Tough Times For NEA, A VC Firm That Put Big Money Into 3 Failing Startups Lot18, Viddy And Beachmint
If you follow the world of startups, you know Beachmint, Lot18 and Viddy have all made headlines over the past few years.
Initially, they were recognized for raising big rounds of financing from notable investors. Each has raised more than $35 million (and in Beachmint’s case more than $70 million) to date. Now, they’re suffering management changes, layoffs, and some of their products are shutting down. Two of them, Viddy and Beachmint, are reportedly returning close to $20 million to investors.
Beachmint is a celebrity-endorsed e-commerce company, Viddy is a social video app with filters, and Lot18 is a wine sales platform.
The common factor in all of those companies, besides their initial hype and struggles, is one of their investors, New Enterprise Associates (NEA). NEA invested in Lot18′s Series B and Series C rounds totaling $40 million. It invested in every Beachmint round of financing totaling $73.5 million. And it invested in Viddy’s $30 million round.
NEA also invested in Loosecubes, a startup that went belly up just as NEA was joining a $7.8 million round of financing in it last summer. Then there’s SAY Media, another NEA investment which recently suffered significant layoffs.
Battery Ventures is also paying the price for similar investments. Battery Ventures was invested in Viddy prior to NEA’s $30 million round as well as Loosecubes.
That’s not to say either firm is in trouble. It takes years to know how a VC’s portfolio will fair. NEA has a giant $2.6 billion fund that it raised in July 2012 to keep it running for a long time. All it takes is one or two home runs to return an entire fund. And NEA has gotten its hands in a number of promising startups, such as 10gen, Duolingo, BuzzFeed and Braintree.
But it’s hard to ignore that over the past two years, a few of it’s biggest picks have gone south.
Some of those cuts happened yesterday. A source told Betabeat the experience was “super uncomfortable” and the “general atmosphere was terrifying.”
Gilt Groupe isn’t the only flash sales site that has been trimming some of its fat. RueLaLa let go of many employees and Lot18, the one-year-old flash sales site for wine and gourmet food, also made cuts yesterday.
BetaBeat’s Adrianne Jeffries reported 15% of Lot18′s staff was let go after she spoke with co-founder Philip James. That comes out to about 14 people.
James called the layoffs “a natural part of the way a business grows and evolves.” James, like Gilt Groupe’s Kevin Ryan, indicated the layoffs were happening in places where the site was over-staffed, but said hiring would continue. “We’re hiring heavily in areas that do make sense for us,” James told BetaBeat.
For Gilt Groupe, the layoffs seem to be a part of the plan to get to cash-flow break-even by Q2. Best of luck to everyone at the companies.
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Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.
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