This is probably on par with the sums that local VCs have invested during the whole year.

To put things in perspective, with that money, you could fund:
+ Floobs
+ Zipipop
+ Wreck A Movie
+ Scred
+ Gemilo
+ MySites 2nd round

I have to say this is rather disappointing.

*have invested -in Internet-

I like big visions and I was relieved to hear a web startup got €40m in Finland. That's an amount usually reserved for solar companies in the US. The idea is great but I can't fathom where all that money is going. It's surely not the technology because that's not rocket science. I assume they have a massive sales force running around Europe signing up vendors and then integrating them into the system. Judging by the current selection on the site they're not doing that well.

And someone needs to tell the vendors that when people shop online they expect a discount. I've yet to see anything sold on Fruugo that I can't find cheaper in Helsinki.

The service that they have out right now does not by any means require 14,5 million euros. That's just silly money. We built Stardoll and Kuvake with literally 0 euros. No offices, no salaries.

I was just reading Steven Blank's The Four Steps to Epiphany, and the story about Webvan reminded me about Fruugo a bit. Even they're a bit different, they still share the same "get big fast" problem.

They round up people from large corporations with their corporation product and business development skills they go around and say "This is how its done". Soon headcount is larger than their first year's customer base. Well of course you need a support team, marketing people, sales team, assistants and managers in addition to bunch of developers and ui artists. Of course you need all the infrastructure to deal with millions of customers, support every language and currency in the planet from day one. How else could you do it?

It would work if you have customers, but since you're a startup and entering new markets - you don't have the luxury.

Another reason why it is like that is since there famous people involved. It's the same why large companies and brands don't launch products with small ventures. First it's not financially wise and second, it's feels degrading(or inflates the brand) to do something small.

I still hope that they can make it work, but high burn rate is usually the worst thing to a startup. Longer you can avoid dying, the longer you have to make it work.

I guess when you say "nothing but easy" you mean "anything but easy"...?

That's just ridiculous. There's successful companies out there which were, as Lasse said, built with 0€. And burning 1,21m€ a month, well, would be interesting to know what they use it for. So it just looks like a lot of hype without much of an foundation, which I dare say will not lead to success. And the product itself still isn't something I see myself using.

That's just plain wrong.
Give that €1M each month to a new startup and your chances of a great exit increase dramatically.

That's not a good example for European startups, we finally get to fund a lot of money into one company and these are the results?

I really do hope they have some secret stuff going on to justify that rate of cash-burning and make them profitable pretty soon.

Well, it's not wrong or unfair. It's not like they used tax payers money (except for that Tekes portion) or otherwise hurt anyone else. It's great that someone in Finland is able to come up with that kind of money for a startup. Money doesn't easily translate into success, unfortunately.

Everyone should now hope and pray that Fruugo ends up being a major success, as then investors around the world (and in Finland) would want to repeat the trick and invest money to Finnish startup companies.

I guess thats one way to try set your valuation for the next round.

I guess with a decent exit in mind, sums like that could be justified. Although I have to agree that looking at the product.. it's quite difficult to spot where the money has gone.

The comparison with WebVan is quite accurate, although I don't think they are investing in their infrastructure so when the sales pick up, distribution could support growth. But then again Webvan burned up a lot more than 18 MEUR, so in that sense, the comparison could be made.

Jani is precisely right there: nothing would be better than Fruugo becoming a huge whopping success. In a way there's a lot more riding on Fruugo than just the success of one startup. It's being watched and noticed, and may make the case for "can anybody get it going from Finland?".. while that's quite unfair: there have been plenty of other great stratups, like Lasse's StarDoll there, that have made it big without 14.5M eur.

..still Fruugo better succeed..

Taneli and Jani: I agree it'd be great if they could be successful. It'd garner more interest in Internet ventures here from investors and press.

However, I have to say it's rather surprising that they got so much funding, when this money could be used for other startups that are most likely equally risky.

Rule #1 of investments, you don't put all your eggs in the same basket.

I find it funny, that I read these two blog posts after each others (and they are posted at the same day):

This on here about Fruugo and right after that Signal vs. Noise talking about "Strangers at the coctail party"... I think you guys should read it, it is probably one of the reasons that Fruugo isn't flying as high that we all hope.

http://www.37signals.com/svn/posts/1808-strangers-at-a-cocktail-party

Good find. I also read it before but didn't make the connection. It might be one reason.

Lack of experience of eCommerce in general might be another.

Trying too much to develop an image and culture of the startup rather than the substance.

Anyone who has worked in eCommerce for more than a few years across Europe would say the concept is an obvious one. The only way in which it was going to be cracked in my mind is creating a franchised approach in each country across the continent where local knowledge and expertise mattered. Trying to rollout a monolithic and unfederated system across the social and economic divides of Europe with barely no local domain expertise is crazy.

@Ramine, Adam: As far as I've seen, the more experienced celebrities you can gather in the Board and Management Team, the more people can believe in your craziness.

And it's not fair to say the money put into Fruugo should have gone to other startups. They've earned it fair-n-square with their negotiation skillz.

Even if Fruugo failed, there will be other options for Finnish startups and businesses. Outsourcing, both on-shoring and off-shoring, is one of the unavoidable imho.

Odin: Every company that gets funding "earns" the money that they got if you want to think it like that, ie. they are entitled to it.

However, negotiating skills shouldn't be the main reason to invest in a company. The foremost reason always should be a great product and a brilliant team.

This is something that has always plagued the finnish internet business scene. Lots of fevered egos running amok and "negotiating" cash for non-products.

Not that I'm accusing Fruugo of such thing.

I am all for Finland getting a mega startup into it's business culture, but it should be mega for the right reasons. Not because someone knows how to talk the talk.

Odin & Co.,

Fruugo hasn't failed. It has just burned through a big pile of cash.

Ironically cutting down their burnrate, as they now claim to have done, may actually make the company more productive. I've long been a staunch believer in keeping teams small, nimble and believers in themselves and their ability to execute.

There's a lot of tension here from fellow startups who are obviously, and probably rightfully envious of the investment fruugo has received (which obviously they/we have not). Fruugo now needs to think hard about their priorities. What are the motivations for people to shop online? Often that is for items which are difficult to find at your local supermarket — something that has worked well for Amazon and the like. How do you manage pricing to be competitive? What will drive people to the site and gather trust from consumers who are always watching their pennies, especially now?

Naturally this is a story we'll be following closely, as Scred and Fruugo in some ways stand at opposite ends of a long pipe. For what it's worth, I do think it's an awful lot of money and my feeling, as a total outsider, is that some of it is bound to have been wasted. The key to fruugo is what they do next, as there's all the possibility to become a big success story. The important is to keep things simple and focused; and yes, not to be wasteful.

[...] kuvattu ennen kuin Fruugon luvut putkahtivat julkisuuteen. Mielipiteet pysyneet silti [...]

Thanks Antti for the Strangers at a cocktail party- link, it hit the sweet spot directly in this discussion!

Let's all hope Fruugo makes it, as the stakes are high.

Amazingly narrow-sighted and envious comments. Fruugo has not failed, yet.

Critical masses and those seller deals don't come for free and I guess that these succesful startups (Stardoll, Sulake etc) didn't just fall from the skies. There's a lot of man-hours and endless nights behind them, so try to estimate price for those -- and you're still pretty far from 14.5m€. Still, saying 0€ is childishly provocative.

Apparently their seller count is rising steadily, but it doesn't automatically bring in the customers. In order to claim their place as a starting point of all online shopping -- doing what Google did -- they should double that monthly burn rate and focus it for marketing.

Mika: Yes there were many man hours and endless nights behind Stardoll, and it was done with no pay and no offices. You could estimate a price for that work, but that is besides the point. We put the price tag 0€ on it.

The only thing that cost us money was hosting fees, and it was always covered by ad revenue. But that is still quite far from even 1m€.

Btw, the further you can manage to go without getting venture capital, the better valuation you can get from the investors. People tend to forget that for every single euro they are getting from investors, they are losing pieces of their company. It's always a trade.

A cool ass espresso machine in the office now can cost you a Porsche later :)

[...] Monday Fruugo, a Finnish startup that in 2008 burned through € 14.5 million, laid off roughly 20 of their 50 employees, which equals to 40% of their whole work force. Fruugo [...]

[...] Chairman of Shell Jorma Ollila as well as F-Secure Founder/Chairman Risto Siilasmaa. In 2008, they burned through about 14.5 million euros before they even put the closed beta product live and were ultimately forced to lay off almost half [...]

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[...] Chairman of Shell Jorma Ollila as well as F-Secure Founder/Chairman Risto Siilasmaa. In 2008, they burned through about 14.5 million euros before they even put the closed beta product live and were ultimately forced to lay off almost half [...]