“It’s less attractive to go public than it used to be.”
With all the excitement following LinkedIn’s May 19 IPO, which resulted in the share price more than doubling the first day on the New York Stock Exchange, it might surprise some investors to hear those words from one of the leading Internet entrepreneurs in the United States. But Kevin Ryan, founder and CEO of online retailer Gilt Groupe, is in no hurry to enter the publicly-traded arena.
Ryan says that’s because today there are many more private funding options than there were in the 1990s when he took the Internet ad servicing company DoubleClick public. Just last month, Gilt Groupe raised $138 million from a consortium of new investors, including Japan’s Softbank Group and Goldman Sachs , and previous investors General Atlantic and Matrix Partners. The latest round of funding values Gilt at $1 billion. That's more than double its valuation just a year ago and twice this fiscal year’s projected revenues.
Since its launch in 2007 as an online ‘sample sale’ for designer women’s fashions, Gilt has expanded to sell menswear, children’s clothing and accessories, home goods, and even operates a travel site. Using a “flash sale” model that sells discounted goods for a limited time, Gilt benefited from the recession when consumers were less willing to pay full price for high fashion.
Gilt competes with other flash sales sites including Rue La La, Ideeli, and Hautelook, which sold itself to Nordstrom earlier this year in a $180 million all-stock deal. Rue La La is soon to be partially owned by eBay after the online auction site purchased its parent company GSI Commerce in March. And one of the pioneers of the flash sale, Vente-Privee, has just announced a joint venture with American Express to bring the site to the U.S.
However, Ryan is not writing off a Gilt Groupe IPO completely, instead putting it on a one- to-three-year pipeline.
Ryan does not see froth in his sector, saying, in general, he does not think we’re in a tech bubble. “I think most valuations to date have been pretty reasonable.”
He added that LinkedIn’s valuation was starting to “push it.” Ryan says he would have valued LinkedIn in the 4- to- 5 billion dollar range as opposed to the 7- to- 8 billion dollar-range it attained. But he doesn’t rule out that the higher valuation can’t be reached in another year or two, saying that LinkedIn is an “extraordinary valuable company.”
Another Internet company Ryan praised is Groupon. The website, which features daily deals, filed Thursday for an IPO that is expected to raise $750 million dollars, with some speculating the capital raised could be even higher. Groupon is often criticized for being in an industry where the barriers to entry are extraordinarily low and for having a business model that is easy replicable.
Gilt, in fact, competes with Groupon with its Gilt City site, which offers deals on goods and services in selected cities. Even so, Ryan said that Groupon is a very valuable franchise, and will continue to be if it executes well. “What you see in the history of the internet, is that the person that gets out there first and gets scale generally wins. It’s hard to catch up.”
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