[Salt Lake Trib] Utah-based online marketplace jane.com, meant to empower women’s business, goes dark

[GGX]

I don’t think the sellers will get much, maybe a few cents on the dollar, but there are (a small amount of) assets to be fought over in bankruptcy court.

[lake]

I doubt if those assets will cover legal fees, and the way to minimize the legal fees will be a bulk liquidation of the assets at a bargain price.

I have had a fair amount of experience in buying bankruptcy assets, and do not see any fight going on in the bankruptcy court over the remains of this company.

[papy]

This was posted on reddit, from 29 Nov 2023:

[Pepper_Thine_Angus]

I don’t think I believe any of what is typed there. 2020 losses? Yeah nah

[papy]

@Pepper_Thine_Angus

2020 losses? Yeah nah

2020 was “record growth and profitability”.

2021 was down 10% with a $1.5M loss, requiring the 2022 Tritium investment of $40M… $38M of which went directly to the (formerly) married co-founders, to buy out their interest (they did stay on the Board).

[Pepper_Thine_Angus]

Whoops my bad, the lines blur together when I can’t highlight while reading!

I would love to have a company where I can burn $40+m of someone else’s money in 3ish years and get away with it

[joebcrafts]

Seems like a lot of companies and VCs felt that the boon of online sales due to COVID were going to be permanent.

VCs are insane, there’s no way that a 27% stake of that company should have been valued at $40 million.

Kudos to the original owners being able to fleece idiots for $19 million each.

[papy]

@joebcrafts

Seems like a lot of companies and VCs felt that the boon of online sales due to COVID were going to be permanent.

Yep, and overextended without a Plan B.

Read similar about ghost kitchens yesterday.

[Pepper_Thine_Angus]

Jane.com's collapse just before Black Friday left sellers scrambling and owed...

[papy]

Excellent and thorough article! Some relevant excerpts…

Jane’s business was more precarious than sellers say they were led to believe, and sellers took the financial risk of having Jane receive and decide what to do with the money from their sales. Now that Jane has failed, sellers have the least financial security out of anyone whose money was invested in it.

Retail expert Neil Saunders of GlobalData said people who sell their goods on third-party platforms might believe the platforms are intermediaries that hold their money until they claim it, but he said it’s not always that simple. In some cases, Saunders said, the platforms will use that revenue as general cash flow to pay overhead and other expenses. Sometimes, those things are prioritized over paying vendors. If a business is healthy and has budgeted and projected its expenses properly, that works out. But if it isn’t and it hasn’t, sellers are left short.

DSI Assignment forms say that, unbeknownst to sellers, Jane.com had a series of financial ups and downs leading to its sudden closure. The documents said the company grew profitably from 2011 to 2018 but lost money in 2019 as growth slowed. It responded by cutting jobs.

DSI cited competitors like Temu and Shein — Chinese retail giants that sell items directly from factories and warehouses — which could provide drastically less expensive products, in explaining what led to the company’s failure.

DSI Assignments to Conduct Auction Sale of Intellectual Property for Jane Marketplace, LLC

[joebcrafts]

How many billions is Amazon using as float in the name of “reserving for returns, chargebacks, etc.”?

If it were really for “returns” and the like then it wouldn’t need to be every dollar of every order for “everyone” (yes you really early Amazon sellers might not have significant reserve, but anyone “newer” does) when many established sellers’ returns/chargebacks/etc are less than 5% of their total orders.

[Chimanimani]

NYT Dec 7, 2023 Erin Griffith

WeWork raised more than $11 billion in funding as a private company. Olive AI, a health care start-up, gathered $852 million. Convoy, a freight start-up, raised $900 million. And Veev, a home construction start-up, amassed $647 million.

In the last six weeks, they all filed for bankruptcy or shut down. They are the most recent failures in a tech start-up collapse that investors say is only beginning.

After staving off mass failure by cutting costs over the past two years, many once-promising tech companies are now on the verge of running out of time and money. They face a harsh reality: Investors are no longer interested in promises. Rather, venture capital firms are deciding which young companies are worth saving and urging others to shut down or sell.

It has fueled an astonishing cash bonfire. In August, Hopin, a start-up that raised more than $1.6 billion and was once valued at $7.6 billion, sold its main business for just $15 million. Last month, Zeus Living, a real estate start-up that raised $150 million, said it was shutting down. Plastiq, a financial technology start-up that raised $226 million, went bankrupt in May. In September, Bird, a scooter company that raised $776 million, was delisted from the New York Stock Exchange because of its low stock price. Its $7 million market capitalization is less than the value of the $22 million Miami mansion that its founder, Travis VanderZanden, bought in 2021.

“As an industry we should all be braced to hear about a lot more failures,” said Jenny Lefcourt, an investor at Freestyle Capital. “The more money people got before the party ended, the longer the hangover.”

Getting a full picture of the losses is difficult since private tech companies are not required to disclose when they go out of business or sell. The industry’s gloom has also been masked by a boom in companies focused on artificial intelligence, which has attracted hype and funding over the last year.

But approximately 3,200 private venture-backed U.S. companies have gone out of business this year, according to data compiled for The New York Times by PitchBook, which tracks start-ups. Those companies had raised $27.2 billion in venture funding. PitchBook said the data was not comprehensive and probably undercounts the total because many companies go out of business quietly. It also excluded many of the largest failures that went public, such as WeWork, or that found buyers, like Hopin.

Carta, a company that provides financial services for many Silicon Valley start-ups, said 87 of the start-ups on its platform that raised at least $10 million had shut down this year as of October, twice the number for all of 2022.

This year has been “the most difficult year for start-ups in at least a decade,” Peter Walker, Carta’s head of insights, [wrote] on LinkedIn.

Venture investors say that failure is normal and that for every company that goes out of business, there is an outsize success like Facebook or Google. But as many companies that have languished for years now show signs of collapse, investors expect the losses to be more drastic because of how much cash was invested over the last decade.

From 2012 to 2022, investment in private U.S. start-ups ballooned eightfold to $344 billion. The flood of money was driven by low interest rates and successes in social media and mobile apps, propelling venture capital from a cottage financial industry that operated largely on one road in a Silicon Valley town to a formidable global asset class akin to hedge funds or private equity.

During that period, venture capital investing became trendy — even 7-Eleven and “Sesame Street” launched venture funds — and the number of private “unicorn” companies worth $1 billion or more exploded from a few dozen to more than 1,000.

But the advertising profits gushing from the likes of Facebook and Google proved elusive for the next wave of start-ups, which have tried untested business models like gig work, the metaverse, micromobility and cryptocurrencies.

Now some companies are choosing to shut down before they run out of cash, returning what remains to investors. Others are stuck in “zombie” mode — surviving but unable to grow. They can muddle along like that for years, investors said, but will most likely struggle to raise more money.

Convoy, the freight start-up that investors valued at $3.8 billion, spent the last 18 months cutting costs, laying off staff and otherwise adapting to the difficult market. It wasn’t enough.

As the company’s money ran low this year, it lined up three potential buyers, all of whom backed out. Coming so close, said Dan Lewis, Convoy’s co-founder and chief executive, “was one of the hardest parts.” The company ceased operations in October. In a memo to employees, Mr. Lewis called the situation “the perfect storm.”

Such post-mortem assessments, where founders announce their company is closing and reflect on lessons learned, have become common.

One entrepreneur, Ishita Arora, wrote this week that she had to “confront reality” that Dayslice, her scheduling software start-up, was not attracting enough customers to satisfy investors. She returned some of the cash she had raised. Gabor Cselle, a founder of Pebble, a social media start-up, wrote last month that despite feeling that he had let the community down, trying and failing was worth it. Pebble is returning to investors a small portion of the money it had raised, Mr. Cselle said. “It felt like the right thing to do.”

Amanda Peyton was surprised by the reaction to her blog post in October about the “dread and loneliness” of shutting down her payments start-up, Braid. More than 100,000 people read it, and she was flooded with messages of encouragement and gratitude from fellow entrepreneurs.

Ms. Peyton said she had once felt that the opportunity and potential for growth in software was infinite. “It’s become clear that that’s not true,” she said. “The market has a ceiling.”

Venture capital investors have taken to gently urging some founders to consider walking away from doomed companies, rather than waste years grinding away.

“It might be better to accept reality and throw in the towel,” Elad Gil, a venture capital investor, wrote in a blog post this year. He did not respond to a request for comment.

Ms. Lefcourt of Freestyle Ventures said that so far, two of her firm’s start-ups had done exactly that, returning 50 cents on the dollar to investors. “We’re trying to point out to founders, ‘Hey, you don’t want to be caught in no man’s land,’” she said.

One area that is thriving? Companies in the business of failure.

SimpleClosure, a start-up that helps other start-ups wind down their operations, has barely been able to keep up with demand since it opened in September, said Dori Yona, the founder. Its offerings include helping prepare legal paperwork and settling obligations to investors, vendors, customers and employees.

It was sad to see so many start-ups shutting down, Mr. Yona said, but it felt special to help founders find closure — both literally and figuratively — in a difficult time. And, he added, it is all part of Silicon Valley’s circle of life.

“A lot of them are already working on their next companies,” he said.

---

@Chimanimani I added some formatting for the article repost. -papy

[papy]

@Chimanimani I don’t know if you’ve been following the jane.com story specifically, but it is not like those in that article.

Jane was founded in 2011–before the VC-funded tech trend started–and did not have any VC funding until 2022, when Tritium paid $38M to the co-founders to buy them out, putting only $2M into the business.

Additionally, the news coming out is that unbeknownst to 3Ps, jane.com first had a negative year in 2019 (pre pandemic) and that the pandemic actually masked their issues by (we now know) artificially inflating their outlook.

From @Pepper_Thine_Angus link (a very thorough explainer!):

Jane was founded by Megan and Michael McEwan in 2011. Sellers would list their wares — often women’s and children’s clothes, customized goods and home decor — on its site, and buyers were urged to make purchases with flash deals and advertising that Jane ran. Jane took 20% to 25% of sales, with sellers getting the rest. Former sellers who lauded the early days of Jane described it as having a boutique, close-knit atmosphere between buyers and sellers, which distinguished it from corporate giants like Amazon. At its peak, the documents said, Jane did $250 million in annual sales. When it closed, Jane had over 90 employees and more than 1,300 sellers who are owed money from sales, according to DSI’s documents.

[lake]

VC funded tech precedes 2011 by many decades.

Jane appears to never have had enough capital. The Trillium deal was an owner cash out.

I remember chatting with a serial entrepreneur in the early 1970’s whose companies all failed. I asked her why she was starting another company. She told me that she had 6 companies she started fail and came out half a million ahead on each of them. In the post-Internet world it would be $20 - 30 million on each.

WeWork screwed VC’s and landlords. All of them should have know better than to deal with them, especially after the founder was thrown out (well deservedly).

Vivek, one of the Republican hopefuls, made some money by selling to Softbank, who regularly loses money on its acquisitions.

All of the warning signs were there for Jane’s sellers. I am sure the sales volume they had clouded their judgement.

I mourn every failed small business, but often the failure is earned.

I hope that many businesspeople learn from the experience of the Jane’s sellers.

[papy]

@lake

VC funded tech precedes 2011 by many decades.

I was referring to…

@Chimanimani

From 2012 to 2022, investment in private U.S. start-ups ballooned eightfold to $344 billion.

…in the article posted by @Chimanimani