Tom Paine
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Valuations of privately held ventures are very fluid, much more so than for publicly traded firms.
Take Theranos, for example. The California-based startup, which claimed to have the methodology and technology to revolutionize blood testing with a simple, low cost solution, soared to a valuation of $9 billion, one of the mightiest of Unicorns.
But reports last Fall questioned the validity of its lab test results, implying that Theranos wasn't being straightforward, at the very least.
Early this week
Theranos founder Elizabeth Holmes made a rare public speaking appearance in front of the American Association for Clinical Chemistry convention (a lively crowd) in Philadelphia, and the audience had an expectation that Holmes would address the controversy surrounding the blood test results. Whether those expectations were realistic, I can't say.
But Holmes instead decided to present the beleaguered start-up’s new 'miniLab' diagnostic tool, a completely different product not facing the same regulatory issues.
Some in the audience felt used, taken in by a pretext to hear a pitch.
Then there's SevOne, Delaware's latest, greatest startup hope.
In 2013, Bain Capital, which doesn't usually make bad bets, poured in $150 million to buy out the founders and investors of the fast-growing network monitoring startup founded by Vess and Tanya Bakalov. Bain also installed its own guy as CEO.
Another round of $50 million followed in late 2015, at a
valuation the Wall Street Journal described as bordering on $1 billion. At that time it became apparent, though never officially announced, that
SevOne's headquarters were moving from Delaware to Boston. This created an extra management layer far from the largest concentration of its engineering talent in Newark.
The first layoffs at SevOne came in March, probably less than 10% of a workforce of more than 500.
The layoffs that began this week were described by ex-employees interviewed by the
Wilmington News Journal as possibly running into the hundreds. A request by
Philly Tech News to SevOne for clarification has not been responded to.
What caused SevOne's problems? Was the headquarters shift to Boston disruptive? Did it staff up too quickly? SevOne is still
well-positioned on the most recent Gartner Magic Quadrant. Also see
451 Research's new report.
My guess is that SevOne's product is complex and not as simple as rolling out more boxes to a new account. Serving a small number of large accounts, such as Comcast or Amazon, is different from reaching a broader customer base. Or maybe it simply wasn't that unique from its competitors. In any event, its unlikely that SevOne could now raise funds at anywhere near a billion dollar valuation now.
Update 8/21: Still haven't seen or heard anything more specific about SevOne's reported layoffs.
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| Marc Lore / ( LinkedIn) |
To the upside, the
Wall Street Journal reported that Jet.com is in buyout talks with Walmart at a valuation that could near $3 billion. Jet has raised at least $700 million to date, with its most recent valuation being in the $1.3 billion range.
Penn-related MentorTech Ventures, which was also on board with Marc Lore's previous startup, Quidsi (sold to Amazon for $545 million) was an early investor in Jet, his latest.
Recode suggests a match could be made between Walmart, which is desperately playing catchup to Amazon in ecommerce, and Jet.com, which may face a tougher road if it needs to raise more capital on its own. Jet.com's ecommerce team is considered one of the best, so in a sense a buyout might be a kind of acquihire.
Birchbox, founded by a pair of Harvard MBAs, was seen as a model for the emerging subscription economy, offering a monthly delivery of a collection of health & beauty aid samples, with the idea that a percentage of subscribers would order full-sized items. Early backers included First Round Capital. In 2014, it raised $60 million in a round that valued it at around $500 million
Birchbox has also had two layoff rounds this year, totaling more than 25% of staff. Although its said to be doing around $200 million in revenue, it was still facing a cash crunch. (You go to Harvard to learn how to make a buck off of $200 million in sales).
So this week
Birchbox announced it had received a $15 million infusion from its existing investors, including First Round, which is hopefully intended to carry it to positive cashflow.
One of Birchbox' co-founders, Hayley Barna, is now a venture partner with First Round.
Lastly, there's RJMetrics, which exited last week through a
sale to ecommerce software firm Magento, previously an RJMetrics partner. I know nothing about its numbers, but considering the extent of its layoffs earlier this year it seems unlikely that it provided a return equal the the valuation implied by the $23 million in VC funding it received .
Not to take anything away from Bob Moore and Jake Stein, who built the business absolutely from scratch with nothing but their combined brainpower, before taking VC money when RJMetrics was firmly established.
No word on how its spinoff, data transfer tool provider Stitch, is financed.
