EncrypTix points to paper future

By | August 18th, 2000

EncrypTix, the El Segundo, CA, venture founded by SunAmerica veteran Jim Rowan and bankrolled by Microsoft’s Paul Allen to the tune of $36 million, is one of the contrarian success stories of the year.

How else do you explain partnerships with American Express, Sabre and GetThere.com to work with what is essentially a 1,900-year-old technology – paper?

EncrypTix is developing technology to deliver tickets, vouchers, certificates and other forms of value-bearing instruments to printers, smart cards, Personal Digital Assistants and wireless devices. But Rowan acknowledges that most of the tickets delivered through EncrypTix will, at least initially, be printed.

While the privately held company is keeping mum about specific future plans, Rowan has hinted that several airlines and perhaps even a cruise line will accept his Internet-delivered tickets starting in 2001.

But he’s reluctant to take credit for convincing the large travel suppliers and distributors who work with him that there’s a future in fiber. He insists paper is only one method of delivery and that eventually the tickets and vouchers could be transmitted by electronic means, either through a PDA or a cellular phone.

“People will have to learn to trust the technology,” he says. “It will happen, eventually.”

Technology is certainly a major part of the EncrypTix story – and one not to be overlooked – but so is the fact that the company sold a lot of forward-looking partners on a very old medium. How did it do that?


– Present a solution to a problem. In EncrypTix’ case, it offered technology developed by Stamps.com that met a need each one of the companies (and their customers) had. “It really was a ‘problem-solution’ proposition,” says Rowan. “And if you phrase the question in terms of ‘I’m trying to lower your costs, your fraud costs, and give you a technological advantage’ you can’t go wrong.”

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– Appeal to their instincts. Even though the pundits say the future is in electronic tickets, passengers often feel otherwise. Whether it’s an agency or an airline being presented with the EncrypTix proposition, managers know that virtual tickets are lacking in many respects. Instinctively, the executives are aware that there’s a comfort level in paper that nothing else has. So even if they’re fixated on 21st Century delivery mechanisms, it doesn’t take much to persuade to also consider the tried and true.

– Wow ’em with technology. “When you offer something sexy that no one else is, they’ll pay attention,” says Rowan. The bottom-line argument when EncrypTix made its case to its partners and investors went something like this: Our technology is approved by the U.S. government (a reference to the Stamps.com deal). And, “If it’s good enough for the U.S. government, isn’t it good enough for you?”

The strategies appear to have worked very well. EncrypTix closed its financing in eight weeks, at a time when the future of dot-coms was in doubt by the investment community. It inked additional partnership deals despite – or Rowan might argue, because of – its reliance on paper as a delivery vehicle for its product.

Ultimately, EncrypTix’ accomplishments suggest that sometimes to take two steps forward you have to take one step back.



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