# Totsy (2009 – 2013)

- URL: https://girisimcikafasi.com/en/startup-graveyard/totsy/
- Sector: E-commerce
- Country: United States
- Total funding: $23.5 million
- Cause of closure: Ran out of cash

## What did it do?

Totsy was a members-only flash-sale site for mothers and families. It sold brands' products, from maternity goods and baby equipment to toys and clothing, at discounts of up to 90 per cent in campaigns lasting 72 hours.

## Why did it shut down?

Having closed an $18.5 million Series B in July 2012, the company invested in rapid growth while competing with Zulily, which had raised far more money, and aimed to turn a profit in 2013. That target was missed; according to an e-commerce expert at Forrester Research, the company probably spent more than it had and could not raise enough money to survive. Across the sector, too, as the economy recovered there was less surplus stock for brands to offload at deep discounts. In May 2013 Totsy went into liquidation and laid off all 83 of its employees for economic reasons. In July 2013 the company's assets were put up for sale.

## The story

Totsy was founded in New York in 2009 by Guillaume Gauthereau and Christophe Garnier. Gauthereau, a vet who had previously worked at Louis Vuitton and Lalique, wanted to adapt the private-sale model for mothers and families. The site worked like an invitation-only club: brands supplied products on consignment, and Totsy sold them at discounts of up to 90 per cent in campaigns lasting 72 hours.

The model quickly drew interest. In January 2012 the company had 115 employees and 2 million members; at one point monthly growth had reached 40 to 50 per cent. In July 2012 an $18.5 million Series B with DFJ Gotham and Rho Ventures took total investment to $23.5 million. By then membership had passed 3 million and revenue had risen 125 per cent on the previous year. The company worked with more than 4,000 brands and aimed to turn a profit in 2013.

But Totsy was competing in the same market as Zulily, which had raised $43 million and reached about 5 million users. The hoped-for profitability did not come. In May 2013 the company went into liquidation and laid off all 83 of its employees for economic reasons. According to an e-commerce expert at Forrester Research, Totsy had probably spent more than it had and failed to raise enough money to survive. By July 2013 the company's assets had been put up for sale.

Totsy's collapse coincided with a period when the flash-sale sector as a whole was struggling. As the economy recovered, there was less surplus stock that brands wanted to offload at deep discounts, which weakened the model's core promise. Growth accelerated by investors' money carried the company to its end within a year once profitability proved out of reach.

## Lessons

- Do not tie your profitability target to the next funding round; in low-margin models such as flash sales, calculate your cash runway on the worst-case scenario.
- In a business model built on surplus supply, allow for cheap stock drying up when the economy recovers, and develop alternative sources of supply.
- If the market leader has raised far more money than you, look for a defensible niche or a different value proposition rather than playing the same game on a smaller budget.

## Sources

- [Flash Deals Site Totsy Lands $18.5M To Take On Zulily In The Battle For Shopping Moms](https://techcrunch.com/2012/07/17/totsy-series-b/)
- [Flash-sale site Totsy is toppling](https://www.crainsnewyork.com/article/20130517/RETAIL_APPAREL/130519886/flash-sale-site-totsy-is-toppling)
- [Why the flash sale boom may be over and what's next](https://www.retaildive.com/news/why-the-flash-sale-boom-may-be-overand-whats-next/396546/)
- [Totsy.com: Three men and their baby](https://www.cbsnews.com/news/totsycom-three-men-and-their-baby/)