Seed Stage Slaughter

Seed Stage Slaughter

Startup Winter Is Coming: Beware Funding Cliffs and Falling Valuations in the Consumer Web

startup winter

“It’s harder to act in a disciplined way in summer. All around you, you see excess and nonsense, companies being bought or funded for zillions of dollars without traction.” Eric Ries, the pioneer behind the Lean Startup movement, wrote those words back in August, 2011, warning that in the cyclical startup business, “what goes up will eventually come down.”

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.” Read More

Seed Stage Slaughter

‘New Tech City’ Won’t Keep You From the Startup Graveyard


The Center for an Urban Future, a think tank headed by Jonathan Bowles, has released a lengthy report  about New York City’s tech sector, titled “New Tech City.” The Center’s findings indicate amazing growth over the last decade. While “New Tech City” contains mostly good news for the local tech set, there is a dash of cold water–just a bit–to leaven any prospective startup’s bright-eyed optimism.

First, the good news! Read More

Seed Stage Slaughter

More Layoffs in Fashion Flash Sales Space, This Time at Rue La La [UPDATED]


Earlier today, the Boston Business Journal broke the news that Rue La La, private shopping and flash sales site, was going to lay off nearly half of its 200-person staff and had already let go of 30 people today. Betabeat heard that across the country, local teams have closed their doors. Now the Boston Globe, has confirmation from the company that it is cutting 60 people from a staff of 550 people.

Rue La La, a Boston-based company founded in 2008, is operated by a parent company called Retail Convergence Inc. The Business Journal reported that Retail Convergence plans to close down, a separate discount site, and merge it into Rue La La. “They [Rue La La] certainly have a better brand than Smartbargains,” noted Fashism founder Brooke Mooreland when reached for comment.

The company told the Globe, that it plans on “outsourcing our sales force and consolidating into Rue La La…These moves unfortunately resulted in the elimination of some staff positions.” Read More

Seed Stage Slaughter

VC Outlook for Startup Funding in 2012: ‘Optimism Wanes’

The National Venture Capital Association (NVCA) and Dow Jones VentureSource just released their sixth annual Venture View survey today, polling 500 VCs and CEOs of venture-backed companies. If their instincts are right, all the happy go-go funding news, we’ve been hearing—including $17.8 million for TaskRabbit, $35 million for Outbrain, and $2 million for Zipmark just in the last 24 hours—doesn’t tell the full story of what to expect in 2012.

Outlook has shifted from optimism to realism, with CEOs more optimistic than investors themselves. Read More

Seed Stage Slaughter

The Startup Death Watch


Here at Betabeat, we’re inundated with calls and emails from publicists who work for startups and founders who don’t have publicists. Most of the calls are cold, obviously part of a mass outreach effort, and frequently come from companies Betabeat wouldn’t cover, usually because they’re not based in New York. Often times the calls are invitations to events we aren’t interested in, like a talk about digital media that takes place in the middle of the day. Frequently the emails bear subject lines like, “New Online Trend” or “Tubalr, a new way of surfing YouTube and enjoying music” or “New app helps ‘break the ice’ at holiday gatherings” or “Localscope on sale for 5 days.”

Anyway, we know what TechCrunch’s Erick Schonfeld means when he says “the sheer number of new startups forming and getting funded these days is dizzying.” Read More

Seed Stage Slaughter

Fund Em’? I Barely Know Em’!

Reap what you sow

Betabeat has been writing about the crunch for seed stage startups looking to raise series A since August of this year. The debate over this trend is now in full flower, with VCs divided over whether or not there is a reckoning in the works.

Regardless of what position you take on the series A situation, it’s clear that 2010 saw a surge in seed stage investments. Pulling data from crunch base, Alexia Tsotsis found seed investments grew substantially while A rounds stayed flat.

As Josh Koppelman of First Round Capital writes on his blog today, this is reflected in the amount of time his firm spent evaluating new deals before deciding to invest. Over the last four years, the amount of time it took for a Read More

Seed Stage Slaughter

The End of IPO and The Startup Cash Crunch

Mike Maples of Floodgate

At the Bloomberg Empowered Entrepreneur conference, talk of seed stage slaughter was in the air.

“A lot of seed stage startups are going to die,” said Jeff Clavier. “An enormous amount were funded over the last two years, and the money is not there now to support them in the next round.”

Lerer ventures Eric Read More

Seed Stage Slaughter

New Data Show Why the Wall Street Journal is Confused About the Startup Cash Crunch

Data via CB Insights


At the beginning of August, Betabeat began talking about a coming crunch for seed stage companies in New York. We believe that the bubble in early stage financing had peaked, and that in the coming months, many young startups would find it hard to raise follow-on cash.

At the time, local investors like Chris Dixon and Shai Goldman argued that this wasn’t some dire turn of events, but simply the natural cycle of venture capital funding playing out. But the drumbeat of seed stage slaughter now seems to have made its way to the mainstream press.

The Wall Street Journal ran a story yesterday, Web Startups Hit Cash Crunch,” which claimed that valuations for these early stage companies had fallen by as much as half in recent months and the venture capital funding was at an all time low. AngelList’s Naval Ravikant said that startup financing is getting weaker by the week and that the survival rate for young companies is dropping fast.

But new data from CB Insights, a venture capital database here in New York, disputes that outlook. Their quarterly report shows a record number of seed stage deals over the last quarter and a steady growth in overall venture deal flow and funding since 2009. Read More

Seed Stage Slaughter

ToVieFor, Graduate of the First TechStarsNY, Started Winding Down Two Months After Demo Day


New York-based ToVieFor, a members-only auction site for women’s luxury goods, has closed up shop after about a year of building the business followed by a spring at TechStars. The site is shuttered, the Twitter account is down, Tumblr is quiet, and co-founder Melanie Moore changed her LinkedIn profile to the past tense. “On the surface, we shut down because we ran out of money,” Ms. Moore said. “However, the root cause of this was a flawed business model. We were attempting to compete solely on price in a world where brands not only do not compete on price, they have essentially formed an oligopoly and set prices (vs take prices). As a result, it was incredibly difficult to convince brands to allow us to change up their pricing structure. And in retail, having those brand partnerships is critical to survival.” Read More

Seed Stage Slaughter

Jumo ‘Acquired’ for $0 and a Graceful Exit

chris hughes

UPDATE, March 13, 2012: The final acquisition price was not $0. It was $62,221. Original story follows.

Facebook co-founder Chris Hughes has struggled with his ambitious solo start-up, the social network for activism Jumo, ever since its bumpy launch. Waning traffic and disinterested users were making it obvious that the site was not going to catch on, despite multiple redesigns; a tough pill to swallow for the wunderkind whose second act after Facebook, online strategy at the Obama presidential campaign, was another huge success story.

But Mr. Hughes found a solution: rather than folding the grant-funded, well-meaning and inordinately high-profile start-up and admitting what would surely be a very public failure, he arranged a deal with an old friend. GOOD, the publisher-turned-digital-media-platform with a focus on good design and social causes, announced today that it has acquired Jumo for undisclosed terms. But the “acquisition” is not quite the earth-shaker it was made out to be. Betabeat has learned the terms amounted to $0, a loose “advisory” role for Mr. Hughes at GOOD, and the opportunity for Jumo’s 16 employees to interview for the start-up’s new owner. Read More