Discount e-commerce startup Clearance.co has gone public through a reverse merger with a Miami shell company. As a result of the transaction, in which Development Capital Group Inc. swapped more than 77 million newly issued shares and $150,000 in cash for the Pacific Palisades company, Clearance.co’s shareholders now hold a controlling interest in Development Capital.
Clearance.co, founded last April, sells bedding, electronics, jewelry, apparel and sporting goods. It works directly with manufacturers and distributors to get discounted prices. The nine-employee business had revenue of $2.1 million last year, all generated through a 30 percent mark-up it takes on each transaction. It does not charge membership or shipping fees to its 560,000 registered users.
After the deal closed March 31, Clearance.co founder and Chief Executive Shahbod Rastegar became Development Capital’s chairman and chief executive.
Rastegar said the merger will help Clearance.co scale up aggressively; he expects this year’s revenue to exceed $10 million.
“The plan for Development Capital is to source and bring on other technology companies that complement our portfolio as a whole,” he said, “We will incubate these companies and bring on new tech properties.”
Development Capital, incorporated in 2010, originally provided transportation and logistics services for manufacturers, and industrial and retail customers, but soon began to look for other opportunities and became increasingly focused on technologies. Its primary asset at the time of the merger was RealtyValuator, an application analyzing foreclosure auctions.
Johnathan Lindsay, who had been Development Capital’s chief executive, resigned his operational role and will retain a seat on the board. Its president, Joseph Richard, will retain that position under the new structure.
“Something that Joseph knows really well is data,” said Rastegar, “which can also be a complementary component to what we do.”
Rastegar was a co-founder of TrafficMarketPlace, an online distribution network that was sold to French media and telecommunication giant Vivendi Universal in 2001.
He and Richard met a couple of years ago and found they share the same vision about data and e-commerce platforms. The two thought they could bring their companies together and make a stronger technology company.
“The real secret to this type of company is understanding the matrix behind it,” Rastegar said. “If you can place a dollar symbol on the lifetime user value of each one of your members, then you can go out and acquire users at that amount all day long at a scale very efficiently.”
Shares of Development Capital were valued at about 50 cents last week trading over the counter.
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