Wednesday, November 5, 2008

FRUUGO Sucks - Already?

From TechCrunch

Is Stealth Startup Fruugo Stumbling Right Before Launch Day?
Rumor has it that Finnish social e-commerce startup Fruugo is burning through a heap of cash, both hiring and firing employees at a rapid pace and dealing with some disappointed potential customers. Caveat: the service hasn’t even been launched yet.

Actually, Fruugo seems to have delayed its launch date a number of times already, although at this point they’re likely going for a big push at the upcoming SIME conference, arguably Northern Europe’s largest web event. The company has been in stealth mode to date, and has been signing NDAs with just about anyone they come into contact with. Being secretive and claiming that they will ‘do for online shopping what Google has done for search’ has evidently made Fruugo the talk of the town in Finland’s entrepreneurial community, but it’s still unclear what they’re up to exactly. It’s definitely a serious venture: they’re assumed to be backed by tens of millions of euros, employ a workforce of around 150 people and its board of directors has been joined by people like Nokia’s former CEO (and current Chairman of Shell) Jorma Ollila, and F-Secure Founder/Chairman Risto Siilasmaa. The biggest investors are Washington DC based Queensway Developments and TEKES.
This is what the Fruugo website reveals about the service:

At Fruugo, we’d like to bring retailers and consumers throughout Europe together for a new kind of shopping experience, one where consumers find a better way to shop and retailers find better ways to grow their business. We want to make it easy for consumers to buy the stuff they want, in their own language and using the payment method they prefer – without the hassle of exchange rates, complex shipping costs, taxes, or staying up all night worrying “am I actually going to get my stuff?” We want to help with all that.

Now tech blog ArcticStartups is suggesting something is amiss at Fruugo HQ.

Local serial entrepreneur Taneli Tikka has been adding fuel to the rumors with a blog post last week saying Fruugo is apparently mass-firing up to 33% of their staff and burning around 1 million euros a month, while customers (merchants) are underwhelmed by what they’ve seen so far. That’s a lot of gossip for a startup that has yet to release a public beta of their product.

Here is his take;

In any case it sounds like a really serious venture: to burn up multiple millions and hire up to 150 people before the product even hits the market. Ambitious, certainly. Risky, for sure.

The 33% people laid off sounds very serious for a couple of reasons; the first one on the list being how poor management competence it demonstrates (if it is true at all?). First hiring people rapidly and then firing lots of them a month later doesn't really showcase competent management. The current economic crisis is not and could not have been a surprise to anyone in the industry. Most people have been waiting since about 2005 for things to crash "any minute now". I personally remember being in Thailand in August of 2007 on a scuba diving course (PADI; Nitrox Diver), and discussing this economic stuff with other entrepreneurs vacationing there. Some memorable lines from the conversations were that "people don't realize how serious this is, our firm has been preparing for the crash for about 1,5 years now, and we except the economy to hit the wall within a year". Didn't happen quite that fast, but almost. Not a surprise for anyone; and it should not be for Fruugo either. Managers cannot see the future, but when they have to lay off people they ARE the ones ultimately responsible.

So what's up with that? All I have is the usual gossip and rumor mill, no really concrete stuff here. Does anybody know better?

PG told you so

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