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In what I can only describe as a refreshingly honest interview, Dot & Bo CEO Anthony Soohoo said that the reason his San Francisco-based, millennial-aimed online furniture retail outfit closed is because it simply did not work as a business.
“I know in Silicon Valley you are always trying to look on the bright side, and you tend to put your head in the sand when things don’t work out,” said Soohoo, the former head of CBS Interactive’s entertainment division, in an interview with Recode this morning. “At the end of the day, Dot & Bo just failed.”
Indeed so, sucking away $20 million in venture investment with it and wiping out its valuation of about $60 million completely. Dot & Bo backers included Trinity Ventures and Oak Investment Partners.
Dot & Bo put up a sudden notice on its site Friday afternoon that it was done, which read in part:
“It is with a heavy heart that we must share that Dot & Bo will be ceasing all operations as of the end of the day Friday, September 23rd. We were in deep discussions to be acquired by a prominent public company, but ultimately the partnership did not come to fruition. We are humbled to have had such loyal customers and are extremely proud of the impact we made on the home furnishings market, but ultimately we were unable to find backers with the necessary vision to help us achieve our mission.”
Thus ends the effort to mesh media with e-commerce, with a splash of native advertising, designed to prompt customers to buy based on engaging in stories around products. While it sure was cool-looking and slick, that was not enough to beat the massive costs and capital outlays that a tight-margin furniture business required.
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“We were trying to build a media company on Day 1, but wanted to get away from the ad model by selling things,” said Soohoo, who said he took inspiration from the inquiries he got from viewers who wanted to buy furnishings they saw on various CBS shows.
Sounds like a nifty idea in concept, offering a private-label line and using sites like Pinterest and Houzz to generate buyer interest. But getting shipping costs to be reasonable for larger and bulkier types of items — as well as developing a regular flow of buyers — proved tough. A recent effort to provide consulting to companies on their workspaces, which typically goes under the tiresome tech euphemism called a “pivot,” also did not gel.
As one investor noted: “The capital requirements to fund the supply chain and working capital commitments proved to be greater than originally anticipated, and more than the VC market had the appetite for, especially with the backdrop of how much out of favor e-commerce is at the moment.”
Yes, the dreaded winter in the e-commerce market, highlighted by the high-profile closing of home-decor flash sales company One King’s Lane, that sucked up $100 million when it went down in a sale of less than $30 million to Bed, Bath & Beyond. That awful outcome chilled the Dot & Bo bidding process, even though the exits of Jet.com (to Walmart for $3.3 billion) and Dollar Shave Club (to Unilever for $1 billion) ended up looking great.
“At the end of the day, the market was frozen over and the sector was out of favor, which is why we went the M&A route,” said Soohoo, noting that Dot & Bo got to a letter of intent with a possible retail buyer. “Unlike a lot of tech companies, these buyers look at Silicon Valley e-commerce companies as a vendor, and not a way to attract digital talent into their business.”
(Soohoo declined to name the possible purchaser, as it might buy the assets of the shuttered startup in the future, but I will add when I find out — and I will! Sources tell me it was a big-box retailer.)
Soohoo added that while he thought Dot & Bo was a great effort, at the end of the day, it would be “roped into the list of e-commerce companies that failed.”
Yes, indeed, because startups are hard. “Sometimes ignorance is bliss, but as you get into a business more, you realize that maybe some of the challenges get pretty impossible,” said Soohoo. “And then you feel like shit.”
Exactly.
This article originally appeared on Recode.net.
