Six months ago, people scoffed when 28-year-old Andrew Busey said he want=
ed
to sell furniture over the Internet. Not anymore. Mr. Busey has sold an 1=
1%
stake in his company, Living.com Inc., for $35 million, giving the closel=
y
held enterprise a valuation of more than $300 million. That is a huge lea=
p
from the approximately $10 million valuation that Mr. Busey's business
fetched just four months ago, when he got his first round of venture fund=
ing
from investors led by Benchmark Capital, Menlo Park, Calif.
Living.com's biggest new investor is Starbucks Corp., the Seattle coffee
merchant, which is putting up $20 million for debt convertible into about=
a
6% stake. Lately, analysts have questioned whether Starbucks ought to be
trying to make a splash in cyberspace. But Mr. Busey says the two busines=
ses
have synergies that the public might not appreciate yet. He added that
Starbucks' chairman, Howard Schultz, "really understands branding and the
consumer perspective." Mr. Busey's sudden windfall reflects persistence,
bravado and the good fortune to be hawking an Internet idea that doesn't
seem so flaky anymore. For much of the past winter, Mr. Busey knocked on
doors in Silicon Valley, trying to persuade venture capitalists to bankro=
ll
his idea. His travails were the subject of a Page One article in The Wall
Street Journal.
Traditionalists saw plenty of reasons why furniture shouldn't be sold on =
the
Internet. Shoppers couldn't squeeze sofa cushions in cyberspace. Delivery
would be a giant headache for everyone. And some manufacturers would be
loath to supply online merchants for fear that traditional stores would g=
row
angry at this competition and stop stocking their wares. But Mr. Busey ke=
pt
insisting that shoppers would like the convenience of the Internet and th=
at
all the rest of the problems could be overcome. After getting about $5
million from Benchmark in March, he set up headquarters in Austin, Texas,
and hired Scient Corp., a Web-site design specialist, to build Living.com=
's
Internet store. He also acquired a small North Carolina seller of furnitu=
re
via catalog, gaining access to many manufacturers' product lines. Living.=
com
planned to open its online store July 1, but it wasn't quite ready. It no=
w
says it will start taking customer orders on Monday.
Delay Helps
In the sometimes topsy-turvy world of Internet commerce, the delay may ha=
ve
been a boon. That's because a competitor, Furniture.com Inc. of Framingha=
m,
Mass., began reporting data from its year-old online furniture store. As =
it
posted rapid growth -- albeit from a tiny base -- analysts and investors
reshaped their forecasts and began entertaining the view that online
furniture sales might take off after all.
"We had $900,000 in orders in the fourth quarter of 1998 and nearly $1
million in May this year alone," says Andrew Brooks, chief executive offi=
cer
of Furniture.com. "We had 642,000 unique visitors to our Web site in June=
,
nearly triple the amount in May." Mr. Brooks calls his company "the clear
category leader," but says the arrival of Living.com "helps validate the
category." It's unusual for an Internet start-up to seek two rounds of
funding before its Web site even opens for business. But Benchmark ventur=
e
capitalists advising Mr. Busey encouraged him to raise money early and
aggressively. They invited General Electric Co.'s venture arm to invest $=
5
million as part of a broader strategy that may involve offering GE financ=
ing
of furniture purchases.
Benchmark officials also arranged a meeting with Starbucks' Mr. Schultz,
drawing on previous dealings together. Mr. Schultz is a director of eBay
Inc., a thriving online auction company that Benchmark helped bankroll in
1997. In a statement Thursday, Mr. Schultz praised Living.com as "one mor=
e
strong partner to our portfolio." He also said the investment will
"strengthen our relationship with Benchmark." Mr. Busey has said for mont=
hs
that he wants to strengthen Living.com's management team. The company is
expected to announce Friday that it has recruited 41-year-old Shawn
Holliday, managing director of Diageo PLC's Guinness Ireland unit, to bec=
ome
chief executive officer of Living.com. Mr. Busey, who together with his
father owns about 30% of the company, will remain chairman and chief Web
officer.
Mr. Holliday says he wants to help Living.com broaden its offerings beyon=
d
furniture to include kitchen supplies, linens and almost anything else fo=
r
the home. "My aspiration is to build this into a company with several
thousand people and multibillion-dollar annual revenue within five years,=
"
he says. Mr. Holliday didn't disclose how much stock he's getting in
Living.com, but people familiar with the company say his total stock and
options package could amount to 10% of the enterprise. That's a very loft=
y
amount by traditional standards. But as fast-growing Internet companies
scramble for talent, traditional recruiting norms are starting to break
down.
Tushar J. Mehta
email: [email protected]
voicemail: (206) 405-2335