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How Nasty Gal Went from an $85M Company to Bankruptcy

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Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#61

Post by Nomentatus »

narrowrail wrote: post #52
raiyu wrote: post #46

It looks like overall a classic mistake of trying to go too fast too soon. The issue with taking on VC capital is that you need to be in control of how you spend that money, and if you don't need it, then don't take it. There are also challenges with any business in crossing the chasm. Selling to more customers, or a different set of customers is akin to searching for product market fit a second time and is tricky li…

I hope it doesn't sound too pedantic, but the 'C' in VC stands for capital, so saying money or capital after VC is redundant. The only reason I was driven to write this is because of how many times it was written.

We avoid redundancy to speed up communication, but some redundancies can greatly speed up communication by removing perceived ambiguities that stall comprehension. These are good. Avoiding redundancy isn't a goal in itself, and hasn't always been an explicit goal at all. Who would understand "V" standing by itself, instantly, without pausing? Nobody. (In fact, I'm still thinking about whether venture money - which could include self-issued digital coin? - is the same thing as Venture Capital.)

In the middle ages, when literacy (and therefore large vocabularies) were uncommon, it was considered good form to include three redundant synonyms or phrases all in a row, creating emphasis, giving the reader the best chance of understanding the writer correctly, and demonstrating that the author understood his language well and probably meant what he was saying. (Not "she" so much, then.)

It's now considered good form in technical writing to start with examples or present them as soon as possible, but examples are, by definition, semantically redundant. Should we axe them all? Absolutely not, since that would greatly slow, and sometimes prevent, comprehension.

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#62

Post by portent »

IsaacL wrote: post #30
alaskamiller wrote: post #9

Earlier quoted context omitted.

Revenue is vanity. Profit is reality. Selling $85MM in 2014 is nifty, but fashion industry is hard. Average EBITA is maybe 10%: http://www.mckinsey.com/industries/retail/our-insights/the-s... to realize how brutal it is. Let's piece this together... She had 280 FTE at 2013 and got into a lease for 500k sqft warehouse: http://www.inc.com/30under30/donna-fenn/nasty-gal-sophia-amo... At ~$60k/yr avg and we'll pretend a…

Revenue is often used as a vanity metric. On the other hand... revenue is tangible, profit is an accounting construct.

Anyone who wants more revenue can get it. Just sell something at a loss.

It happens more often than you think! That's why - in the long run - profits matters more than revenue.

Of course in a land-grab situation the normal rules of gravity may not apply, but most businesses are not operating in a land-grab.

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#63

Post by portent »

cookiecaper wrote: post #42
grzm wrote: post #33

Earlier quoted context omitted.

Would you elaborate? It seems the pile of money you have after paying expenses is tangible in the same way as the pile of money you receive.

Revenue is absolute. Money either came in or it didn't. Profit is fungible because the accountants and business principals decide what counts as a cost and what counts as a surplus. An infamous example of this is "Hollywood accounting" [0], whereby major studios spin off independent LLCs for each film project they pursue, charge these LLCs exorbitant fees for marketing, distribution, etc., and then the LLCs never pos…

> Revenue is absolute. Money either came in or it didn't.

Sadly nothing is that absolute. Plenty of revenue scandals out there.

A typical example of this: a large supermarket hasn't made enough money for the year, and asks its suppliers to book future sales that (very likely) will come next year as real sales now. The suppliers do this, and actually pay up, because they want to stay on good terms with the big supermarket. So the supermarket has the "absolute revenue" now, but has a hidden liability behind it.

It's not theoretical:

http://www.bbc.co.uk/news/business-37536538

"Auditors found that the inflated profit figure was the result of Tesco booking payments from suppliers before the company had been due the money."

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#64

Post by sirclueless »

narrowrail wrote: post #60
adventured wrote: post #57

Earlier quoted context omitted.

That's not necessarily correct. When the parent writes: > A great example of a company taking on VC money VC can stand for "venture capitalist" in that context. So "VC money" equating to venture capitalist money, would in fact be a proper use. Further, venture capital is a specific type of money. One could also correctly say: bond money, debt money, home equity money, (the) bank loan money, among others and they act…

I just happen to disagree, and I believe when one says I took VC that means 'I took venture capital', not 'I took venture capitalist money.' There is a wiki entry[0] for VC, and when referring to venture capitalists it is spelled out, not abbreviated VC. [0] https://en.wikipedia.org/wiki/Venture_capital

"I took VC" probably parses out to "I took venture capital" in this same context, but it's a strange phrase and less common than "I took VC money."

I think this is because "VC" is only one type of investment, and for other similar forms of investment the phrase is nonsensical. For example, PE means "Private Equity" but you can't say "I took PE." (Equity means ownership, and taking money from an investor means giving up ownership, not taking it.) "I took VC" is basically abusing the dual meaning of "Capital" as the thing an investor provides in exchange for equity and the thing a business uses to operate.

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#65

Post by narrowrail »

Nomentatus wrote: post #61
narrowrail wrote: post #52

Earlier quoted context omitted.

I hope it doesn't sound too pedantic, but the 'C' in VC stands for capital, so saying money or capital after VC is redundant. The only reason I was driven to write this is because of how many times it was written.

We avoid redundancy to speed up communication, but some redundancies can greatly speed up communication by removing perceived ambiguities that stall comprehension. These are good. Avoiding redundancy isn't a goal in itself, and hasn't always been an explicit goal at all. Who would understand "V" standing by itself, instantly, without pausing? Nobody. (In fact, I'm still thinking about whether venture money - which co…

I didn't realize I criticized a YC company founder; that was a mistake, but I stand by my sentiments (it made my eyes go crossed).

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#66

Post by Nomentatus »

atomical wrote: post #26
PaulHoule wrote: post #25

The clothes were awful. It sounded like a good story from a distance, but if you looked at the catalog it was a definite maybe and if you saw the clothes in person you realized they used cheap materials and were photographed from the good angle.

Were the colors off as well? I have bought clothes from online retailers and the colors looked different in person.

It's also true that colors in between the three frequencies that our eye's cones can easily detect cannot be accurately reproduced by a computer monitor. Yet these colors are great attention-getters for just that reason - you never see them on TV (which abstracts and exaggerates the limits of human cones); so fashion tends to gravitate toward those "in between" colors. Modern flower breeds also bend toward these colors, for the same reason, and artists for the last century have adored them as well - making it awfully hard to buy an accurate reproduction of many or most paintings.

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#67

Post by narrowrail »

sirclueless wrote: post #64
narrowrail wrote: post #60

Earlier quoted context omitted.

I just happen to disagree, and I believe when one says I took VC that means 'I took venture capital', not 'I took venture capitalist money.' There is a wiki entry[0] for VC, and when referring to venture capitalists it is spelled out, not abbreviated VC. [0] https://en.wikipedia.org/wiki/Venture_capital

"I took VC" probably parses out to "I took venture capital" in this same context, but it's a strange phrase and less common than "I took VC money." I think this is because "VC" is only one type of investment, and for other similar forms of investment the phrase is nonsensical. For example, PE means "Private Equity" but you can't say "I took PE." (Equity means ownership, and taking money from an investor means giving…

I like your explanation the best and I actually dislike the abundant use of acronyms. It seems use of acronyms on HN is often a kind of signaling rather than a convenience.

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#68

Post by Nomentatus »

narrowrail wrote: post #65
Nomentatus wrote: post #61

Earlier quoted context omitted.

We avoid redundancy to speed up communication, but some redundancies can greatly speed up communication by removing perceived ambiguities that stall comprehension. These are good. Avoiding redundancy isn't a goal in itself, and hasn't always been an explicit goal at all. Who would understand "V" standing by itself, instantly, without pausing? Nobody. (In fact, I'm still thinking about whether venture money - which co…

I didn't realize I criticized a YC company founder; that was a mistake, but I stand by my sentiments (it made my eyes go crossed).

This could reflect a personal difference in abstraction. I'm not saying this is what should be the case, but for me "VC" might as well be it's own word with it's own associations and connotations. If you're used to mentally expanding contractions for precision - as lots of programmers and analysts are - then I can see that "VC money" would be a stumbling block. Not something I thought about enough before your second comment. Generally the plebes win such struggles: in this case, I'm with the plebes.

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#69

Post by ChuckMcM »

pdog wrote: post #56
raiyu wrote: post #46

It looks like overall a classic mistake of trying to go too fast too soon. The issue with taking on VC capital is that you need to be in control of how you spend that money, and if you don't need it, then don't take it. There are also challenges with any business in crossing the chasm. Selling to more customers, or a different set of customers is akin to searching for product market fit a second time and is tricky li…

The founder and chief executive had a majority 55% stake. Considering she had final say on all decisions, you can't blame VCs for blowing up the company.

This was how I read it as well. A person feeling their way into this level of business, makes some bad hiring decisions and either chooses advisers poorly or doesn't have the skills to listen well. It's a sad outcome but certainly not unheard of.

Re: How Nasty Gal Went from an $85M Company to Bankruptcy

#70

Post by edshiro »

spaceflunky wrote: post #45

I was very close to insiders at the company, can't tell you who I know, but you'll have to trust me. Nasty Gal was a lot worse of an environment that this article leads on. There's a lesson to learn here, so that's why I'm posting. Basically, Nasty Gal made a string of horrible investments, one after another, which makes one wonder if they were trying to fail. Lots went wrong, but I'll cover the stuff that hasn't bee…

Thank you for the insights into the company. I don't know whether this is common in VC backed companies, but I am surprised at the lack of governance around spending of company money for personal gain. 500K on a ghostwriter when you are trying to steady the ship and then make it move full steam ahead??! That sounds insane and if I were an investor I'd kick that CEO's ass.

Moreover, very surprised Index Ventures poured $40M into this company. What were the reasons that motivated such a sizeable investment?

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