Betabeat has learned that Gilt Groupe is in the final stages of acquiring the troubled daily deal site BuyWithMe, which laid off more than half its staff last week to sweeten the deal for potential buyers. The sale is a win for Matrix Partners, who has invested in both firms, and been backing BuyWithMe across three rounds and $30 million in venture funding.
BuyWithMe will officially be part of Gilt starting Nov. 1. The remaining sales staff who were left after last week’s layoffs will be let go with one weeks pay. Gilt gets a lean company consisting largely of technology, a few executives, a large email list of customers and merchants partners in cities around the country.
Buy Together Die Together
Betabeat has been covering the layoffs at BuyWithMe since Wednesday, when more than half the staff, at least 100 people, were laid off without warning or severance. There has been almost no word from the company or its management. As a result, we’ve had to rely mostly on anonymous sources who know bits and pieces. But over the last 24 hours, we’ve been able to put together some big pieces of the puzzle.
The statement released yesterday by CEO James Crowley, that the company was reorganizing to best serve its clients and customers, was disingenuous at best. Numerous sources Betabeat spoke with confirmed that BuyWithMe is looking to be acquired by a larger player in the daily deal space, and has been for some time now. The layoffs were intended to make it a more attractive purchase.
How did BuyWithMe end up in such dire straights? Betabeat has heard from a source that not only did the company purchase six smaller startups in the last six months, burning through some of its capital, but it also took out a $10 million debt round from its backers that was never disclosed to the press. That goes a long way towards explaining how the company got to where it is today.
Updates about the list from a former employee at the end of the post.
Second update from a source on who determined the firing list.
A source familiar with the situation revealed more details about the layoffs at BuyWithMe yesterday that left 55 percent of its staff unemployed without severance or warning. “The founder came back yesterday and literally made a list of people he liked and didn’t like and whacked everybody he didn’t like,” said the source.
“He’s not giving them anything,” added the source. “They were getting zero severance, zero warning. It’s perfect for a massive lawsuits kind of thing, which they’re probably going to get.”
The founder of BuyWithMe, the group buying deals site, is Andrew Moss. On his Twitter bio, Mr. Moss describes himself as, “Value-minded venture investor, Founder of BuyWithMe.com, former hedge fund COO/GC/CCO.” The company has also cycled through two CEOs, including an interim president when former CEO Cheryl Rosner stepped down last December.
UPDATE: A source familiar with the situation says BuyWithMe founder Andrew Moss based layoffs on a list of employees he liked and didn’t like.
A member of BuyWithMe’s engineering team who had a direct view to the company’s traffic numbers says that it never had any organic growth. “We would buy a new company Read More
UPDATE: A employee who was fired today calls to explain why the company went under. UPDATE 2: Another ex-exmployee says the company blew its cash trying to buy its way to growth.
UPDATE 3: A source familiar with the situation says BuyWithMe founder Andrew Moss based layoffs on a list of employees he Read More
The markets reacted to Google’s acquisition of venerable guide brand Zagat, pushing Open Table’s stock price down eight percent. The move is based on the assumption that Google is trying to get closer to the action in terms of reviews, reservations and someday payments.
JP Morgans analyst Doug Anmuth thinks Google will integrate Zagat Read More
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.
Group Buying Mania
Bad news for group buying from local daily deal aggregator and number-cruncher Yipit. Following on some earlier analysis based on the start-up’s S-1 filing, the initial paperwork required for an IPO, Yipit finds that Groupon’s numbers are getting worse with time. In Boston, the company’s second-oldest market, subscribers are buying fewer Groupons and revenue per merchant is waning, Yipit’s Vinicius Vicanti writes. As Groupon spends more to acquire new customers, its subscriber base is buying fewer Groupons. “That’s not good,” is Mr. Vicanti’s kicker.
Deal With It
Local daily deal site BuyWithMe will now offer discounts in Chicago, home to the industries biggest player, Groupon.
With the addition of DealADayOnline (DADO), BuyWithMe will now offer deals in thirteen US cities.
The company has raised a healthy $21.5 million, but other players are scaling much quicker, with Groupon raising nearly a billion Read More
In the booming market for daily and group deals, small business owners are finding they can play one service against another, and get burned if they’re not careful.
Avi Marko runs the Brooklyn based KidsSocks.com. His first deal, reports the WSJ, was with Mamapedia brought an big traffic boost, 600 customers, but with half the revenue going back to Mamapedia, Marko didn’t make a dime.