Breakups are always tough, but when you are a small tech company which depends on a single partner for survival, they can be literally devastating. That looks to be what happened to Boston-based startup N2N Commerce, an e-commerce software company that was building a modern e-commerce platform for Victoria’s Secret, and had at least 70 employees. Boston is a small town. Two separate entrepreneurs there tell us that N2N Commerce is shutting down. Says one via e-mail: “Rumor has it that the product they delivered for Victoria’s Secret/Limited Brands was a total dud and VS dropped them. Almost everyone was let go late last week.”
Calls to multiple people at N2N Commerce earlier today, including CEO Ruben Pinchanski, went unanswered. But a spokesperson for Limited Brands confirms that the startup is ceasing operations and that Victoria’s Secret will not be using its technology. Victoria’s Secret CEO Sharen Jester Turney is an N2N Commerce board member. And N2N Commerce CEO Pinchanski used to be an executive vice president at Limited Brands Direct (Limited Brands owns Victoria’s Secret). Pinchanski convinced Limited Brands and General Catalyst Partners to sink $30 million into N2N Commerce back in 2006. He was going to create a multi-channel e-commerce platform to replace Victoria’s Secret’s IBM-mainframe, silo-like infrastructure (troubles in its distribution center may have cost Victoria’s Secret $150 million in sales last quarter). Pinchanski even ramped up hiring last summer. But now it looks like the geek-meets-model dalliance is over, and the rejection was too much for N2N Commerce.
In retrospect, the warning signs were everywhere: 1) big company spin-off; 2) raised way too much money for a series A round; 3) reliance on that same big company as its main customer (and as an investor). N2N Commerce can now be found in the deadpool.
For those looking for an alternative multi-channel (open source) eCommerce platform – Magento is just getting started.
http://www.magentocommerce.com
-Roy
New year, new life? Time will tell… In the meantime, I invite you to read my latest post on my blog about a new definition of Web 2.0 and the proposal for an exciting Web 2.0 world-wide project: World 2.0. That article is in English language, even if the rest of blog is in Italian language.
I hate feeding trolls, but that looks pretty fun, Roy.
But there can be only one!
/sword
The CEO is a doodle. He ends up announcing in August 2007 about ramping up hiring and even goes to the extent of saying that by the end of 2008 there would be 200 employees. Now in January 2008 (which is just 4 months after that announcement) the company is going to shutdown. This man is one helluva CEO. Ramping CEO up for grabs….anyone???
quote: “In retrospect, the warning signs were everywhere”
So being a spin off of a big company and having the original company as an investor is a warning sign of failure? Plenty of companies follow this model successfully – if anything, having an initial customer and financial backing should be a positive and increase your chance of success.
From what is reported in the article, the real warning sign was that the company was not able (or chose not) to attract outside investment and that it was unable to sell its product to anyone else.
$30 Million to build an ecommerce system to sell underwear? What are these people on?
Something is funny when you need to spend millions on an e-commerce platform that could have been built for a fraction of the price.
Jon
That’s a tough break for the companies employees. They lose out from some poor managment decisions…
@Chrisw
crack(s) got to em…….in every way. A Digishop e commerce cart cost about $500 without all the fancie platform techiespeak. VS should try THAT.
Did the geeks get to grope any of the models first?…maybe…no…bummer
I have seen this before. It’s the new hunting ground of the Con Man. Raise a pile of money (As much as you can) for an idea. Start shoveling as much out the back door as you can (Into your own pocket and those of your friends) before you get found out…
And as a StartUp, just blame everyone else.
They everyone covers everyone else’s arse as they don’t want to be seen as opportunistic and incompetent. Ie the Accountant companies, Lawyers etc. They cannot be seen as making a mistake.
It’s the fresh new play field of the Con man. And you can never get caught. (As long as you don’t do anything stupid).
Turns my stomach. Seen it a few times.
But the really funny thing is they blame it all on the developers (who in this case could very well share some of the blame) and the executive buddies move on to some other screwup.
Develop what? N2N did not even have their own ecommerce platform! They were going to use Demandware http://www.n2nc...007_DW_PIE.html
Personally, I have no idea what this company was doing…?!? Can someone explain this to me – they got 30min for what? Ecom platform from demandwre, order management from Sterling (that’s another crazy idea…), this is a hodgepodge of different platforms…do what did the developers develop? Maybe they needed people to integrate this all together… ha ha ha, well these things don’t work together no wonder they spent 30mil. Now that’s funny!
I agree on all the three warning signs you mentioned …
I would just add that this is not the first time that a large non-Internet company believes that building a good Internet service is only a question of putting some millions on the table to hire developers and buy some hw/sw.
Also some media-companies failed in this (mainly european TV broadcasters)
I firmly believe companies should hold to their own core business … and in the Internet space there is no exeption to this rule!
Or was the warning sign that they were spending $30 MM to reinvent the wheel?
The happiest day in the life of (most) IT projects – whether bought or self-developed — is the day you start.
It’s all downhill from there. The only variable is how quickly the reality sets in and how different reality is from the initial proposal/demo.
How the multi-channel retailers will connect direct to customers? Will this model will incorporate with social media concept?
Folks are asking what the money was for and regarding the cash. There’s a big difference between operating an eCommerce platform that handles a few orders per hour at a mom-and-pop-shop website versus one that can handle over a million orders in a single day with no latency and five 9s availability (99.999%) at the peak of holiday season. Not to mention the level of manageability of such a system. We’re not talking about some platform that just dumps order records into a MySQL database.
This type of engagement requires significant pre-planning, careful development, significant stress-testing, and full compliance with the payment card industry (PCI). Training for the marketing and administration teams – which, at Victoria’s Secret are quite large, integration into Limited Brands’ signifiant customer marketing database, and full volumes of all levels of documentation are also required.
This is much more of an undertaking than just dropping osCommerce or similiar product onto a web server and creating a theme.
eCommerce systems at this scale are highly prized by their developers and clients. In most cases, the clients retain the distribution rights to the applications – they did, after all, foot the bill – and will not distribute these often-patented customizations (i.e. Amazon.com’s one-click check-out) and optimizations to other companies without price tags likely higher than scratch development.
n2n raised their $30MM series A not in 2006, but in feb 2007. flaming out and shutting down barely 10 months later in dec 2007 has to be some kind of record
bubble, bubble, toil and trouble
All this talk of con men and excess Series A rounds misses the mark.
n2N was forced closed according to a friend and not because they delivered a dud. The shut down actually had something to do with the turmoil that the limited is going through. She claims that after the limited sold off a few of the brands they were running to nowhere, then loosing the leadership of their visionary COO back in the summer, the mis-steps continued. The limited has had major problems with product distribution, their same-store sales are anemic and the stock is heading in the wrong direction, fast. Add on that they were always an administratively bloated company and you have a recipe for disaster.
My understanding is that this was actually a closed project between the limited and a Boston VC firm and that they were barred from taking on additional customers until after the Vicky’s project was over.
No matter what the case, it’s a shame that so many folks had to loose their jobs over the mis-steps of a corporate giant.
Any time an ambitious venture fails, it’s a sad day for our industry. It’s especially hard when they are neighbors – N2N is just down the street, and we know lots of people there – smart, talented hard-working folks with a great vision. We wish all of them the best if luck. The industry is very strong, great ecommerce growth over the holidays, lots of re-platforming going on and vendors doing very well. I’m sure the people who lost their jobs will have no problems finding their next gigs.
The real challenge was, as earlier poster Chris points out, this stuff is not easy. Victoria’s Secret is #16 on the IR500 list – comparable to our customers OfficeMax (#6) and BestBuy (#11), so we know something about what it takes to make this kind of site work. There are three major requirements in this class of deployment: handling the volume of visitors and transactions across literally hundreds of servers with fast response time, no downtime, no lost orders; integrations with rich interfaces, community applications and other front-end systems, as well as backend order management systems, financial systems, store systems, warehouse management systems, etc; and a flexible architecture and development framework that supports the making a Victoria’s Secret site unique from a BestBuy site or AT&T site. It takes many deployments, over many years of learning, sometimes the hard way, to end up with a platform that can meet these requirements for a wide range of customers.
With apologies to the candidates, this is one instance where experience is at least as important as the desire for change.
Cliff Conneighton
Senior Vice President
ATG
It’s really,really too bad that the little companies who did all the start up work for them, you know furnishings, paint, wallpaper, fixtures etc etc etc now get burned in a way that they really can’t use or possibly recover from in this economy.
Maybe Victorias Secret should have spent more time checking out their background before they jumped headlong into such a major change?
G
I never understood how n2N was going to pull this off. Top multichannel retailers are very demanding. They have to be to stay on top.
Console-based solutions like n2N put control of the site into the hands of business people. This is perfect for retailers who need features without IT. But these consoles run on shared instances; and they impose reasonable limitations that make top retailers uncomfortable.
I suspect n2N burned through much of the cash trying to build to VSD’s custom specs *and* also make customizations configurable for future clients — who will want it to function in a completely different way. It just doesn’t work for everyone.
Top retailers like VSD who need complete flexibility can’t avoid custom code. Custom code needs a dedicated environment where IT can write, run and maintain any piece of functionality on a dedicated instance.
not clear where n2n burned the cash. 70 employees to be sure, but essentially none in technology development, all of which was outsourced to other startups (incestuously, mostly to other portfolio companies of n2n’s sole VC investor, general catalyst)
there is something — many things — rotten in denmark. putrid, really, tons of people should be royally pissed: n2n’s managers and staff, general catalyst’s own investors, etc
Ruben ran Digitas Miami into the ground. Is it any wonder why this crashed-and-burned too? Good luck accounting for the 30mil
VP’s hanging out on message boards?
Don’t know about you but I am selling all my ATG asap.
I interviewed with them last year and didn’t bite – I commented to my wife “Great Tech – good buzz – but Company had only one customer (Limited Brands) which wasn’t doing well. Had $30 mill in financing less than 6 months ago and was already looking for more for version 2.0″
Their product was trying to be everything to everyone (bad sign), had burned through a lot of cash very quickly (really bad sign) and had ONE customer in the freaking Retail business (low margins).
Can’t believe they imploded so quickly though.