Luxeyard Inc. was ready to ride the wave of flash-sale websites and become one of the stars of the L.A. tech scene when it launched a year ago. It raised capital, made an acquisition and expanded its user base. It even went public. Then everything evaporated.
The Culver City company, which offers limited-time discounts on high-end furniture online, watched its stock tank as it quickly burned through almost all the money it raised through private investors and the public markets. Its stock is now trading at about two cents a share, down 99 percent from its high in May. It fired its chief executive in October. In November, it reported a third quarter operating loss of more than $3.6 million on $574,381 in revenue.
The quarterly report included a statement that the company might not be able to continue. To top it off, several creditors recently hit the company with an involuntary Chapter 7 bankruptcy petition. The company said the petition has no merit.
“There was a time where we felt like we had found the Holy Grail,” said Amir Mireskandari, chairman and acting chief executive at Luxeyard. “Now we have to come in under extreme duress and (we have) very little cash left. The only things we have are the technology, our user base and a team of fighters.”
Mireskandari founded Luxeyard in April 2011 in Houston with the hopes of riding the trend of daily deals and flash-sale websites that were attracting interest and lots of money from the venture capital community. Flash-sale sites offer limited-time discounts on merchandise; they’re similar to daily deal sites such as Groupon in that they email members about specials.
Mireskandari hoped he was kicking off the next generation of flash-sale sites by making the customer experience more interactive. For example, customers could post requests on the site for the styles of chairs or couches they wanted to see for sale. Manufacturers delivered the merchandise, such as designer coffee tables and rugs, so Luxeyard didn’t have to deal with warehousing or shipping. Luxeyard takes a percentage of each sale.
Mireskandari hired Braden Richter, who had run furniture businesses before, as chief executive and the company moved to Los Angeles.
They raised $3.5 million in funding before going public through a reverse merger into a shell company. In total, Luxeyard raised about $8.5 million from private and public investors.
But Luxeyard hemorrhaged cash. It spent between $700,000 and $1 million every month as it bought other companies, tried to reach more customers and built its site.