Dwolla founder Ben Milne. (Photo: Twitter)

Dwolla*, the Des Moines-based payment platform that has a strong presence in NYC, announced today that it has received a $16.5 million Series C investment led by venture capital behemoth Andreessen Horowitz, with contributions from NYC firms Thrive Capital* and Union Square Ventures. The fresh funding will allow Dwolla to double its staff of 40 to 80 and open a third office in San Francisco, according to The Next Web. Andreessen partner Scott Weiss will be joining Dwolla's board.

Dwolla is a payment network that allows users to transfer money back and forth for free for transactions under $10 and a flat rate fee of $0.25 for those over $10. The platform hooks directly up to your bank account and offers transfer fees lower than what banks or credit card companies typically charge, positioning it as a legitimate competitor to conglomerates like Visa and Mastercard (not to mention that rumored deal with Square).

But the company also appears to have PayPal in its sights. In October, Dwolla announced a new MassPay feature that competes with PayPal's "Mass Payment" function; MassPay allows users to send out payments to up to 2,000 people at once with just a few clicks. It's worth noting that Jeff Jordan, the former President of PayPal, is a partner at Andreessen.

This is one of the largest investmens Andreessen has made in a payment services startup, though it's made smaller bets on Stripe, a payment system for developers, and Balanced.

Mr. Weiss, who led the investment, explained on his blog why the firm chose to make such a big bet on Dwolla:

• Founder/market fit: Ben is one of the most determined and scrappy entrepreneurs we’ve met and has a deep knowledge of the entire payment network.

• Ridiculous market size: Dwolla’s FiSync is taking on ACH and FedWire, a combined $730+ trillion market with real-time transactions, new revenue streams and incentives for key players in the payment process.

• A snowball of traction: Its annual processing run rate has moved from the hundreds of millions to billions and its business development pipeline is chock full of opportunities.

Mr. Weiss signed off: "I am excited to be joining Dwolla’s board of directors and look forward to helping Ben build the next multi-billion dollar payment company!" Enjoy all that dough, boys.

*Disclosure

Pre-announcement jitters.

Fab famously got traction once the cofounders pivoted from gay Yelp to design-focused flash-sales site. But now that flash sales are no longer the darling of the tech industry, Fab is moving on. Hence the company's announcement at its kindergarten-like West Village HQ last night: "We're going to do a little pivot again," CEO Jason Goldberg announced.

"We're redesigning Fab as the world's number-one design store," he said. "We're going from flash sales to design store, and we're going there in a really big way."

That means a revamped website, products sold exclusively on Fab, brick-and-mortar stores, and the acquisition of a German company offering customizable furniture. 

"The vision that we had back in early 2011 was, we said we can be the global brand synonymous with design for years and years to come," Mr. Goldberg explained. "We said right then and there we want to build something really massive."

"We said we can create the Ikea/Amazon of design," he added. Don't be shy, fellas.

To that end, Mr. Goldberg had several announcements:

First off, the company has wholly redesigned its website and mobile apps. Search is better, and thanks to the addition of departments and other ways to sort products, it's now much easier to go looking for a particular item. (No more paging through the entire furniture category on a fruitless quest for a green rug.) They've added designer pages (opening up the possibility of marketplace-style selling) and an outlet, as well.

Not that this is an entirely new development. Two thirds of the company's daily revenue already comes from search and browsing.

Second: The launch of "Exclusively Fab," a line of products unique to the site. That might be products designed in-house, capsule collections from particular designers or lines of products where Fab has taken on the upfront costs of manufacturing.

Third: Fab has purchased the German company MassivKonzept, which makes customizable furniture. Fab will be launching the offering in the U.S. as Designed By You. So if you've got a weird corner in your house that needs an odd length of table, hold tight.

Fourth: Fab is opening actual brick-and-mortar stores, starting by converting a MassivKonzept showroom in Hamburg. (So Monocle!) "We're going to test a number of different physical retail environments," Mr. Goldberg said.

"There will be more than one Fab store this year, and there will be multiple formats," he said. "We're going to learn how to do this by trying it a number of different ways."

Also, Fab is launching in France.

What Mr. Goldberg didn't announce was a new round of funding. All he'd offer is a tease: "When the time does come for us to raise money--and we will raise money in the next few months, to build out our global footprint--we'll be looking for investors to help us take Fab and spread this brand everywhere we want to take it."

We assume that means: Get ready to write a really, really big check if you want in.

(Photo: thebusinessfiles.com)

A tipster contacted Betabeat to let us know that Ben Fischman, the founder and longtime CEO of lifestyle and fashion ecommerce site Rue La La, had stepped down from his role. A press release obtained by Betabeat confirms the news: Mr. Fischman will be replaced by Steve Davis, Rue La La's president.

"We founded Rue La La five years ago to offer consumers the most engaging online retail experience, and I leave the company in the hands of Steve and a brilliant team who share and will continue that  vision," Mr. Fischman said in the release. Rue La La declined to elaborate further on the reason for Mr. Fischman's departure.

Rue La La is a members-only shopping site that raised a total of $22 million in January 2012, shortly after laying off 60 people.

This is a developing story. Updating...

If you know anything about this executive shuffle, you know what to do: tips[at]betabeat.com

Yep. (Photo: Fab.com)

Fab.com has made more costume changes than a drag queen. Launched in 2011 as a social network for gay men (name: Fabulis), the company then transformed itself into a flash-sale site selling arty farty tchotchkes. Now, Business Insider suggests, Fab might be gearing up to design its own products.  According to a blog post written by Fab cofounder Jason Goldberg, details of the pivot have not yet been publicly released but it will be "gradual."

According to Business Insider:

"It will be 100% towards delivering the best customer experience in the world for discovering everyday design. We’ll offer even more unique products supported by an even better experience," wrote Mr. Golberg in December.

Business Insider speculates that it's moving toward an in-house model of designing, making and selling its own products. Bradford Sellhammer, the company's other cofounder, told Fast Company that it wants to become "the world's alternative to Amazon and Walmart."

"The only way to compete in the world of Amazon is to sell things that Amazon doesn’t sell,” Shellhammer said. “We’re building a brand, and part of that is bringing the brand to our own line of products.”

Fab said all will be revealed at a press event on April 29, but signs of its gradual change are seeping out. but signs of its gradual change are seeping out as the company held a design competition earlier this month. The company held a design competition earlier this month, and contestants--who consisted of designers and students--were asked to create product ideas for immediate judging. Winners will have their concepts sold on Fab.

Maybe one concept can be designing a sustainable business model.

If there were a word cloud for recent ecommerce reports, it would be shaped like a mushroom cloud with "over-hyped" "implosion," "froth," "down rounds," and "suck it, America, Europe does it better," all in extra large font.

So we weren't expecting to hear that JackThreads, the men's ecommerce site acquired by Thrillist in 2010, had its best revenue month ever in February, even bigger than typically high-selling holiday months. Growth in new members was up 366 percent year-over-year and double the growth in number of new users joining in November and December of 2012.

The company also boasted the highest number of app downloads in February. Mobile revenues were triple from November, with sales from the app counting for 40 percent of JackThreads February revenue. But the most important metric--as that imaginary word cloud can attest--was the fact that JackThreads did it while maintaining its highest gross margin month ever as well.

"I can feel the heat," heat-seeking CEO Ben Lerer told us by phone, "Frankly, for a company that's seven years old, it's a little unexpected." Mr. Lerer raised a $13 million Series A last year (after growing Thrillist to 150 people on just $1.7 million). He attributed the surprising success to a number of little tweaks and improvements, rather than one magic bullet.

"You figure out make a bet and you win one, you lose one. But they all harmonically came together," he said, adding, "I don’t know if that’s English." Improvements were made on the website (adding a search function and boosting speed) as well as in mobile development, SEO, speed of order fulfillment, greeting customers the right merchandise when they arrive on the site, better photography, and buying deeper into certain categories.

One popular item seen around the upwardly mobile men of Soho? A seasonally appropriate "ninja hoodie." Rebrand it as a snuggie for your neck and Betabeat might consider throwing down for a few.

Of course, if there's any niche that's getting beat up worse than ecommerce, it's digital media, i.e. the Thrillist side of Mr. Lerer's business. But he brushed off concerns that Jackthreads gains means that he'll eventually be running an ecommerce company, rather than a "media group."

"The lifetime value of a user," he said, "is monetized through both media and ecommerce. Ultimately, it's going to mean a larger audience for our advertisers to reach as well, but that doesn’t work in real time." They're sure trying. Register for JackThreads and you'll get a pop-up noting the city you're in and wondering if you'd like to sign up for relevant recommendations from Thrillist.

We asked the ever-amiable Mr. Lerer why he thought there was so much skepticism about ecommerce recently. "There has been a tendency online for ecommerce companies to buy revenue," he replied. Companies like Gilt Groupe and Fab.com, he said, have spent a lot on marketing. The idea is, "I can make no money on my users, but they can buy a whole lot of stuff from me," he said, noting, "You don’t raise $150 million to put it in the bank. You raise it to spend it." Only after they scale does the focus turn to making money. "Gilt is an example of that. I think Gilt will pull it off, but not without some pain to get there. And Fab is on a similar trajectory."

Mr. Lerer opted against that route. "Maybe we were wusses," to try growing a more comfortable clip rather than aim to be an industry leader, he said, but, "our margins feel a lot more like businesses that are private label than companies that are also selling large quanitifes of third party goods." Despite unintentional misses, like early foibles running a shipping promotion without understanding how it might impact margin, "We don’t give the store away."

JackThreads has evolved over the years from its target 18-to-24-year-old demo, he said, and been able to sell at a higher price point, incorporating more athletic brands and tailored items. "Our users are a little bit less price sensitive and a lot more focused on curation and brand discovery," he said. "If you’re gonna be known for being super cheap, you better stay super cheap." You can find Self-Edge denim on JackThreads, but at the same time, they're not selling $250 pairs of jeans.

Mr. Lerer said JackThreads recently did a sale on vintage Patagonia items and is incorporating more home goods. "But without the Gilt approach of: JackThreads Home! JackThreads Taste!"

I care about your startup thiiiiis much. (Photo: Slog)

Good news for tech bros who still have a soft spot for their jam band past: everyone's favorite musician from high school is now joining Justin Bieber and Will.i.am in the angel investor game. Dave Matthews has backed SpotTrot, an ecommerce app that allows musicians to sell merch on mobile phones.

Hey, this almost makes your firedancer tattoo relevant again.

Not so fast.

Step away from the "purchase" button. According to an investigation from The Wall Street Journal, shopping sites run by companies like Staples, Discover Financial Services, Rosetta Stone and Home Depot show customers different prices and deals based on what they know about you, including geolocation. 

The paper reports that Staples.com showed higher prices 86 percent of the time "when the ZIP Code actually had a brick-and-mortar Staples store in it, but was also far from a competitor's store." However, New York City was an exception:

"Tests of Staples.com using ZIP Codes in the boroughs of the Bronx, Manhattan and Staten Island consistently saw higher prices, while Brooklyn and Queens saw almost only the discounted prices. This despite the fact that all parts of New York City look to be within 20 miles of a Staples competitor, according to the websites."

Thank you, Journal, for giving us an excellent excuse as to why we didn't buy anyone Christmas presents this year.

Startupland, he explained, can only stay insulated from broader economic forces--like, say, today's warning about a new global recession--so for long: "The LP's that fund booms are, after all, pension, municipal, and sovereign wealth funds. Consumers need disposable income to invest in the latest products,  as do the companies who serve them and advertisers who reach them."

The latest venture capital numbers and tales from the boardroom seem to indicate that some of Mr. Ries' predictions are coming to pass.

In a trenchant blog post over the weekend, Union Square Ventures' Fred Wilson said, "it is a tougher time for early stage consumer internet companies than I have seen since the 2001-2004 time frame. And I think we are still in the early innings of this more challenging environment," noting reports of a 42 percent drop in VC funding for consumer web and mobile companies for the first nine months of 2012 (year-over-year).

Looking at same report from Dow Jones VentureSource, the Wall Street Journal noted that:

“Just under half of the 165 companies in the consumer information services sector that raised first rounds in 2010 have raised a subsequent equity round and fewer than one-quarter of those who raised a first round last year have done so.”

Those numbers spurred fears of what Ed Zimmerman called a "Series A Funding Cliff," where the emergence of seed funds and so-called micro VCs has not been matched by an increasing number of funds in the next stage. That results in the kind of bottleneck that's bound to create carnage, though at the the moment, the impact has been softened by “the seemingly inextinguishable thirst by larger companies” like Google, Facebook, Twitter, and Groupon to “acqui-hire” talent, he explained.

Meanwhile, between heady times and inexperienced entrants, "investors have gotten a little sloppy," says The Verge:

The temptation to pick up a company on little more than a good first impression or a colleague’s recommendation was strong. One entrepreneur who raised over half a million dollars for his startup last year told me that he fudged the presentation to investors — the technology didn’t work yet, so he used a video and pretended it was live.

But the constriction is not just at the seed stage. Last week, Bloomberg noted that investors were wary of sky-high valuations in ecommerce companies like Fab, Gilt Groupe, and celebrity-infused BeachMint and ShoeDazzle.

After pouring more money into retail startups in the third quarter than in any period since the dot-com bust in 2000, venture capitalists concerned over the formation of an e- commerce bubble are balking at deals they consider overpriced. The valuations in recent funding rounds and executive exits suggest investors are no longer willing to sink cash into online stores that don’t have proven growth prospects.

Concern over growth prospects--and profitability!--are also hurting Foursquare's attempts to raise a $50 million round, the Wall Street Journal reported last week.

Foursquare is expected to bring in about $2 million in revenue this year, people familiar with the matter said, by selling targeted coupons. That is well behind the pace set by Facebook, which generated $153 million in revenue selling ads in its fourth year, and Twitter, which sold $45 million in ads at the same point in its history, according to research firm eMarketer.

Foursquare also faces "a backdrop of growing skepticism about young technology companies in the wake of deep stock-market declines for their publicly traded peers," i.e. Zynga, Groupon, and Facebook.

Mr. Wilson's astutely analyzes some of the underlying causes of this capital crunch, including competition for consumers' attention as large platforms like Google, Facebook, Instagram, Twitter, and LinkedIn "suck up a lot of the oxygen" of time spent online in the English-speaking world.

there are still occasional new entrants into this list and departures too. tumblr and pinterest have risen a lot in the past couple years while myspace has declined. but consumer behaviors are starting to ossify on the web and it is harder than ever to build a large audience from a standing start.

What's more, he argues, the turn towards mobile means has led to difficulties in getting that coveted homescreen spot. Careful observers of the startup scene have no doubt witnessed startups get "stuck in the transition" from having a good-looking product that does what it promises fail to get a large user base. As Mr. Wilson says:

you need to master the "download app, use app, keep using app, put it on your home screen" flow and that is a hard one to master.

For some evidence of that, look at a mobile-first companies like Foursquare. As the Journal noted, only 8 million of the company's 25 million registered members use the app at least once a month.

Perhaps because of those challenges in adoption and engagement, Mr. Wilson notes that momentum for late stage investors is moving away from consumer towards enterprise. Dave McClure of 500Startups vehemently objected to that shift in interest, calling it a "huge error," and seeing an upside even in the flailing trajectories of Groupon and Zynga, especially as nearly "every possible internet distribution channel has MORE users than ever before – whether it be search, social, mobile, video, local, SMS, email, chat, etc.":

The number of recent internet services that have grown from nothing to hundreds of millions of users is frankly rather astonishing – Pinterest, Instagram, Groupon, Zynga – all of these took less than a few years to get to hundreds of millions of users and in some cases billions of revenue. While Groupon & Zynga have certainly fallen Icarus-like from higher heights, it’s still the case that both are amazing for how fast they grew and acquired users via search, social, and other channels.

Despite their respective reading of the tea leaves, neither Mr. Wilson nor Mr. McClure is backing off consumer Internet investments. And the decreasing cost of building scaleable software-based companies means one can live lean to survive harsh startup cycles. But especially in New York's app-happy tech scene, entrepreneurs might want to look down at their home screens and keep Mr. Wilson's litmus test in mind.

Ms. Nguyen (Photo: We Are NY Tech)

New York-based street style social network Thre.ad announced in an email sent out to users today that it will be shutting down. The company's owners would probably rather you think of it as a pivot, however: According to the announcement, they're folding Thre.ad into a new ecommerce site called That's Foxy, which will deliver "shop-able products that are inspired by what’s trending in the community."

The email announcement explains that the transition from Thre.ad to That's Foxy is due to the fact that many of Thre.ad's users browsing street style looks wanted the option to be able to easily shop for the items showcased in the photos. A quick perusal of That's Foxy shows street style-like photos with a specific accessory or article of clothing highlighted, which users can click to purchase.

Thre.ad launched in private beta in November 2011 and was in the process of raising a $760,000 round back in February; according to its Form D, the company had raised $560,000 of that round. No updated Form Ds have since been filed.

The company's CEO, Mimi Nguyen, is a fixture on the New York tech social scene. Last year, she helped organize the Raise Cache fashion show to help benefit Hack NY. Justin Bieber, who knows Ms. Nguyen through a nonprofit she cofounded called Pencils of Promise, was rumored to have agreed to invest in Thre.ad, though that was never confirmed. "If he ever wants to [invest], I wouldn’t be against that,” Ms. Nguyen told Mashable at the time.

Wonder if the Biebs will be willing to toss some cash at That's Foxy?

Mr. Ryan (Photo: Invoke Media)

Weeks after news broke that flash sales giant Gilt Groupe put its travel deals site, Jetsetter, up for sale, the Wall Street Journal reports that Gilt is looking for a new CEO to replace company founder Kevin Ryan. Sources told the Journal that Mr. Ryan and the Gilt board agreed two months ago to quietly begin the hunt for a new CEO who can help usher the struggling e-commerce site towards a successful IPO.

Despite flailing forays into verticals like menswear and travel, Gilt is still eyeing going public within the next 18 months, and wants a CEO who can revamp Mr. Ryan's business strategy in order to "generate sufficiently predictable profits."

This is the second high-level shakeup in four years for the New York-based e-commerce company. In September 2008, Susan Lyne was brought in to head the company, but was then replaced by Mr. Ryan in 2010 as Gilt was poised to expand into new markets.

Gilt has not been without its stumbles. Back in January, the company laid off 90 employees, closing Gilt City offices in six different markets.

UPDATE 2 p.m.: Betabeat spoke with a source close to the company who offered a different version of events. According to the source, it was never Mr. Ryan's intent to stay on as Gilt Groupe's CEO through its transition into a public company.

Gilt Groupe is one of three companies in the AlleyCorp network, along with 10Gen and Business Insider--both prominent, fast-growth New York startups. Mr. Ryan's business partner Dwight Merriman, a fellow DoubleClick veteran, also does not have plans to stay on as CEO, should 10Gen go public, added the source.

Considering Mr. Ryan's tenure at Gilt, the source also scoffed at the idea that the board, where Mr. Ryan has voting power, was searching for someone with more ecommerce experience. Rather, the source said the board had always been aware of Mr. Ryan's intent and with an IPO possibly happening within six months to a year, it was time to start the search.

Now that 10Gen is busy scaling--the source said 10Gen had raised $50 million at a $500 million valuation--Mr. Ryan will be advising on matters like sales, as opposed to 10Gen's early day when Mr. Merriman, DoubleClick's former CTO, exclusively handled 10Gen for AlleyCorp. Mr. Ryan also recently joined the board of the Yale Corporation, which manages a $19.3 billion endowment.

The source said Mr. Ryan is expected to still devote the bulk of his time to Gilt and will keep his office with the company, returning to the type of role he had in his previous post at Gilt's chairman.

Nitasha Tiku contributed reporting to this article.