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LivingSocial: Employees' and Founders' Common Stock Now Worthless

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Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#21

Post by mead5432 »

timdorr wrote: post #10
tomasien wrote: post #5

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…

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.

It's not that they are flawed, it's more about the businesses that provide the services aren't in a great position to understand how to leverage the deal.

These can bring in a short term influx of customers but unless the small business has some sense about how to convert those "daily deal" people, it's just blowing money.

In the end, daily deal sites are just another marketing channel. It helps to bring people in but if you can't convert, your ROI will ultimately be negative. This isn't something that small businesses can't understand, it is just not how they view these sites... they only see dozens and dozens of people coming in the door.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#22

Post by tomasien »

timdorr wrote: post #10
tomasien wrote: post #5

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…

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.

"Daily Deals" are just one format for solving the physical businesses initial distribution problem. It's a one-size-fits-all solution that actually only works for high margin businesses.

For us, we solved this problem for bars, who have this really specific opportunity/problem where when they really need to fill up their bars at very specific times, when they're empty but didn't expect to be. The reasons are too numerous to mention, but it's something every single bar owner will tell you if they've thought about it at all.

However, other industries have other problems, and DAILY Deals solve so few of them. From our analysis, massage therapists and similar businesses (luxury, high margin, service based companies) were the only ones who benefitted across the board.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#23

Post by tomasien »

hammock wrote: post #19
tomasien wrote: post #5

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…

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

Yes and yes. Wish we were doing more with it, but we are doing a re-launch soon and are launching native apps.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#24

Post by tomasien »

prostoalex wrote: post #11
timdorr wrote: post #10

Earlier quoted context omitted.

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.

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.

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.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#25

Post by tomasien »

hammock wrote: post #19
tomasien wrote: post #5

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…

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

Too many of our deals are out of date, but soon that's fixed on the re-launch.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#26

Post by taf2 »

This is absolutely terrible news. I don't care if you "like the daily deals business model" or "hate the daily deals business model" - this is very very bad news for a lot of people. It will have impact on the rest of the industry and perhaps already has. We should be very disappointed that things have gone south in this way. We should work harder to build profit into our businesses and we should hope still that LivingSocial can pull itself above water... Best wishes go out to everyone there...

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#27

Post by saalweachter »

timdorr wrote: post #10
tomasien wrote: post #5

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…

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.

I think I'd say the problem is that Daily Deals is a fantastic and valuable service, but not a billion dollar business.

Daily deals works by drastic price cuts, the end. That means it costs the merchant far more than just what they pay the middleman. The middlemen can't charge more than pocket-change for the service or it just don't work.

So the future as I see it for daily deals sites is small companies making decent money charging huge numbers of businesses tiny commissions to promote their sales through largely automated platforms. It's perfectly suited to a ten-man company, which is why I personally think the over capitalized megacorps are doomed.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#29

Post by ricardobeat »

rtfeldman wrote: post #8
tomasien wrote: post #5

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…

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

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.

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