Aubrey Dan's private equity fund usually aims for a healthy return when taking a position in small entrepreneurial companies that want to get bigger. As the sole shareholder of Dancap Private Equity Inc., Dan's “sweet spot” investment level is $1 million, and he has a fondness for old-economy businesses with proven fundamentals.
So what was he thinking last year when he sank $1.5 million into a piece of musical theatre called Urinetown? While theatre is arguably as old economy as you can get, it's also notoriously risky, as Dan learned. Urinetown–a musical satire set in a dystopic future where people have to pay a corporation in order to go to the bathroom–had enjoyed cult-hit status on Broadway. But Dan's Toronto production failed to pack audiences into the 876-seat Bluma Appel Theatre over the summer. “You typically want private equity to yield between two to four times your investment,” says Dan. “We call it a two-to-four bagger.” Urinetown was a no-bagger, losing an undisclosed amount thanks to mixed reviews and a scarcity of U.S. tourists.
Undaunted and much wiser, Dan is back at it, partnering once again with CanStage, the country's biggest not-for-profit contemporary theatre. His company is putting close to $500,000 into CanStage's Toronto production of Fats Waller's Ain't Misbehavin', a tried-and-true entertainment that doesn't have “urine” in its title. It also stars singer Jackie Richardson, who was an award-winning sensation in the very successful Cookin' at the Cookery, which opened at CanStage in 2003. But Dan knows that theatre is always a crapshoot. “As an investor,” he says, “call me crazy.”
Or maybe stage-struck. That's a fair description of Morris Berchard, another entrepreneur who's taking the stroll from Bay Street to Broadway North. In both cases, these mid-life impresarios are exposing themselves to more risk than they're used to–but each believes that some rewards are greater than capital gains.
Berchard is putting close to a half-million of his own money into a Toronto production of Bat Boy: The Musical, which achieved cult status in New York. The show also had its run extended in London, despite uneven reviews. It opened on Feb. 22 for an eight-week run at the 500-seat Bathurst Street Theatre, following two weeks of previews. That's a fairly luxurious preview period in Toronto, giving the 10-member cast extra time to try to nail the vocally challenging score. As lead actor Jay T. Schramek says of Berchard, “He didn't cheap out,” referring also to the ample budgets for sound equipment and props. “I wouldn't spend my last nickel,” says Berchard, 49. “But it is a risk putting this kind of money forward.” It's also a long-delayed dream.
Growing up in Winnipeg, Berchard wanted desperately to be an actor. “But my parents said, 'Do something where you're going to make some money.'” So he earned a degree in psychology and sociology, and used it to help build the fledgling Toronto-based company WarrenShepell into Canada's largest purveyor of employee assistance programs. Revenues are now approaching $50 million, and the thriving concern no longer requires the full-time attention of vice-chairman Berchard. He's free to indulge his pent-up theatrical dreams. “I hope I'm not too foolhardy,” he says, “but I really believe in this show.”
Berchard has been gathering producing credits and experience, having invested about US$50,000 in the 2002 New York production of Last Sunday in June, a well-received but short-lived drama. His first exposure to Bat Boy came a year ago at a gathering of potential investors in the London run. The original New York cast did a reading and sing-through of the show, and Berchard was engaged by its humour and transported by the story of an outsider trying to fit in.
In this case, the outsider is a boy born with pointy teeth and ears. Bat Boy originated in 1992 as a freakish cover photo and story in the U.S. supermarket tabloid Weekly World News. The managing editor from that time still insists the story was real. But doubts are raised when you learn that Weekly World News actually holds a copyright to the Bat Boy image, which it has licensed to the play's authors. (You can't copyright an actual person.)
Berchard is gay, and was discreetly so in the early '80s when he began marketing the then-unknown concept of employee assistance plans to corporate Canada. But he says his homosexuality is not the reason Bat Boy's outsider status resonated with him. If anything, it was his years of selling companies on the idea of offering mental health counselling as an employee benefit, in the belief that it would lead to a more productive workforce. “Sometimes the reaction was 'If we have employees with personal problems, then they shouldn't be here,'” he says. “I would take the rejection personally and I had to develop the courage to go forward, but I believed in the values of it a lot.”
Then there's the simple fact that Berchard loves to hang around theatre people. He was right alongside the director and choreographer when casting choices were made, and once all the contracts were signed, he catered a company meet-and-greet at his condominium in Toronto's upscale Yorkville neighbourhood.
Dan developed a similar soft spot for theatre folk when he saw them pouring their hearts out every night last summer, often to disappointing crowds. But he says he's better suited for the back office than backstage. “I'm not a theatre person, I don't perform, I can't sing worth a damn,” says Dan, 41. “I'm not involved at all in the acting or the casting. That's not my expertise. What I've found quite incredible is how much goes into the branding, the marketing.”
He ought to know. Before establishing Dancap, Dan was president of Wampole, a venerable but ailing purveyor of herbal medicine and vitamins. He more than doubled sales in less than five years by rebranding for a more modern appeal and by expanding the product line. “We rode the herbal wave, rode the glucosamine wave, and, in 2000, basically the family sold out of the business,” he says.
Dan is the son of Leslie Dan, founder of the Novopharm group of pharmaceutical companies and one of Canada's wealthiest individuals. (He ranked No. 29 on the latest Canadian Business Rich 100.) Leslie Dan is also one of Canada's most generous philanthropists, which may explain another of his son's theatrical motivations.
Aubrey Dan says he's developing a turnkey model with CanStage by which charities can market tickets that include a donation to their cause. He also uses the theatre to promote his private equity fund. “It's a great way to treat our investees and our financial intermediators–the people who bring us deal flow,” he says. “On opening night, we make them feel special.”
As well, Dan is committed to bringing greater choice to Toronto's theatrical market. But was all of this worth taking a hit on a $1.5-million investment? “There's always a cost whenever you enter a new business,” says Dan. “I paid that cost.”
He also learned the best way to leverage his private dollars. Instead of underwriting an entire stand-alone production, à la Urinetown, he's supplementing the budget of Ain't Misbehavin', which is part of the CanStage subscription series. The company's 17,000 subscribers will carry the first four weeks, and Dan's money is being used to raise production values, ramp up the marketing and, he hopes, extend the show through the summer.
Berchard is also learning as he goes, mainly from prominent New York entertainment lawyer Donald C. Farber, who is executive producer on Bat Boy. Farber is a powerhouse in the American theatre and the author of several seminal texts on the subject. He has also become a close friend of Berchard, whom he first met five years ago–“My grandchildren love him” says Farber–and the two men are developing a Broadway musical together.
Farber agrees that theatre is risky. And indeed, the initial reviews of Bat Boy in the Toronto dailies were so vehemently negative that, if the show were publicly traded, its stock would have surely hit a record low. But every so often a stage-struck investor enjoys returns that would make you stand up and applaud. One of Farber's books recounts the development of The Fantasticks, a musical that set a world record by running in New York for 42 years. “If you'd invested $330,” says Farber of that production, “you would have made $70,000.”