Struggling online retailer buy.com Inc. may need all the help it can get, but a recently departed director calls his move a natural one and not a rush for the exit.
“Naturally, we are flattered that people think so highly of us,” said Scott Russell, a general partner at Softbank Venture Capital in Mountain View, the largest institutional investor in Aliso Viejo-based buy.com. “A venture capitalists’ strength is in the earliest stages of a company’s development, and buy.com is clearly past that.”
Russell and Bill Burnham, who had been on buy.com’s board since 1998 and 1999, respectively, are the latest directors to vacate their spots. The move raises question about Softbank’s future support of the dot-com, which is driving hard to generate cash by year’s end.
As of Dec. 31, the company reported $56.6 million in cash and equivalents, plus another $11 million in marketable securities. That’s down from $109 million in cash and securities as of Sept. 30.
Anthony Gikas, an analyst at U.S. Bancorp Piper Jaffray, said he anticipates buy.com will need more financing to survive. With little hope of turning to Wall Street, Softbank is a potential source of funding for buy.com.
Buy.com’s troubles go beyond the board room, according to at least one industry observer. Tony Cherbak, a retail analyst in the consumer products group at Deloitte & Touche LLP’ s Costa Mesa office, says buy.com’s fate hinges on its now-questionable business model.
“When things are really hot, everybody wants to be involved,” he said. “And when things don’t go so well you have the opposite impact. To survive in this economic environment you’ve got to have a viable business model and many of these e-tailers have not had viable business models,” he said. n
