Recent IPO action has gotten many people in the tech startup space hopeful. After the disappointing post-IPO performance of Zynga and Groupon, many in Silicon Valley and beyond are hoping that a new crop of tech companies can show Wall Street that tech valuations are not a fluke and tech plays are safe bets. Sadly, they were disappointed by Facebook’s initial stumble out of the IPO gate. Now that Facebook has risen, phoenix-like from the ashes of a mid $17 stock price, and is headed for much higher stock heights after busting through the $50 range, Twitter’s IPO pop has gotten many tech investors excited. The same giddiness that, as we wrote about earlier, frightens some investors has informed the market once again. And this all explains why Zulily’s recent IPO bagged the ecommerce player $253M and company is now valued at $5B. Seriously.
I thought ecommerce was dead
As Mark Twain famously said, the reports of his death were grossly exaggerated. The same goes for ecommerce. While many tech startup observers still have a bad taste in their mouth when etailers like etoys went IPO and went tits up in short sequence, Zulily’s IPO shows there is still a lot of kick left in the old ecommerce horse. Of course, just like with current and past ecommerce plays, a quick peek into Zulily’s numbers show some glimmers of hope and some serious cause for concern. The company lost over $10M last year but made over $2M this year. This is par for the course-especially for a fast growing company. Moreover, a key part of its revenue growth strategy is its reliance on flash sales. This might boost revenues but these can easily yield Phyrric victories. Zulily shouldn’t worry too much because even the 800-pound gorilla in the ecommerce space, Amazon, still shows a loss every once in a while. That’s just the nature of this part of the Internet woods.
Regardless, the success of Zulily shows that Wall Street hasn’t gotten tired of ecommerce plays despite the recent disappointments in this space typified by Groupon and Fab. Zulily’s success shows that if you focus on a lucrative and fast growing market, you have a good chance of succeeding.