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I know some of Living Social's original investors, and I approached them for an investment in my startup about 8 months ago. Part of our pitch was that daily de

I know some of Living Social's original investors, and I approached them for an investment in my startup about 8 months ago. Part of our pitch was that daily deals solve and amazingly valuable problem in an inherently not-valuable way, and although our system would take less of a straight line, it would and already WAS solving the problem for a small subset of businesses in a more valuable and vastly more sustainable way. They ultimately passed on the investment, our last gasp to survive, because "Living Social was obviously their flagship, and they didn't want something who's core value proposition was that Living Social was doomed, which is obviously isn't." That's very close to a direct quote. This doesn't make me happy. I hope Living Social figures it out. They realized Daily Deals were doomed even before Groupon did and tried to work out other revenue streams. I hope this report isn't even true. But God damned if I didn't tell'm so.

rtfeldman 14y ago
Whether or not they privately thought you were right, openly betting against one's own companies is rarely a prudent move for any investor.
- ricardobeat 14y ago
  Fun fact: Stripe is backed by three out of five Paypal founders. In my layman's view, that's a prudent move, similar to neutral/risk reversal stock trading strategies. Of course VC is about more than just money, but still.
- notJim 14y ago
  Is that true? Isn't that basically what hedging is?
- incongruity 14y ago
  The simple fact is that over the long (enough) run, there is no such thing as sustainable competitive advantage – markets change, grow, shrink, die – if you're not actively exploring what will replace your offering or share the market with it, you can rest assured that someone else is and eventually, they will enter your space. So, IMHO, the smart money finds the best alternatives and bets on them too, at some point... (or they exit, if the market is simply going to die, but that's another angle).
- mogrim 14y ago
  I could invest $100 in two competitors, assuming that one will fail, but the other will be worth $1000. Risky - of course. A third company might come along and I end up with nothing. But still a reasonable strategy.
timdorr 14y ago
Do you think Daily Deals are a fundamentally flawed concept? I tend to think there's nothing wrong with them other than an over-saturation of the market and a prevailing attitude that says all you need is a sufficiently large mailing list to win. But that's just my outsider's view.
- prostoalex 14y ago
  Indeed. If you're a restaurant/spa/bowling alley in need of drumming up some business, the daily deals channel, with all of its issues, will still generate the most qualified leads for the buck. Other channels are newspaper or Yellow Pages ads (probably dead) or a combo of Google/Facebook micro-targeted ads.
  - tomasien 14y ago
    The only, repeat the ONLY thing that matters, is cost to acquire a customer and the value of that customer to you in the term for which you can afford to measure. Daily Deals RARELY put you in the positive for that metric unless your conversions and retention numbers in the amount of time you can afford to measure are fantastic.
- kloncks 14y ago
  I think doing something that eats away 90% of a merchant's revenue is not sustainable in the long run and arguably something illogical if you just run it once too.
- nazgulnarsil 14y ago
  Daily Deals aren't doomed, it's just that businesses AND the people providing the platforms don't really understand how to take maximum advantage of price discrimination. Larger companies have already figured this stuff out and the way they structure their own deals, sales, and price matching should be looked to a a model.
- azylman 14y ago
  Daily deals like Groupon are fundamentally flawed in certain markets. The problem is that it rarely generates repeat customers and/or customer loyalty - they tend to generate customers that come once, when they have a coupon, and never come again. So unless your business is high margin, you're almost guaranteed to lose money from daily deals. Thus, it's very good for things like paintball and skydiving and very bad for restaurants.
hammock 14y ago
Off topic- dude, your startup is awesome. Automated bar crawls :) And in my cities first! Are you from Richmond/went to UVa?
- tomasien 14y ago
  Yes and yes. Wish we were doing more with it, but we are doing a re-launch soon and are launching native apps.
- tomasien 14y ago
  Too many of our deals are out of date, but soon that's fixed on the re-launch.
jrosenblatt 14y ago
What was your old startup 8 months ago?
- tomasien 14y ago
  http://thecityswig.com/ http://thecityswig.com/, but you emailed me so I'm assuming you figured that out!

rtfeldman 14y ago

Whether or not they privately thought you were right, openly betting against one's own companies is rarely a prudent move for any investor.

ricardobeat 14y ago
Fun fact: Stripe is backed by three out of five Paypal founders. In my layman's view, that's a prudent move, similar to neutral/risk reversal stock trading strategies. Of course VC is about more than just money, but still.
notJim 14y ago
Is that true? Isn't that basically what hedging is?
incongruity 14y ago
The simple fact is that over the long (enough) run, there is no such thing as sustainable competitive advantage – markets change, grow, shrink, die – if you're not actively exploring what will replace your offering or share the market with it, you can rest assured that someone else is and eventually, they will enter your space. So, IMHO, the smart money finds the best alternatives and bets on them too, at some point... (or they exit, if the market is simply going to die, but that's another angle).
mogrim 14y ago
I could invest $100 in two competitors, assuming that one will fail, but the other will be worth $1000. Risky - of course. A third company might come along and I end up with nothing. But still a reasonable strategy.

timdorr 14y ago

Do you think Daily Deals are a fundamentally flawed concept? I tend to think there's nothing wrong with them other than an over-saturation of the market and a prevailing attitude that says all you need is a sufficiently large mailing list to win. But that's just my outsider's view.

prostoalex 14y ago
Indeed. If you're a restaurant/spa/bowling alley in need of drumming up some business, the daily deals channel, with all of its issues, will still generate the most qualified leads for the buck. Other channels are newspaper or Yellow Pages ads (probably dead) or a combo of Google/Facebook micro-targeted ads.
- tomasien 14y ago
  The only, repeat the ONLY thing that matters, is cost to acquire a customer and the value of that customer to you in the term for which you can afford to measure. Daily Deals RARELY put you in the positive for that metric unless your conversions and retention numbers in the amount of time you can afford to measure are fantastic.
kloncks 14y ago
I think doing something that eats away 90% of a merchant's revenue is not sustainable in the long run and arguably something illogical if you just run it once too.
nazgulnarsil 14y ago
Daily Deals aren't doomed, it's just that businesses AND the people providing the platforms don't really understand how to take maximum advantage of price discrimination. Larger companies have already figured this stuff out and the way they structure their own deals, sales, and price matching should be looked to a a model.
azylman 14y ago
Daily deals like Groupon are fundamentally flawed in certain markets. The problem is that it rarely generates repeat customers and/or customer loyalty - they tend to generate customers that come once, when they have a coupon, and never come again. So unless your business is high margin, you're almost guaranteed to lose money from daily deals. Thus, it's very good for things like paintball and skydiving and very bad for restaurants.

hammock 14y ago

Off topic- dude, your startup is awesome. Automated bar crawls :) And in my cities first! Are you from Richmond/went to UVa?

tomasien 14y ago
Yes and yes. Wish we were doing more with it, but we are doing a re-launch soon and are launching native apps.
tomasien 14y ago
Too many of our deals are out of date, but soon that's fixed on the re-launch.

jrosenblatt 14y ago

What was your old startup 8 months ago?

tomasien 14y ago
http://thecityswig.com/ http://thecityswig.com/, but you emailed me so I'm assuming you figured that out!