The surging startup Fab is spending some of the $40 million in funding it just booked. Today Fab announced that it’s acquiring New York based startup Fashion Stake as it looks to expand its focus on its best selling category, clothing. FashionStake’s co-founders Vivian Weng and Daniel Gulati will join Fab, but beyond that terms of the deal were not disclosed.
“They are super well respected with the kind of independent designers we want to feature on Fab, so having their industry connections will be a great help,” said Fab CEO Jason Goldberg. The Fashion Stake site will fold and become part of Fab.com. But Mr. Goldberg said that they may look to incoporate elements of the company, like their crowdsourced model for voting on items to see which goes on sale.
This is a guest post from Eric Wiesen, a general partner at RRE. It originally appeared on his blog.
The recent acquisition of Gowalla by Facebook is just the latest incidence of the potential tension between investors and founders when a company is acquired primarily for the team rather than for the technology, product or business that they’ve built. People around the web will take the opportunity to observe that in situations where a company is acquired in this way, the founders typically get a package of equity to motivate them to join (and remain at) the acquiring company, while investors usually get anywherefrom zero to a small return on invested capital. Look around and you’ll find people willing to condemn the founders for unethically “selling out” their investors and you’ll find people who say the exact opposite, that such a company didn’t have saleable assets anyway, and so investors are owed nothing because the business failed.
Seed Stage Slaughter
BuyWithMe, “a daily deal contender” or “Groupon clone,” depending on who’s doing the talking, announced last night that it acquired its fifth company this year. This time they plunked down cash for Scoop St., which took a hyper-local approach to discounted deals, focusing only in New York City. AllThingsD reports that the terms of the deal weren’t discussed, beyond the fact that it was all-cash, but considering Scoop St. just announced its own branded mobile app earlier this month along with a new lottery feature, it probably wasn’t in the works for that long.
A recent report from the 451 Group found that acquisitions were up in the suffocatingly crowded deals space, but the Scoop St. buyout is also another indicator of the impending seed stage slaughter we’ve been trying to warn you about, as the early stage funding banked in the heady days of 2010 runs out.
The Start-Up Rundown
Your week in New York start-ups:
ANOTHER ONE BITES THE FACE. Facebook has [edit: not acquired, hired the people behind] pretty, pretty Daytum, the two-person New York-based start-up that has been helping users organize and make spiffy all that data we create: check-ins, runs, hot dogs eaten. The app will live, the company said, but the team is moving out West.