
Jet.com’s Valuation Nears $600M Before Launch - nikunjk
http://blogs.wsj.com/digits/2015/02/11/jet-coms-valuation-nears-600-million-before-launch/
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bkjelden
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?

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

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fidotron
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.

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akcreek
> 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/](https://partner.jet.com/)

~~~
adamnemecek
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](https://en.wikipedia.org/wiki/Marc_Lore)

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melling
I think their backend is built in F#:
[http://vimeo.com/104896802](http://vimeo.com/104896802)

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

~~~
melling
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.

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

~~~
dazmax
Good question, let me cuil it.

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austenallred
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
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...](http://www.wsj.com/articles/jet-com-
raises-140-million-led-by-bain-capital-ventures-1423696950))

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sixQuarks
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.

~~~
bhouston
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
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.

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api
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.

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

~~~
ericglyman
No, not unless the later equity round is in a different type of security
(preferred equity, convertible debt, etc.).

Otherwise, all holders of common equity are considered to be on equal footing
(pari passu)

~~~
api
Don't investors normally get preferred shares?

~~~
ericglyman
Not unless you agree to sell preferred shares. All up for negotiation.

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tim333
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.

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dude_abides
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.

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en4bz
Will jet.com be the next pets.com?

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krschultz
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.

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josu
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.

~~~
prostoalex
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
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.

~~~
prostoalex
If I had to guess (and this is based on nothing but conjecture), an amount
like that for an early stage e-commerce play is to be used for some sort of
capital expansion. Perhaps somebody is going to buy up RadioShack stores or
Sears leases.

Harry's Shaving Products is another one that comes to mind raising this much
money early-stage, and they've pumped all nine digits of their round into a
German steelmaker.

From the large investor perspective this provides some sort of fallback
scenario, as worst-case scenario you're left with some commercial real-estate
portfolio.

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bane
Relevant and recent.

[https://news.ycombinator.com/item?id=9031420](https://news.ycombinator.com/item?id=9031420)

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

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petercooper
Anyone remember 'Boo'?

