At the IPO, it was ‘Sofa' so good… but today, MADE.com is bust.
Fingers have been pointed at supply chain issues and the 6 long weeks it took to ship MADE's furniture. (This as 4 hour deliveries are becoming standard).
However, like most corporate failures, it seems that the company’s whole business model was just ‘Insufficiently Profitable’.
According to data from their 2021 Report and Accounts, an average MADE order looked like this:
- Sale Value £246
- Gross Profit £97
- Fulfilment £45
- Contribution £52
- Marketing £38
Meanwhile overheads were running at something like £40m.
MADE isn’t alone in being a heavily funded, unprofitable business.
For the last four decades of cheap money, unprofitable growth was considered fine. In fact it was the norm.
Age old accounting principles were squeezed out by optimistic forecasts. Institutional money’s greedy short-term thinking was fuelled more by crossed-fingers and hope than commercial logic. WeWork, Uber, Peloton - now Made.
How long will it be before institutional investors change tack or will we see a ‘Great Unravelling’ explode the glister of startup land for a generation?