Fruugo Moves On - Merges With UK Based DTL
One of the most debated startups, and companies in Finland, Fruugo, has reached a significant milestone. It has purchased Directory Technologies Limited (DTL) with its own shares and will also issue longterm financing through a share issue to fuel further growth in its ambitious quest. The new company will continue to operate under the name Fruugo and will also be registered to Finland. I sat down with Juha Usva (Fruugo CEO), Risto Siilasmaa (largest shareholder in Fruugo) and Dominic Allonby (CEO of DTL) to talk about the deal.
Risto Siilasmaa gave me a brief mention of the developments in the recent months, leading up to the merger. He said that they did not agree on the deal over night as talks had been continuing on an on and off basis for a period of months with DTL about various issues, including the merger. In the recent weeks, mutual interests finally met over the issue and they decided to go ahead with the deal.
DTL has been a partner of Fruugo in the UK, and the talks naturally followed into areas of mutual interest until the issue of a possible merger was touched upon. Juha Usva, who's job Siilasmaa praised as "doing the best possible work required in the situations he faced with", will leave the new company. Dominic Allonby will take over the CEO role as of today.
DTL operates ShoppingBank, one of the largest multivendor online stores in the UK. In 2009, they shipped 9.9 million euros worth of goods and combined over the years, they have shipped goods to over 1.1 million addresses. DTL has some 800 vendors under their umbrella and make available a portfolio of million products. Fruugo's 100 vendors with about 100 000 products will now join this group. The new Fruugo, will continue to do business in its existing markets in the UK, Finland, Sweden and the Netherlands.
Siilasmaa did not disclose the price of the deal, nor did he say exactly the new ownership structure of the company - except that DTL will own a slightly larger share compared to others - somewhere north of 50%. My guess is that Siilasmaa will still be the largest shareholder of the original investors after the deal.
The new company will also have quite an interesting board of directors. It will consist of John Clare, former CEO of Dixon (among others such as Elgiganten, Pixmania, etc), Dominic Allonby, Risto Siilasmaa and Marko Parkkinen. Also involved with the company, continue to be Jorma Ollila from the original investors and as a new member, from DTL's side of business, Lord Saatchi (Saatchi and Saatchi fame). One cannot argue that future success is challenged by a badly manned Board of Directors - these people are one of the most connected in the world.
Dominic Allonby praised Fruugo's efforts and their platform for being something extra ordinary, something that no one else had built in Europe. He said that Fruugo will continue to have ambitious goals in the future.
Siilasmaa also discussed the original idea of Fruugo and why the started in such a manner. He mentioned that the original idea was to create something big out of Finland, something that the other countries already had, something in the scale of Skype. They were ambitious and so were their goals. According to Siilasmaa, the original idea was to raise 70 million euros of funding for the company but they ended up around 30 million euros. Needless to say, you can't pursue the same goals with less than half the money - albeit 30 million euros being a lot of money.
The scale of operations at Fruugo have been massive, to say the least, to the somewhat lean Finnish startup ecosystem. Many have questioned the efforts, but many support the causes also by noting that you need to spend big and think big to achieve big.
The story of Fruugo is far from fading out. Despite being one of the most largest startups finacially, it continues to move forward in its own style. It is now up to Dominic Allonby and his future team to pursue their ambitious goals.
Photo by Tero Heino
Sounds like Fruugo will begin competing with my little startup, Superbonus.
Superbonus.fi is a Finnish cashback / reward site with some 100 or so vendors under its umbrella.
I also checked out the value of the goods shipped and for all of my sites (not just this one as I like to run many sites at once) the grand total is over 2 million euros *, counting only this year.
Superbonus received some Tekes-funding last fall, but other than that, it has been pretty much bootstrapped by my own savings.
Just so that it happens, I have been thinking about putting my site up for sale. There is really nothing wrong with the site except for the fact that I have solved all of the problems and being the problem-solver that I am, I would like to move on to solving other problems. If you are a problem-solver, you know what I mean.
If you are interested in purchasing a fully-functional (ok, yes, there are some bugs in the code, but nothing a reasonably knowledgeable programmer could not fix in a couple of days) cashback site with a little bit of existing user-base and about a 100 or so vendors (the figure fluctuates), hit me with a message at markus.ossi@gmail.com
* yes, I know! crazy, right?
It's a shame that Usva is leaving - I've enjoyed reading his articles on the Fruugo blog. Still a strong team though...
I've always been a bit skeptical about Fruugo because of the big burn rate, but now having read Siilasmaa's plan to "create something big out of Finland" it kind of makes sense now. Building big things takes a lot of money and in their field, building big is the only option to survive.
"Dominic Allonby praised Fruugo's efforts and their platform for being something extra ordinary, something that no one else had built in Europe. He said that Fruugo will continue to have ambitious goals in the future."
I certainly hope so. They burned tens of millions of euros and Logica probably built it three times over.
It's great to have big ideas, but from the outside this seems just a big mess. The whole thing leaves me with unease and puzzled.
Ville, having seen Fruugo from the inside, I can only say there were a tremendeous amounts of conceptual, legal and technology issues to be solved - but the team eventually made it, and launched a fully functional multi-retailer, multi-currency, multi-language, multi-country shopping site. Easy? Hell, no. I've never seen it done before. The beauty of it--in my opinion--is the fact that Fruugo is able to hide most of the underlying complexity from both consumers and retailers.
Might seem like a mess when you're building the bike while you ride it, right? I don't know if it's just us Finns, but I feel people are way too eager to jump up and say "I told you so!" when the story is just beginning. A startup might take various forms along the way, or end up being something drastically different. Just look at Blyk for example.