Fondue’s Melting Point
Welcome to Wednesday, futurists.
Earlier this week, cashback app Fondue announced an exit to SMS app Postscript.
The app, co-founded by former venture investor Oren Charnoff, touted “millions in revenue” in its announcement post. The revenue — presumably GMV observed by the app on behalf of customers — wasn’t enough to keep the app afloat on its own terms beyond its first year in business.
While the acquisition amount is undisclosed, it comes a few weeks shy of 10 months post-seed-round raise of $10.5 million dollars. The goal of Fondue was novel — to “help brands quit their addiction to discounts” — and the timing of their exit is novel, as well.
$10M Seed rounds in Shopify consumer eCom tech were few and far between when Fondue closed their round last September. When we had co-founder Oren Charnoff on the podcast, he said as much:
“I think the overall key metric if you intend to exit a company, will be you have to explicitly address profitability and not just a path towards it, but people want it all. People don't want trade-offs.”
The episode was aptly titled “The Shift from Growth to Profitability” — and profitability is hard to come by these days in the B2B SaaS space. Even harder in eCom; especially when you’re retraining an industry — and the consumer — how to merchandise and promote.
While the app’s founders and investors are positioning the sale as a win, we all know that this is not how the world of angel and venture investing works; and makes for all the more cautionary of a tale when a cofounder is a former venture investor.
Postscript, fresh off their own $65M Series C, will have to learn how to acquire and integrate for the first time, as Fondue is their first foray into M&A. It also hints at yet another superapp suite emerging in growth-stage eCom SaaS that will need to compete for thinner margins, and higher operator expectations in a time where retail growth is slowing.
The real zinger? Postscript announced that anyone signing up for Fondue post-acquisition would receive 10% off SMS.
So much for quitting the “addiction to discounts.”
— Phillip
P.S. You wanna know how to screw up an acquisition? We’ve documented the four ways that M&A goes awry. Check it out here in the Insiders column or longform with Ingrid & Orchid on the Infinite Shelf podcast.
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