Startup muscles into online ticketing market

Sometimes great things spring from humble origins.
Vendi Software Inc., which is operated out of a home office in Belmont, aims to crack the online ticketing market with its Web site, www.vendini.com.

That’s a market Wall Street analysts estimate is worth more than $10 billion annually in U.S. sales and is dominated by Ticketmaster, a unit of e-commerce powerhouse USA Interactive of New York, which had $4 billion in ticket sales last year.

Vendini is happy to live in Ticketmaster’s shadow by focusing on small community-based or independent theaters and performing arts groups, such as the Berkeley Symphony.

So far, Vendini says the strategy is working. Although founder and CEO Mark Tacchi would not release specific numbers, he claims the company is profitable and growing with 400 customers nationwide since it launched in November 2001.

To make money, Vendini takes a small percentage of each electronic transaction, determining charges on a case-by-case basis. Other ticketing companies take similar custom-set charges from ticket sales, but unlike Vendini, they also charge set-up or administration fees even if no tickets are sold by them.

“We’re not elbowing in. There is a huge opportunity there that Ticketmaster won’t touch. There’s this unspoken threshold where the accounts are too small for Ticketmaster to even consider,” Tacchi says.
Ticketmaster says that’s not really the case, but acknowledges smaller clients are not as profitable as big-name acts or larger arenas.

“It’s just basically our concentration has been with the larger venues,” says Ticketmaster spokeswoman Kandace Simpson from her Los Angeles office. “Don’t get me wrong, we do all size venues, but obviously most of our business comes from larger venues and larger clients.”

Ticketmaster aside, Vendini’s biggest challenge could be from companies such as Paciolan Inc. of Irvine, which does ticketing for the San Francisco Ballet as well as Stanford and San Jose State universities.

Paciolan claims it handles 25 percent of all U.S. ticket sales, putting it neck-and-neck with Concord-based Tickets.com for the No. 2 position in ticketing behind Ticketmaster. Tickets.com did not return calls requesting comment.

“Traditionally, we owned the college athletic market, performing arts, museums and attractions,” says Paciolan spokeswoman Laura Christine.
Privately held Paciolan started 23 years ago as a brick-and-mortar company to provide a full-range of box office staffing for nonprofit sports teams and arts programs.

“We do ticketing — not only Internet, but the back office and phone as well as box office. We do the entire infrastructure to sell your own tickets,” Christine says.

After receiving $20 million in third round venture funding in January, Paciolan has a total VC take of $35 million.

Armed with new IBM servers that allow it to process 100,000 ticket orders per hour, Paciolan says it is ready to capture big arenas and major league sports and take on the industry’s Goliath.

“We compete head to head with Ticketmaster now,” Christine says.
That’s a far cry from Vendini, which is happy to stick with the smaller venues and operates with a staff of fewer than 10. The company started with $4,000 and lots of programming muscle from its founder, a programmer himself, who cut his teeth by founding enterprise software company Hipbone Inc. of San Carlos in 1998.

“What I realized with my last company is VCs want things to move a lot faster. But when you’re building a product and a customer base, sometimes this takes time and it’s hard to show month-to-month progress. The whole VC dog-and-pony show is a big time suck,” Tacchi says.

He also says his company is hell-bent on keeping expenses low, opting to operate out of home offices.

“The most important thing for us is to keep operating costs low. With Tickets.com and Ticketmaster, their cost of operations are higher and it’s reflected in their service fees,” Tacchi says.

Vendini says that a successful ticketing company doesn’t require a branded Internet portal.

“This is the best business to be in. Tickets are consumable; they expire after a few days and people come back to buy more. It’s not like we’re selling computers that can last three to five years,” Tacchi says. “Our next step is we’re going to Canada.”