[Herring] Boo.com -- here's a perfect example of the worst...

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From: Adam Rifkin -4K (adam@XeNT.ics.uci.edu)
Date: Wed May 03 2000 - 21:54:11 PDT

I was just ranting about how awful some of the dealflow is. Rohit found
this one for me as an example of how bad it has gotten lately...

How does a company lose $120 million in six months? Sounds like the
plot of a bad John Candy Richard Pryor movie...

> Boo's blues
> By Dianne See Morrison
> Redherring.com, May 04, 2000

> With a name like Boo.com, it was perhaps a star-crossed company from
> the very start. The Internet-only clothing retailer, backed by some
> of Europe's most prominent dot-com investors and savvy offline
> players, is seeking a buyer after burning through its cash six months
> after its launch.

> Investment banks familiar with the company's woes say Boo.com Group
> has contacted them seeking fresh funds to survive, most likely by
> selling itself outright. "The deal was going around to act for
> Boo.com to help them raise more money in any shape or form, including
> finding a buyer," said Gerard van Hamel Platerink, an Internet
> analyst at Salomon Smith Barney in London.

> Boo.com declined to comment on whether the company is up for sale,
> which was first reported today by the Wall Street Journal
> Europe, and would not disclose its funding situation. The company put
> a brave face in the possible problems it faces. "We're doing quite
> well," said Dina Cholack, the company's communications director, and
> pointed to Boo.com's $670,000 revenues for February, which she
> indicated was "in line with our internal goals."

> Yet Mr. van Hamel Platerink and a source at another investment bank
> both indicated that a sale was the most favored option. "But as far
> as I know, none of the banks would touch it," added Mr. van Hamel
> Platerink. Finding a buyer for Boo.com won't be easy, since there is
> speculation that a staff exodus is imminent due to the current
> problems.


> It's a big setback for the company, whose investors include the
> French millionaire Bernard Arnault, the Italian clothing company
> Benetton (NYSE: BNG), the London-based venture fund Zouk, the U.S.
> fund Bain Capital, as well as the U.S.-based investment banks J.P.
> Morgan (NYSE: JPM) and Goldman Sachs (NYSE: GS). Together, they
> ploughed a reported 75 million (British pounds; approximately $120
> million) into the company since its formal launch in November 1999,
> after many months of delays.

> An investment bank familiar with the matter said that potential
> buyers include Adidas-Salomon, Reebok (NYSE: RBK), and the U.S.
> sporting goods site Fogdog (Nasdaq: FOGD). The person noted that
> Adidas already shares an informal relationship with Boo.com: the Web
> site's former chief financial officer had previously come from the
> German shoe and sports equipment maker, although has since departed
> for a post at Chello Broadband, an Amsterdam-based Internet service
> provider.

> To be sure, many of Boo.com's troubles were self-inflicted. Although
> well-hyped, it failed to execute well. The company first formed in
> November 1998, yet took a year to launch -- for reasons the company
> never disclosed -- after a number of false starts. At launch,
> shoppers complained that the Flash-heavy site often crashed their
> browsers, and did not work at all on Apple (Nasdaq: AAPL) Macintosh
> computers.

> The launch delays themselves dealt a heavy blow. As the launch was
> pushed back farther and farther, media spots on TV had already
> booked, and the company had to shell out a hefty sum in kill fees,
> according to one media buyer familiar with the situation. More
> generally, the company's huge marketing spend depleted its cash. It
> went so far as to get film director Roman Coppola -- the high-profile
> music video director and son of Francis Ford Coppola -- to film
> Boo.com's television spots.

> In January, the site began discounting their products by 40 percent,
> though it originally had said it would never stoop to such measures.
> In February, its chairman and cofounder left the company. In the same
> month, it fired 70 staff.


> However, Boo.com's problems are a symbolic slap to the broader
> Internet economy in Europe. On the run-up to its launch, the company
> was regarded as an innovative and viable Internet player -- an
> example that a completely new brand could be established on the Net
> and one that played to Europe's traditional strength relative to the
> U.S.: clothing fashion and design.

> Yet it now seems likely to suffer the same fate of other suffering
> startups in Europe's fledgling Internet economy, such as
> Lastminute.com (Nasdaq: LMIN) and World Online, which both have
> failed to meet their original lofty expectations. "This is just what
> people don't want to hear right now," said Mr. van Hamel Platerink.
> "It's just more doom and gloom for the market -- maybe we should all
> jump off a tall building right now," he said.

> Part of the company's concerns might be attributed to the
> characteristics of the market sector and Boo.com's investors'
> impatience. Analysts note that in the competitive fashion world,
> retailers do not expect to make a profit until at least two years
> after starting. And competitors saw Boo.com's problems early on. Eva
> Pascoe, the UK managing director of Zoom.co.uk, a fashion site owned
> by the UK clothing group Arcadia, had already sounded Boo.com's
> warning bells.

> "Fashion is a long-term business," she said, commenting directly on
> Boo.com's business prospects during an interview in March. "You have
> to be in it for the long haul, not just for the next ten minutes,
> which is what the VCs are in it for," Ms. Pascoe said.


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