One Kings Lane sold for less than $30 million after being valued at $900 million

One Kings Lane
Source: One Kings Lane

One Kings Lane, an online home-furnishings retailer, fetched less than $30 million in its recent sale to Bed Bath & Beyond, according to three people familiar with the deal. The purchase price marks a massive discount from a valuation of $900 million that the startup had secured when it raised more than $100 million from investors in early 2014.

The disappointing sale, which was announced in June without a purchase price, does not come as a total surprise to those who had followed the once-hot startup in recent years. Recode had reported in January that the shopping site had been searching unsuccessfully for a buyer, in the wake of multiple rounds of layoffs and a business that had been deteriorating for some time.

A Bed Bath & Beyond spokesperson did not immediately respond to a request for comment.

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In the wake of Dollar Shave Club's $1 billion sale to Unilever and Walmart's impending $3.3 billion acquisition of Jet, the One Kings Lane outcome is a reminder of how brutal the e-commerce industry can be for many startups.

The web retailer, co-founded by Ali Pincus and Susan Feldman, burst onto the scene in 2009 with limited-time sales — known as "flash sales" — of upscale furniture and home decor at heavily-discounted prices.

As Gilt Groupe did with the fashion industry, One Kings Lane initially benefited from the fallout of the Great Recession; businesses were desperate to find new ways to unload pricey goods as the economy slumped and shoppers shunned full-price discretionary items.

Over time, the company secured $225 million in investments from firms such as Greylock, Tiger Global, Kleiner Perkins Caufield & Byers and Mousse Partners, and at one point it booked hundreds of millions of dollars in annual revenue.

As the economy bounced back, however, excess inventory was harder to come by for flash-sale sites across the board. Traditional retailers and brands also began running their own versions of these sales on their own sites. In short, it was really tough to keep the selection of goods fresh on a daily basis.

To make matters worse for One Kings Lane, the furniture and home decor categories are much less seasonal than the fashion industries, meaning there wasn't as much unsold merchandise to come by organically on a quarterly basis, as there is for discount sites in apparel.

The startup tried to jump-start growth through new initiatives like Hunters Alley, a site that was like an eBay for high-end decor. But that project was killed less than a year after launching.

One of the first red flags now seems so obvious in hindsight. Within months of raising $112 million for his company in early 2014, then-CEO Doug Mack stunned insiders and outsiders by leaving for the same role at Fanatics, an online seller of licensed sports apparel.

There's a lot more to the story of what went wrong at One Kings Lane and what e-commerce entrepreneurs and employees can learn from it. That includes the tough lessons some employees learned after spending thousands of dollars to exercise stock options that were rendered completely worthless after the sale to Bed Bath & Beyond.

By Jason Del Rey, Recode.net.

CNBC's parent NBCUniversal is an investor in Recode's parent Vox, and the companies have a content-sharing arrangement.