Analysis: Venture capital funding doubles for online retail

Fri Dec 9, 2011 2:14pm EST
 
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By Sarah McBride

SAN FRANCISCO (Reuters) - Consumers spent a record $1.25 billion on Cyber Monday, according to comScore, highlighting how much people love shopping online.

But another group is in just as much of a frenzy over online retail: venture capitalists, who invested a record $2.39 billion in online shopping this year, according to Thomson Reuters data. That's more than double last year's $1.06 billion, which in turn was almost double the prior year's investments in the sector.

For a graphic on venture capital investments in online retail, click on link.reuters.com/bec55s

"We think that online commerce -- traditional goods, soft goods, social commerce, flash sales -- that whole category is going through a tremendous amount of innovation," Tony Florence, a venture capitalist at New Enterprise Associates, told Reuters.

"You've got this confluence of technologies and business models that for consumers is creating a unique value proposition." NEA has backed online retailers ranging from high-end flash-sales site Gilt Groupe to diapers retailer Quidsi, which was bought in 2010 by Amazon.com (AMZN.O: Quote) for $500 million.

The excitement has led to a surge of investment in the sector. Shoedazzle, a subscription site, secured $40 million from investors like Andreessen Horowitz and Lightspeed Venture Partners in May, and Gilt Groupe landed $138 million in May from backers including Goldman Sachs (GS.N: Quote) and NEA.

Earlier this week, flash-sales site Fab.com raised $40 million in a round led by Andreessen, just months after transforming itself from a network for gay men.

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