, Inc.
- The company sold for 4X sales (1995 full year sales) and 20X original investment.
Turning Point: Like most business owners will lament the key to success is cash flow, cash flow, and cash flow. LYRIQ International almost died from its success as sales were climbing rapidly requiring additional operating capital, but the terms for payment from distributors were not improving from the 3 Month+ in delays. Banks would not lend to a software company, and Connecticut state and local business funds would not invest in companies that sold products for consumers. Using personal credit cards to provide needed capital to fuel the business could only go so far. The company was at a point in October of 1995 that it needed to find an investor or a buyer, or close the doors.
Response: After months of talking to every government agency, venture firm, and financial consultant with angel investors, things were looking grim for finding a timely infusion of cash to save the business. In late 1995 we were introduced to Andrew Gyenes, the Chairman, and CEO of Enteractive, Inc., by a fellow marketing colleague Margaret Tuttle, who was VP of Marketing for Enteractive. It was apparent at the first meeting that the two companies needed each other; to summarize: Enteractive had money, but no products and LYRIQ had great products and no money. The situation was much more complicated than the summary, but the essence of the prospective marriage came down to those basics. It was a relatively short and furious courtship/negotiations process, but within approximately four months the companies were merged under the Enteractive, Inc. company name and structure.
Close: LYRIQ was a great success story. On the day of closing the acquisition LYRIQ was out of money and would not have met the next payroll, and yet Gary Skiba and I held out for what the company was worth. Gary and I achieved our goal of growing a business successfully and returning an excellent return on our investment. As satisfying, if not more so, was the fact that every individual that was in LYRIQ went on to succeed as high-level managers in the companies they went on to work for all achieving their personal and professional goals. The training and time they received at LYRIQ paid off in multiples.