Are acquisitions of failed startups in venture capital nefarious? In 2014/15, Roominate, a building toy company raises $3 million in Silicon Valley. They appear on Shark Tank and get a $500k investment from Greiner and Cuban at a $10 MM valuation.
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Kevin O'Leary, a fellow "shark" on the tank (who knows toys) said "say a prayer for that money, because it just died." Roominate, at the time of the show had locked up major distribution across the country, but had not been through a single seasonal sales cycle.
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In other words, they had gotten the product on the shelves (somehow), but there was not yet any evidence that it would sell, when on those shelves. I don't have the data, but based on the number of reviews it acquired over the past 5 years on Amazon, it didn't sell well at all.pic.twitter.com/VV09BZdw5L
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In early 2016, Roominate gets acquired by a company called PlayMonster, which as far as I can tell, is one of those retarded walking dead PE backed roll-ups that has little logic but a fat stockpile of cash. Playmonster either knew that the sales from Christmas sucked or were sopic.twitter.com/qRuJcSxKfe
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stupid, that they decided to buy the company without having seen the sales from Xmas 2015. Was this was a backdoor deal, done between the original VCs and the PE people to keep the failure of the company quiet and to avoid marking the investment to market?
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Replying to @cowboyInNY
I am increasingly getting the impression that this economic crisis is going to unravel a lot of walking dead PE and VC companies.
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Replying to @Molson_Hart
Ponzi schemes and alike usually are exposed during recessions.
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Right, but you can't quite call this a ponzi. PE and VC have been in this weird bubble-type situation for over a decade now. Ponzi-esque, but this is something different.
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