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Ecomom is liquidating and shutting down
- leoedin 14y agoThe article doesn't say what the 28 people on staff did. Even if the cost-per-employee was only $50k/year, that would be an annual bill of $1.5m. A staff of programmers would cost more than 3 times that. It doesn't really explain away a recent $5m funding round, but there doesn't have to be much of a drop in revenues for monthly payments to 28 staff to start eating away at your bank account very quickly.
- HarryHirsch 14y agoIt's an online retail company - what do you need 28 people on the staff for? Hosting and administration is outsourced, as is warehousing - that leaves a front office guy, a back office guy, a finance guy, a web guy and someone who writes the truly awful copy that you get to read on Ecomom.
- filmgirlcw 14y agoAnd a buyer, and a customer service person, and accounts receivable, plus ad ops -- not to mention sales and biz dev folks.
- drpgq 14y agoAt the date of his death, I was wondering what the financial status of his company was. Now we know, unfortunately.
- uptown 14y agoI have no idea where they spent their money - from the article it sounds like some of it may have gone towards misguided inventory purchases, but why would a company like this need its own technology infrastructure? It seems very well-suited for operating on someone else's sales platform (Shopify, or something similar). Let the third-party focus on uptime and scaling while you worry about marketing, promotion, and order-fulfillment of your site and its products.
- michaelt 14y agofrom the article it sounds like some of it may have gone towards misguided inventory purchases, but why would a company like this need its own technology infrastructure? They're a retail company; by inventory, perhaps it means they spent all their cash on a big shipment of diapers and sippy cups.
- pclark 14y agoYou'd burn through $5M scarily fast with a staff of 28.
- deleted 14y ago[deleted]
- lisper 14y agoThey raised $4.7M last August: http://pandodaily.com/2012/08/14/a-4-7-million-injection-in-green-in-las-vegas/ http://pandodaily.com/2012/08/14/a-4-7-million-injection-in-... They would have had to pay their 28 employees an average of about $300k a year to burn through all that by now.
- gojomo 14y agoBut they're reported to have ~$1 million in debt right now (plus perhaps that much or more cash still in the bank). And it's possible they had another $1 million or more in debt around the time of the financing, in vendor AP or bridge loans, which the financing paid-down. And there are other expenses beyond employee overhead in growing an ecommerce brand. They were apparently burning cash too fast but a simple ($4.7M / 28 people / 0.5 year) isn't going to give a fair estimate ("paying $300K/year") of what they were burning it on.
- lisper 14y agoSure. My point was just that the head count alone probably can't account for the apparent burn rate. There must have been something else going on.
- rdl 14y agoAssuming you have zero revenue. If you have zero revenue in a retail business, wtf.
- justin_vanw 14y agoIs everything on ecomom marked down to liquidate it? Because it looks like they are heavily subsidizing the prices on this stuff. I see prices that are half or 2/3rds what amazon charges for the same thing. Plus they give free shipping as well for not-that-large orders.
- trotsky 14y agoI don't believe anything is priced down due to this news. If I'm not mistaken the free shipping threshold was actually raised to $100 in the last week or two. I think that inventory liquidation is typically done by a 3rd party in situations like this.
- bitcartel 14y agoWe know students are taking their own lives because of the debt they think they can never pay back[1]. Start-up founders are in a similar position, indebted to their investors[2] and under pressure to deliver a return. Do start-up incubators like YCombinator and 500 Startups provide advice and counselling to founders, especially younger entrepreneurs just out of college? [1] http://www.huffingtonpost.com/c-cryn-johannsen/student-loan-debt-suicides_b_1638972.html http://www.huffingtonpost.com/c-cryn-johannsen/student-loan-... EDIT: Added to clarify [2] A debt of gratitude, where there is a moral obligation to repay investors for their help and funds.
- Retric 14y agoUnlike student loans you can always declare bankruptcy if startup related debt is unmanageable so it's only really an issue for older founders who have actual savings.
- tptacek 14y agoNone of that debt will be from your investors, and, once you have investors, the norm is that you'll be taking a salary as well. "Funded startup founder" is an immensely privileged position from which to operate and not remotely comparable to that of a 30 year old who chose the wrong major and faces six figures of non-dischargeable debt.
- tptacek 14y agoStartup funding is structured as equity, not loans. The situations are not at all comparable. You can virtually always walk away from a failed startup.
- deleted 14y ago[deleted]
- chimi 14y agoThat perspective varies by the individual. I know people who have taken money and consider themselves to owe their investors a return. The depression experienced from a lack of ability to deliver that return can be extreme. There are also lots of funding deals that are loans as well.
- athst 14y agoSomething seems off about this. I think we need to learn more details about what happened at the company rather than just accept some vague idea that there was a bad purchasing decision. Should a bad purchase really be able to sink a company? At an e-commerce company, shouldn't there be systems in place to make sure that this doesn't happen? I hope a another journalist digs into this.
- zulfazli 14y agoFraud by employee(s)? Never heard of startups going down on this reason before though...
- adrianscott 14y agoand PandoDaily turned off comments and hid the existing comments... interesting, pandodaily...