Startups Adjust to Web’s Down Cycle

Originally published December 24, 2012

By Pui-Wing Tam, Greg Bensinger and Ian Sherr

Some companies that were preparing for a public offering after Facebook’s May IPO have shelved those plans. Others are distancing their businesses from those of Zynga and Groupon, amid concerns their companies will be tarred by the same brush. And some have watched their user growth trail off and are working to recapture the viral magic they once experienced.

Several Web startups have closed shop entirely. Color Labs Inc. raised $41 million in venture capital last year before even launching its social photo app for mobile devices, but it has since imploded and the app won’t be available after Dec. 31.

“There’s less heat in and around the SoLoMo market,” said Brian O’Malley, a venture capitalist at Battery Ventures in Menlo Park, Calif. “For a while, there was a suspended disbelief about how hard it is to build a company. Now that’s coming back to bite people.”

Here is how three closely held SoLoMo sector startups all raised hefty financing at sizable valuations during the froth and how they are dealing now with the other side of the hype cycle.


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(Published December 24, 2012, in The Wall Street Journal.)