With the announcement of our investment in Groupon, it makes sense to provide some context for why we were compelled to make the investment at this time. Josh Kopelman has recently written about, the innovation that is taking place in the e-commerce market. At Battery, we’ve been following this same overall trend of innovation and referring to it as “re-commerce”, the reinvention of e-commerce. We believe that Groupon is a major player in this reinventing of the huge and growing e-commerce industry.
For the past 15 years, the Internet has been centered on community, content, collaboration and commerce. Community has been revolutionized by social networking. Content has been changed forever by user-generated content. Collaboration has been re-imagined by myriad online services. Until recently, the modern online shopping experience was nearly identical to shopping online many years ago. We believe that there are fundamental changes taking place in the e-commerce world, similar to what happened in offline retail over many years, with the advent of discount retailers, big box specialty retailers and warehouse clubs.
There are many innovations that we have seen over the course of the past few years, but there are five that have been particularly exciting for us at Battery (*Represent Battery investments) .
- Private flash sales (Gilt, RueLala)
- Collective buying / demand aggregation (Groupon*, LivingSocial)
- Customization (J. Hilburn*, CafePress)
- Crowdsourcing (Threadless, Modcloth)
- Democratization (Fingerhut*, Etsy)
The new models of e-commerce that are emerging are not fads. They are tapping into all of the same trends that are impacting the broader web, including social, personalization and gaming. Most importantly, they are yielding e-commerce businesses that deliver better experiences for consumers and are more profitable than their predecessors. Many investors look at the valuations of public e-commerce companies and dismiss the entire sector. You can expect Battery to invest heavily in the sector as we view re-commerce as an opportunity to create enormous wealth by reinventing an industry that has been stagnant for too long.