Menu Close

This Is a Sign the Startup Bubble Is Totally Maxed Out: It Resorts to (um, Sexy) Junk Mail to Disrupt

As I was finally cleaning out the junk receptacle that my mailbox has become, I found a thick, nearly black envelope among the wadded-up fliers. It was sent to “Resident” and titled “San Francisco Offers.” Kudos. Whoever was trying to get through to me, made it.

It contained six glossy, multicolored sheets, each for a different company. It must have cost a bundle. I was getting ready to toss the packet when I recognized one of the names: these were startups!

But why would startups that plan to disrupt entire industries, invent new paradigms, take mankind to the next level, and make the world a better place for all … why would they resort to expensive, wasteful, dead-tree, old-school junk mail?

Was it a reluctant admission that this old, low-tech stuff works?

There are now 48 pre-IPO startups valued at over $1 billion. Uber, which is currently getting tarred and feathered even on NPR, is sitting on top of the heap, with a valuation of $18 billion. But there are thousands of smaller startups, and they’re all scrambling for money and attention and love.

Their valuations too have been soaring. In 2014, the median Series A valuation – the first major VC money after friends-and-family rounds and seed money – has hit $19 million, which surpassed even on an inflation-adjusted basis the median Series B valuations 10 years ago, according to Tomasz Tunguz, a partner at VC firm Redpoint Ventures. And Series B valuations now exceed Series C valuations from 10 years ago. Everything has moved up. Big money is gushing in all directions.

Some of these millions are for startups not to develop a better mousetrap that would disrupt, but to buy other startups. So messaging startup Kik Interactive just announcedthat it had raised an additional $38.3 million, for a total of $70.5 million, and that it would blow some of this money on yet another overvalued messaging startup, Relay.

Much of the remaining money is spent, not on building the newest mousetrap, but on advertising. Facebook is the biggest beneficiary of this VC-funded money flow to the point where Mat Honan at Wired suggested that “if the app bubble pops, Facebook’s money machine could seize up – just as it had happened to magazines a decade before.”

So I look through the glossy sheets of paper from another era. On top, a delivery service called Minibar that delivers wine, spirits, and beer “in 30-60 minutes.” Perfect for those desperate situations when you’re too plastered to make it to the store yourself. The inducement: “$10 off your first delivery.” Its seed round – the angel investors that get you started – wasn’t $100,000 or so, but a whopping $1.8 million, a month ago! They’re already blowing some of this money on glossy flyers.

Then there was on-demand home-cleaning and repair service Handy. It has racked up $45.7 million in four rounds, and some of it was plowed into two acquisitions. Handy is currently in the news, not for inventing the next big thing or disrupting something, being a latecomer in a very crowded industry, but for being already tangled up in aclass-action lawsuit over a whole laundry list of alleged labor law violations and other claims. Unperturbed, the coupon promises, “Only $29 for your first 2-hour home cleaning.”

And another delivery service. Food. They sprout like mushrooms. A while ago, Google was partnering with our local Costco for a similar thing. Amazon is dabbling in food delivery. Heck, Safeway has been doing it for years. OK, this one is different…. Blue Apron delivers a recipe and the required ingredients all together. So, two eggs, a pinch of salt…. It received $58 million in three rounds, including $50 million in April!

And another delivery service. This one for your pooch. You choose a dog size and a plan, and you get a BarkBox “of treats and toys” delivered every month. The eponymous company received $21.7 million in four rounds, including $15 million in July.

And another delivery service. Enticement: “Get $20 off $80 on your first order.” Boxed, an “online wholesale club,” received $7.6 million in two rounds, including $6.5 million Series A in May. It’s as if the money-spigot had been opened all the way this year, and no one can figure out how to shut it.

Join the conversation and have a little fun at If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

1 Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Follow by Email