Where Are VCs Clamoring to Invest?
There’s a new, red hot sector in internet investing, and the Silicon Valley venture capital firms are just flinging money in this direction even faster than Ben Bernake prints the stuff up at the Federal Reserve. Believe me- that’s fast.
Here’s a few eye opening facts:
- Amazon (NASDAQ: AMZN) bought a company in this sector for $110 million in 2010
- Nordstrom (NASDAQ: NOBE) bought one for $270 million in 2011
- American Express (NYSE: AXP) did a 50/50 joint venture valued at $3 billion in May of 2011
- $70 million just went to one competitor in the sector for under 10% of the company.
Have I got your attention? Here’s more…..
Flash Sales: The New Gold Rush of Silicon Valley
Flash sale sites are the new Gold Rush of Silicon Valley- a place that has seen more than its fair share of gold rushes over the years. Flash sale sites are borne out of the 2008 recession.
When the US was facing a complete financial collapse three years ago, manufacturers and retailers found themselves in the precarious position of having too much inventory laying stagnant in their warehouses and on their shelves.
Retailers can have special sales, but their brick and mortar customer bases are limited to the immediate area. Manufacturers can offer big discounts to retailers- but again- you are limited by the brick and mortar proximity.
eCommerce pioneers came up with the brilliant idea of a Flash Site, and here are the main components:
- Build a user of base of 1 million plus consumers who are highly motivated by deep discounts on merchandise.
- Negotiate a very deep discount “bulk” purchase from a manufacturer of some sort of excess inventory.
- Offer the product to your subscriber base by passing on these huge discounts for a limited time- while the supply of inventory lasts.
- Move mountains of merchandise in a limited time, thereby freeing up badly needed capital trapped in the manufacturer’s excess inventory.
Needless to say- you have to find products consumers want at a deep discount, and have the registered user base to move the merchandise.
As I stated above, the Silicon Valley VCs are just throwing money in the direction of these companies. Here’s more examples:
- Gilt Group was recently valued at $1 billion based on an investment made by Goldman Sachs, Pinnacle Ventures, Matrix Partners. Gilt is expected to do an IPO in late 2012.
- Zulily received $43 million in VC funding last August from Meritech Capital Partners
- iDeeli just raised $70 million from Kodiak Ventures, Constellation Ventures, and Starvest for just under 10% of the company.
- OneKingsLane was valued at $440 million in a recent investment by Kleiner Perkins.
- Fab.com received a capital injection of $40 million from AndresenHorowitz this past December. The financing valued this total start up at $200 million.
So, where is all this fantastic information leading? Glad you asked, because I happen to have the answer.
Believe it or not, there is only one public company in the Flash Sale business, and as compared to the money raised by the names you see listed above and the valuations, this stock is very undervalued.
I’m also personally an investor in this company. I own both free trading shares I’ve purchased, and restricted shares I’ve purchased when I helped finance this company’s growth.
In light of the explosion of interest in the sector, I’m very optimistic about the opportunity to notch some major profits in the near term.
I’ll be introducing the company to you on Thursday- remember- it’s the only Flash Sale Site public company you can participate in today.
Stand by for the 411…. I’ll have all the information, and then you can make your own informed decision.
Vringo (AMEX: VRNG) Trying For New Highs
In case you’re following huge OTC Journal win VRNG (introduced last year at $1.20- now $3.37- the stock has been trying for another new high the last couple of days on some very positive developments.
It’s traded over 1/2 million shares today, down from over 1 million shares yesterday.
The surge in the stock is being fueled by a research report out of Five Star Equities, citing the significant opportunities in the growth of the 4G LTE networks as being significant fuel for companies with services in the sector.
Five Star forecasts LTE Phone shipments will grow 10 fold in 2012, from 6.8 million units in 2011 to 67 million in 2012 globally.
Two companies mentioned in the report that should benefit greatly from the growth of 4G LTE networks and handsets are Zynga (NASDAQ: ZNGA), and Vringo (NYSE: VRNG).
If this company continues receiving this kind of positive press, breakouts to new highs are inevitable.
If the stock pulls back to the $3.15 level, that would be a good time to accumulate. If it softens more and holds $2.50, that would be a great time to pile in with a full position and a tight stop. I would not hesitate to suggest jumping into this one if and when it pulls back to that level.
This stock has gone from quiet and under followed to “In Play”. Several analysts and writers have picked up on the story, and I suspect there’s more to come.
Use a pullback to get positioned.
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From yesterday’s opening trade, to today’s high trade, there’s a 24% move. The only way to have captured that move would have been to trade into the stock right at yesterday’s open, then leave an open, good-till-cancelled limit order to sell 20% higher. You would have scalped a beautiful profit.