Wow, that's... interesting. When I hear an ex-employee talk about why the company is laying people off I always take it with a grain of salt-- but still interesting none the less.
The reckoning is clearly coming on this industry (daily deals / group buying). Just look at Groupon cutting their IPO in half today.
But the way this happened is really terrible. They laid of tons of people with no warning and no severance.
They did not have to try and raise more money at a ridiculous valuation. They could have taken a flat to down round, stopped buying other little companies, and tried to make it work.
Groupon cut their IPO by more than half to $10-11b from $25-30b. If you think its bad that they laid off 75% of their employees wait until Groupon has to lay off a good portion of their 10k +- sales force. Through being in the business, understanding Groupons financials and the market I have a hard time believing they are worth more than a few billion. The market requires a large on the ground sales force (expensive) and huge marketing expenditures to keep and gain new customers who are not loyal. Groupon may be better off pivoting into some sort of social network as they do have >100mm subs. What about Living Social? Their recent valuation was in the billions but not hearing much about them.
A Groupon IPO is one of the worst things that could happen to the industry, at any price.
It's reminiscent of the .com crash and it gives me serious doubts about the rationality of the current tech market.
Let's sell stuff at a discount so large that the merchants lose money but we make money is not a sustainable business model, it's a predatory strategy. How on earth could you offer stock in a venture like that to the public with a clean conscience?
Sooner or later you run out of merchants, it only works for goods that have such a huge profit margin that you can actually afford that. And I rarely see Groupon deals that suggest that they're still profitable for the merchants. Why merchants do Groupon deals is a mystery to me, maybe someone that has done a Groupon deal as a merchant can shed some light on the economic returns for them.
Maybe they're out-of-band in recurring visitors or something like that but I simply don't get it. Or maybe there is something crucial about how Groupon operates that I'm missing, in that case enlighten me please.
At this time BuyWithMe is laying off 75% of their workforce
Technically yes, that's more than half, but maybe they should have said 75%. That's quite a chop and it certainly tells us something about (a) the finances of the company, and (b) the state of the group-buying industry.
It just doesn't seem like there's any room in the market for Groupon and all of the me-too startups. The business model for most of these companies don't seem to add up in the long run either.
i'm curious, how is it that this business model not sustainable? isn't that being "broker" is always profitable? basically they're just middlemen between merchant and customers right?
If there are any buywitme employees out there check out adaptly.com send me an email at sean@adaptly.com. We're highly profitable, and have the kind of people who make big things happen
6 purchases in 6 months, then asking for more money... Sounds like a VC/PE firm, not a deal site. If you're out of cash, I understand letting people go in a hurry but that management team will struggle to get employees in their next venture.
I don't get why startups go into acquisition binges, trying to buy their way to the top rather than out-innovating the competition. It is really sad for the poor folks laid off, and this seems like it was run purely on greed rather than any kind of desire to do something awesome. (Sorry, do I sound like a hippie?).
Great companies focus on their products and understand that their employees are a key part of the team. Passionate employees will work their tails off for something they believe in. Too bad the CEO wasnt passionate about the employees or actual products.
23 comments
[ 2.6 ms ] story [ 62.0 ms ] threadBut the way this happened is really terrible. They laid of tons of people with no warning and no severance.
They did not have to try and raise more money at a ridiculous valuation. They could have taken a flat to down round, stopped buying other little companies, and tried to make it work.
With more folks predicting recession (eg http://www.channelregister.co.uk/2011/10/18/gartner_recessio...), I doubt it will be just this industry.
It's reminiscent of the .com crash and it gives me serious doubts about the rationality of the current tech market.
Let's sell stuff at a discount so large that the merchants lose money but we make money is not a sustainable business model, it's a predatory strategy. How on earth could you offer stock in a venture like that to the public with a clean conscience?
Sooner or later you run out of merchants, it only works for goods that have such a huge profit margin that you can actually afford that. And I rarely see Groupon deals that suggest that they're still profitable for the merchants. Why merchants do Groupon deals is a mystery to me, maybe someone that has done a Groupon deal as a merchant can shed some light on the economic returns for them.
Maybe they're out-of-band in recurring visitors or something like that but I simply don't get it. Or maybe there is something crucial about how Groupon operates that I'm missing, in that case enlighten me please.
Technically yes, that's more than half, but maybe they should have said 75%. That's quite a chop and it certainly tells us something about (a) the finances of the company, and (b) the state of the group-buying industry.
http://www.betabeat.com/2011/10/19/canned-buywithme-employee...