The End of the Cash Toss

Over the past fifteen years, a slow crescendo in the investment world sped up to insanity the last five years. Perhaps the end began when Yahoo died.

In 1998, we began to see some of the same insanity. I remember Fred instant messaging me after a meeting that someone just pitched him, where they would, you got it, only sell ties. We laughed about devising a plan to sell everything and move to South America, but of course, we were not allowed to liquidate so easily. We saw it coming. The dot com crash happened in 1999.

This downturn is a bit different. Too much money being thrown at companies who chose to build the brand and the customer base with zero thoughts on profitability. Building at all costs forces the company to raise more and more money, and each round gets bigger and more expensive.

Let’s go back to Yahoo. First, there was MSN, AOL, Yahoo, Mindspring, Google, and Alta Vista; each raised a significant amount of cash, and clearly, the winner is Google. All that capital changed all of our lives. Thank you, Venture Capitalists!

I never understood why anyone invested in Bird, the electric-sharing scooter company that began in LA, where nobody walks, went bankrupt this past week. At its peak, Bird was valued at $2.5B. Yes, there was COVID, but I would like to see the financials prior to that.

In the fashion world, it has been a crazy week. Not only did the Real Real go bankrupt, Coupang, a South Korean e-commerce company, acquired Farfetch for $500M, and Matches of Fashion was sold to the Frasers Group, a British retail conglomerate, for $52m. Apax had previously acquired Matches of Fashion for $1b in 2017. When Farfetch went public, pulling out $855m with a $6.2B public valuation. These companies helped change the model for brands and small, unique stores, but again, realistically, were those platforms ever going to show a profitable balance statement?

The good news about all these companies is that they helped the economy grow. The bad news is there are more fallouts to come. Would this have ended differently for all of these companies, or is this just the evolution of building new industries?

The following year will be interesting because this check in the market only bleeds into other markets. It is definitely the end of the commerce tech boom.