Venture capital dreadful at online shopping
Silicon Valley e-Commerce investments are exploding. Gilt Groupe was sold for a fraction of its valuation. One Kings Lane may be next to die. Earlier also Fab.com was underperforming and was sold for a small part of its valuation. Fab was the first 'unicorn' billion dollar retail startup. Groupon, One Kings Line and Wish.com were few examples that give insight of what's happening.
Marc Andreessen, Silicon Valley's Brobdingnagian Sloth Fratelli overlord, termed Fab as an e-Commerce category killer. After two years of his forecast, Fab was killed. Prior to being offloaded, some startups witnessed theirs stocks tumbling on stock exchanges. Groupe lost 90 percent of its worth.
Now, Living Social, which is believed to be in super sad business pivot. It sells maps to celebrities' houses. Online shopping failure is widening. Venture capital money has been invested in several retail startups.
Most of them become digital junkyards. According to a report by TechCrunch, One Kings Lane valuation was over $1 billion. The invested capital in the startup so far is $225 million. The rumored sale price is $150 million only. Another one is Gilt. Analysts look at what's in store for 2016. Analysts commented that "the shiny shoe-boots look like they got trapped in a factory conveyor belt. Gilt's flash sales were popular exactly nine years ago."
Silicon Valley assessment is that valuation of Gilt is $1 billion, invested capital so far is $271 million and sale price may be $250 million.
Coming to Groupon, which sells bikinis, the valuation of Groupon at IPO time was $12.6 billion and the invested capital so far is $1.14 billion. The Groupon's stock price at the time of IPO was $26.11 and the current market price is $2.86.
Wish (Wish.com) is another junkyard e-Commerce platform. Wish is doing the previously impossible as it raised the money without pretending to be fancy or worthy good. The invested capital so far is $578 million and this is may be more than its valuation, according to Silicon Valley assessment.
Analysts blame venture capitalists for the most of the failures and not the founders of startups. Majority of sites were attractive at the beginnings of their ventures. Gilt, Fab and One Kings Lane were so attractive in their respective segments. Fab, Groupon and Gilt self-declared that over 60-70 percent of users are female. Interestingly, females account for four percent of the deal-making venture capitalists in the Silicon Valley.
Coming to technology startups, it seems to be positive for investment climate in 2016 as well. Mark Haefale, Global CIO at UBS Wealth Management, said: "The US equity surge is now in its seventh year, making it the longest bull run since World War-II." The 2015 year ends well on positive note of $100 billion investment flowing into startups, as reported by Inc.
Bobby Franklin, President and CEO of NVCA, said: "Although down slightly from the end of last year, the venture ecosystem deployed a healthy amount of financial capital to the startup ecosystem at the start of 2015, surpassing the $10 billion mark for the fifth consecutive quarter and setting the stage for what we expect to be another busy year for startup investing."
Venture capitalists invested $13.4 billion in 1,020 deals during the first half of 2015, according to Moneytree report. The VC investment declined 10 percent in US dollars and eight percent in number of deals during the period., as reported by National Venture Capital Association.
The Silicon Valley witnessed 10 deals over $100 million including two $1 billion investments during the first quarter of 2015. Along with VC, seed state investment was also down 32 percent in US dollars and 35 percent in deals. Despite some odds, the software industry is expected to receive funding support.