Sunday, November 29, 2015

E-Commerce Startup Jet Raises $350 Million, at $1.35 Billion Valuation.

Jet.com Inc. said it had raised $350 million of fresh equity in a new funding round that values the e-commerce startup at $1.35 billion.

Mutual-fund giant Fidelity Investments led the round, joined by previous investors.

Jet said it expects to raise another $150 million “shortly,” bringing this round to $500 million.

In addition, Jet it expects to obtain $125 million in debt financing, including a $50 million increase in a credit line from Silicon Valley Bank and $75 million from venture debt investors. It also plans a smaller amount of “strategic financing.”

Jet founder and Chief Executive Marc Lore declined to name any other new investors in the round, nor the source of the venture debt or details of the strategic financing.


Jet is challenging Amazon.com Inc., Wal-Mart Stores Inc. and other e-commerce players with an array of household items, electronics, pet supplies and more. It initially planned to sell $50 annual memberships for access to discounted prices, in hopes of attracting more customers to the site, but abandoned that plan in October.

Before the latest financing, Jet had raised about $195 million of equity and debt, said Mr. Lore.

The funding provides a badly needed infusion as the company had been running low on cash.

The Wall Street Journal reported in early November that a recent financial plan showed the company projected it would have $63 million of cash on its balance sheet by the end of October and was forecasting a cash drain of $76 million in November and December. Mr. Lore said Jet now expects to burn less money before the end of the year and to consume about $417 million during 2016.

The membership fee was supposed to help fund Jet’s big marketing budget — which Mr. Lore said on Tuesday should be about $270 million for 2016 — with whatever was left providing the company its profit margin. Instead the company will now charge more for products, hoping to break into the black by 2020 when it reaches much larger scale.


The new business model is more “retail and brand friendly,” said Mr. Lore. Jet doesn’t want to alienate suppliers who don’t want their items to appear on a discount site that might undercut other distributors. At the same time, it needs to advertise low prices to attract customers away from rivals like Amazon.com Inc.

Mr. Lore said customers will be attracted by “smart cart” savings that Jet offers when they add multiple items to their order, for example. He said Jet hopes to save on shipping by getting more items into each box sent to customers. He said the average customer order includes 5.5 items and they are shipping 3.1 per box.

Thus far Jet is struggling to break through with consumers despite a large marketing budget that includes TV commercials and outdoor ads in big cities. For instance, Jet’s mobile app is currently ranked #63 in the Shopping category of Apple’s App Store in the U.S. according to research firm App Annie.

Disclaimer : Following article come from WSJ.D