Jet.com’s Valuation Nears $600M Before Launch

http://blogs.wsj.com/digits/2015/02/11/jet-coms-valuation-nears-600-million-before-launch/

by nikunjk • 11 years ago

49 57 11 years ago

blogs.wsj.com

melling2• 11 years ago

I think their backend is built in F#: http://vimeo.com/104896802

MichaelGG• 11 years ago

That's pretty neat. Though I'm not sure it's the best association for F# :/. I wonder if they're using WebSharper.

melling2• 11 years ago

What's wrong with the association? If there aren't any technical issues, it shows F# can scale. If the company doesn't succeed, it's not because they couldn't build what the business required.

austenallred• 11 years ago

Seems like a recipe for disaster.

Why not prove something simple out with a few million before dumping $140 million into it? Does what they're building really require that much software to be written before we know if it will work? I get that the founder has been successful, but wow.

I'm usually pretty wary when people say "OMG It's 1999/a bubble all over again!" But that is a pretty damn frothy raise, even if you're optimistic.

ssclafani• 11 years ago

It's for marketing:

The capital will help fuel Mr. Lore’s grand plans, which include an estimated half-billion-dollar marketing budget and projections for $5 billion in annual transactions by 2020.

(From the full WSJ article : http://www.wsj.com/articles/jet-com-raises-140-million-led-b...)

fidotron• 11 years ago

This is an attempt to generate a self fulfilling prophecy. A new internet marketplace, almost by definition, cannot become viable unless people think it either is already or is a sure bet to become so. Only by trying to persuade us that it's succeeded before launching do they even have a shot.

sixQuarks• 11 years ago

Despite the highly talented and proven founder, this company has already jumped the shark. Having that much funding and expectations before launch (for this type of venture) is kind of ridiculous. There's going to be unnatural pressures to this business, and I predict it will be a colossal disaster.

bhouston2• 11 years ago

Weird things happen sometimes if you generate enough hype.

Oculus VR got bought by Facebook for $2B when its revenues were very small, but highly hyped by nerds.

sbisker• 11 years ago

Seems like an unfair comparison - Oculus has little revenue and working prototypes of the best VR experience to date. Even disregarding the tech talent, Oculus proved their ability to deliver something interesting that people wanted, however unprofitable that something was.

josu• 11 years ago

What are VCs shooting for here? Even a 10x exit at 6B valuation seems outrageous for a service that doesn't seem that easy to scale.

prostoalex3• 11 years ago

This is late-stage capital, not VC. Goldman Sachs invested in Facebook at $50 bil valuation, so with later revelation that IPO would happen around $100 bil price point, presumably they were happy about 2x.

adevine• 11 years ago

But when FB had a $50 bil valuation, they already had hundreds of millions of users and real revenue. This company has neither. Bad things are bound to happen when capital is coming in at "late stage" pricing to a VC-stage company.

arfliw• 11 years ago

pre-launch late-stage capital

#ShitVCsSaidIn1999

krschultz• 11 years ago

Well, it will be at least interesting to see what happens. They are also potentially the most anti-Lean Startup we have seen in a while, and now that seemingly everyone has accepted Lean Startup as orthodoxy, that might be a unique angle.

bkjelden• 11 years ago

One of the main arguments used to distinguish the current tech landscape from the dot-com bubble is that today's companies have real products and real revenues to back up their valuations, whereas many dot-com companies soared to huge valuations without a real product.

But Jet.com is a company worth $600M with no product... so where does that leave us in relation to 1999?

coralreef2• 11 years ago

Is it public money (IPO) or private money? This makes a difference.

ojbyrne• 11 years ago

The article says "convertible debt" and lists some investors. Google Ventures, Goldman Sachs, etc.

jsprogrammer• 11 years ago

No product? A mailing list is a product, no?

prostoalex3• 11 years ago

No launched product. These are the guys who have done it before, so can probably model some numbers. Goldman and Coatue presumably like those models.

objclxt• 11 years ago

I can think of quite a few examples of people who had "done it before" and went on to have a very disappointing experience. Often, the people who have done it before will fail because they assume the same strategy will result in the same payoff. It is often easy to overlook the importance of luck and chance.

dougabug• 11 years ago

Goldman liked credit default swaps, too.

eloff2• 11 years ago

Exactly. These guys are the opposite of the lean startup. All air and venture funding with ambitious growth plans. No product, nothing tested, just on theory. That seems like how a lot of famous dotcom companies launched to great fanfare only to discover the market wasn't interested. Pets.com and webvan come to mind.

x0x04• 11 years ago

amazon proves enough people will buy many things online

costco (and even amazon prime) prove the membership model

past experience proves the founder can build a large ecommerce company

there is a little more validation than just theory

staunch• 11 years ago

But Jet.com is a company worth $600M with no product

This is a common misconception. They are not "worth" $600M just because investors put a little money in at that valuation.

Buying 10% of an old car for $60M doesn't make it worth $600M to anyone.

garazy• 11 years ago

Exactly right, "worth" should only really be used if someone else would pay $600M for it today.

x0x04• 11 years ago

getting, no doubt, investor shares -- ie their cash is out first

aaardvark• 11 years ago

But buying one share of a publically traded company makes it worth number of shares * value of share?

kolev3• 11 years ago

Where's the Snapchat's revenue or Instagram's or WhatsApp's?

samsolomon2• 11 years ago

It appears that WhatApp was profitable in 2014 with $16m in revenue and $13.5m in expenses. With that said, the value to Facebook was purely strategic and was worth far more than their business model.

http://techcrunch.com/2014/10/28/whatsapp-revenue/

alfiedotwtf• 11 years ago

That reminds me, how is color.com going anyway?

dazmax• 11 years ago

Good question, let me cuil it.

cflyingdutchman• 11 years ago

https://twitter.com/peterpham "I thought I was good.."@WSJD: http://Jet.com hasn't launched yet, but it has already raised $140 million http://www.wsj.com/articles/jet-com-raises-140-million-led-b... …"

akcreek• 11 years ago

Take advantage of Jet’s audience of millions of loyal shoppers and build a direct relationship with the customers you acquire.

I don't understand how companies can make claims like this [1]. Unless I'm missing something this has to be false considering they haven't launched yet and their homepage says 350K people have signed up for early access.

I run an online business and a couple of our competitors make false claims very regularly about being #1 (quarterly ranking from the MFG has us at #1 every time). I just can't imagine making a false claim like that - and knowing it is false.

[1] https://partner.jet.com/

adamnemecek• 11 years ago

I'm guessing that VCs are betting on the co-founders' previous experience. One of the co-founders also co-founded diapers.com which achieved something like that https://en.wikipedia.org/wiki/Marc_Lore

bhouston2• 11 years ago

Another company with a skyhigh valuation pre-launch is MagicLeap - it is worth something like $1B or so.

petercooper• 11 years ago

Anyone remember 'Boo'?

bane• 11 years ago

Relevant and recent.

https://news.ycombinator.com/item?id=9031420

en4bz• 11 years ago

Will jet.com be the next pets.com?

api3• 11 years ago

I must have missed something. I thought convertible notes were for seed stage stuff. When did people start raising hundreds of millions with them? Also why, and how, and huh?

Edit: 600m valuation, not raised. Face palm. Never mind.

ericglyman3• 11 years ago

It's senior in the capital structure. For a high dollar risky investment like this, you really want to protect against downside as much as you can -- a convertible note gives them this protection.

So if it all goes south, these guys can hold debt (rather than common equity) and get first claim on the assets (ahead of common equity).

wmf• 11 years ago

Aren't later equity rounds usually senior to earlier rounds (the "last money in, first money out" principle) anyway?

dude_abides• 11 years ago

Private investors (a handful of rich people) bet on this startup. If their bet succeeds, they become richer, else they will still remain rich.

There is no bubble, go home everybody.

tim333• 11 years ago

I think it's misleading to say it's valued at $600m. What has happened is that the recent investors have invested $140m such that they get 23.3% of the stock it the thing does well. Probably it will end up worth something like $0 if it fails or say $20bn if it succeeds so the investors are hoping $20bn x $probability-of-success x 23.3% > $140m. The headline figure is 600m= 140m/23.3% but I'm not sure that's terribly important. As to whether it's a bubble it depends a bit on your view of $probability-of-success. Dunno about that one.

Jet.com’s Valuation Nears $600M Before Launch

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