E-commerce start-up Jet.com, the latest project of Marc Lore, who famously sold Diaper.com to Amazon for $545 million, has just announced it has raised another $140 million on top of the $80 million it already raised.
The Wall St. Journal reported that the investment, in the form of debt that is convertible into equity, is expected to value the company at nearly $600 million, according to people familiar with the matter.
That’s pretty impressive. But what is even more impressive is that Jet.com hasn’t even opened its doors to do business. The new site, which is due to start operating publicly in the next few weeks, has Amazon and Amazon’s e-commerce customers firmly in its sights.
Jet.com is an e-commerce marketplace that aims to match customers with local businesses and delivery services. In doing so, it claims it can undercut the prices of the same goods offered by other e-commerce vendors by around 5 percent.
The idea appears to have caught the attention of a number of heavy hitters. Led by Bain Capital Ventures, the new funding round brings together previous investors as well as new investors that include Google Ventures, General Catalyst Partners, Goldman Sachs Group and Silicon Valley Bank.
In a blog post about the funding, Lore said that the driver behind Jet.com is the idea that consumers using other e-commerce sites are not really receiving the price benefits of online shopping. "We believe that there is big opportunity to deliver meaningful value to mass consumers by optimizing the underlying economics of online shopping and unbundling the embedded retail costs that drive up price," Lore wrote.
And he’s not just talking high-end technology goods. He’s talking about all kinds of everyday household items like diapers and soap. Those are two things of which he should know since he made a clean half billion dollars by selling Quidsi, the parent company of Diapers.com, Soap.com and several other sites to Amazon.
Going on Experience
It's his success with Quidsi that has so many venture capital companies chomping at the bit to get some of the Jet.com action. It seems clear that any website that can save consumers a few bucks on the weekly shopping bill is going to be a success if it is managed properly.
And Lore says he has the technology to do just that. In an earlier post, he explained how Jet.com will work. Jet.com, he wrote, is a new take on the traditional shopping club and will be able to offer millions of products not just in bulk but also on single items.
When retailers sell goods on Jet, the site gets a small percentage of each sale depending on the type of good and the product category, much the same way Amazon, which charges fees of up to 15 percent.
For consumers, get bigger discounts when they buy in bulk. If you order two different items, Jet.com looks for an outlet that sells both items to reduce delivery charges and applies the savings from this to your overall bill. Lore explained:
Jet’s technology platform optimizes orders for efficiency and empowers merchants with smart tools that enable them to offer lower prices without impacting profitability…While our algorithms may be complex, shopping on Jet is simple. Jet does all the work behind the scenes, correcting pricing inefficiencies within e-commerce that have existed for years.
You see why investors are lining up. The potential is enormous. Think what happened when Alibaba paired businesses with consumers in China and the $21. 8 billion it finally generated through an initial public offering last year.
Jet.com is clearly a long way away from that, but in the e-commerce space still has a lot of growing to do. Someone like Lore could make a whole bunch of money for you — if you happen to have a few million dollars to throw in his direction.
Title image by Ewa Studio/Shutterstock.