Analysts are questioning the wisdom of the US venture capital industry after Ashford.com, an online retailer of up market watches won $30 million in its second round of funding.
Observers believe the venture capitalists are awash with cash and are scrabbling to hook the next Yahoo.
Ken Cassar, an analyst with Jupiter Communications, said Ashford's ability to raise a total of $34 million, "makes you wonder about the wisdom of the market. That's because consumers don't purchase watches as frequently as they buy items like books and pharmaceuticals. [Ashford.com ] will have to acquire every purchase they get," Cassar said. "They'll never get over the customer acquisition hump."
Benchmark Capital and Sequoia Capital, the venture capital firms behind eBay and Yahoo respectively, joined Bowman Capital Management in the $30 million funding for Ashford.com, which recently changed its name from Newwatch.com. This follows an initial round of financing worth $4 million from Benchmark in December.
The Texas based company sells more than 6,000 different watches from 60 up market manufacturers, including Omega, Seiko, Breitling and Rolex.
Chief executive and cofounder James Whitcomb, said the new name implies qualities such as trust, stability, comfort and an "old British feel". The .com combines that stature with the cutting edge and convenience of the Internet. "It's hard to be Newwatch Company when you're selling old watches," he said.
The company said it will spend its financing on an extensive and expensive marketing campaign and has recently recruited Bill Stewart, formerly strategic innovations director for Coca-Cola, as Ashford's vice president of marketing.
David Gow, former director of strategic planning for Compaq also joined as chief financial officer and vice president of business development.
Watches are both easy to sell and easy to deliver, said Gow. "There aren't a whole lot of colours associated with a watch. It's easy to look at on a website and discern if you'd be comfortable with it," he said. Gow added that the company will use the funding to branch out into other product lines.
Ashford was founded as Newwatch in March 1998 and the website was launched the following month. On the first day, the site attracted 10,000 hits.
Whitcomb said: "It is not that we're the first and we're certainly not the last. Our advantage is we're focused."
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