Is a $3 Billion Sale a Failure?

August 8, 2016, 2:07 PM UTC
Marc Lore is about to launch a new e-comerce dark horse 4 years after selling his successful e-commerce company Quidsi to
MONTCLAIR, NJ - APRIL 28: Marc Lore, CEO of new e-commerce site and his team smile at the photographer during the meeting in the conference room at headquarter on Apr. 28, 2015 in Montclair, NJ. Marc Lore, who was co-founder of successful e-commerce company Quidsi sold this company to rival company in 2011. He claims his new e-commerce site will have the lowest price and provide human connection to its customers and retailers by new business model. The new business model will make profits not from purchase transaction but from 50$ of annual membership fee like Costco. recently raised 140 million led by Bain Capital. (Photo by Shin Woong-jae/For the Washington Post)
Shin Woong-jae — The Washington Post/Getty Images

This morning’s big deal news is the official tie-up of Wal-Mart (WMT) and Buying Jet “accelerates our progress” toward giving customers what they want, according to Wal-Mart CEO Doug McMillon. Under this deal, “The seamless shopping experience we’re pursuing will happen quicker.”

The debate over whether the deal is a failure for founder Marc Lore rages on. Yes, we live in a world where selling your startup for $3 billion can be considered a failure.

The problem was Lore’s stated plan of taking on one of the Web’s handful of monopolies: Amazon (AMZN), which acquired his first company after a price war. It was a goal so wild and ambitious that not a single other entrepreneur would dare go after it. For all the press his bold plot garnered, whenever I spoke with Lore, he was matter-of-fact about his plans, genuinely surprised that anyone would find them audacious. He always knew he was going to need to raise billions of dollars to make this work. It was nearly impossible to get him to concede that the odds were completely against him. It’s also possible he knew that Wal-Mart, the enemy of his enemy, would likely be desperate.

In the press release, Jet touts a $1 billion “run rate” in gross merchandize value sales. Sure, it feels cheap to extrapolate revenue based on one strong month of sales, but $80 million in monthly sales after just a year in business is nothing to sneeze at (even if you were burning far more more money than that to achieve it). If Jet had waited much longer to sell — say, after another round of funding with a higher valuation — it may have been too expensive for Wal-Mart to justify the price to its shareholders.

For its part, Wal-Mart is doing the awkward tightrope walk of a company that just bought itself some innovation, but can’t insult past attempts at innovation in the process. McMillon called the deal “another jolt of entrepreneurial spirit being injected into Wal-Mart.” The careful use of the word “another” is code for “never own up to our shortcomings.”

One person that definitely sees this deal as a raging success is Eric Martin, the funeral industry worker from Central Pennsylvania who won himself 100,000 shares of Jet stock a year ago in an unusual sign-up promotion. If anyone knows the exact share price for this deal, I’d love to do the math on what this guy walked away with.

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