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Comment by crispyambulance | Hacker News Reader

Seems like a lot of drama for 4-year old luggage company that has a couple dozen products, some accessories and a podcast. Yet they got 100 million in their last round of funding and have a "valuation" of 1.4 billion according to wikipedia.

What's wrong with just building a business that makes stuff, selling and marketing it, hiring people as needed, making a decent profit, and per-chance innovating? But giant globs of venture capital money for luggage, LUGGAGE?

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It's for this reason I bookmark the 37signals blog section "Bootstrapped, Profitable and Proud" [0], which is a set of posts about small companies who are just out there selling stuff. No VCs, no term sheets. Just small business, like the ones we're told America is built on.

It honestly gets tiring reading about the latest "unicorn" company that's valued at a billion plus despite grossing nowhere near that and never making a profit.

[0]: https://basecamp.com/bootstrapped

But not every company can easily bootstrap. And of those that can, much of the time it's a lot faster if you take some money upfront.

Nothing wrong with either approach imo, but the ridiculous valuations are a separate and, yes, exhausting problem. I'm not sure why people even seek insane valuations - maybe VC push them into it or something? I don't know.

I'm not sure why people even seek insane valuations - maybe VC push them into it or something? I don't know.

Because the founders get to keep more ownership of their company. If I take an investment of $100 million at a $1 billion valuation I own 90%. If the valuation is only $500 million I only own 80%. Why the company needs such a huge investment is a fair question but the insane valuation makes sense.

> Because the founders get to keep more ownership of their company.

At first that would be the case, but as the valuation drops (and becomes more realistic) wouldn't the founder lose shares, and the VC would gain more control due to non diluting shares?

No. but the investors would remove the founder.

Hmm, the list is a little strange, as it includes a few entrants that are shadows of their former selves. I can speak to one that I'm personally familiar with: A Small Orange is a hosting company that sold to a conglomerate and the entire staff was cycled out after the sale. Now it's merely a shell corporation with a website with some branding, the same as every other Endurance International Group brand. The infrastructure and whatnot is all EIG, and the staff is intermingled with the staff from dozens of other small-name web hosts, and not to mention that that whole industry has been bleeding money since the advent of AWS. I guess it was started as a small business, but it's not one that prevailed. The owner made some money when he sold it -- in 2010 or 2011. Now? It's barely a company at all.

Thank you for this. I was just about to recommend A Small Orange to a friend out of years of habit... but now I'll rethink this.

Business is fluid, so I imagine some of those posts are going to be out of date. I'm reading them more to learn about how they started and what their basic business model was at the time of writing. Like I said, it's a respite from the breathless coverage of the latest food delivery app that raised a billion in their last round.

37signals is a broken clock that is right twice a day. It's blog is very effective content marketing for it's SMB basecamp product.

One of my favorite examples: https://signalvnoise.com/posts/2585-facebook-is-not-worth-33...

I think the real answer is the VC model works well for some cases, and bootstrapping is OK too! Both have their downside! Many VCs will tell you this directly. No need to get religious about it.

In 2010 this was a reasonable position. Predicting the current absurdity that is Facebook data collection and sales would have been quite the hot take in 2010.

I would just like to point out that Sikorsky, the company that makes the damn Black Hawk helicopter, was sold for $9 billion. These valuations are not rooted in reality.

I do agree that valuations are inflated.

Also, I think that the total addressable market for luggage vs. a Black Hawk are very different.

You're right, and the market for the Black Hawk is better.

Totally right. Especially when one of your clients (US military) has a $693,058,000,000 budget.

I guarantee Away used some ridiculous number to cite their audience. Something like "The 500 TRILLION dollar GLOBAL travel market."

“Rotary and Mission Systems, which makes Sikorsky helicopters and ships, ended the year strong with quarterly net sales up 14 percent to $4.35 billion from $3.81 billion.“

Quarterly. That’s a lot of luggage. Also you can’t easily replicate a Blackhawk from the same factory and slap a badge on it.

Unsure of the margins, but there seems to be plenty of wiggle room, and contracts run into the 10s of billions for major buyers like Saudi Arabia.

https://www.reuters.com/article/us-lockheed-results/lockheed...

Why Sikorsky is not worth a lot of money money Sales were up 14% year of year... which is meh compared to tech companies. In 2015 they made $51 Million for the entire year. so their margins are tiny. crappy business to be in - but consistent.

https://www.bizjournals.com/washington/blog/fedbiz_daily/201...

Sure, but a lot of these companies are not even profitable. The HOPE of massive profits seems to be worth more than the proof that a business can be in the black. And Sikorsky, honestly, could probably have higher margins, but they are in the business where billions disappear on boondoggles.

Not sure how the valuation of a company that makes helicopters and sells them to governments is related to a company that makes luggage?

Apparently if you build a low-tech commodity product you can get a $multibillion valuation as long as you have a charismatic millennial for a CEO and an overly-excitable charismatic VC. I'll bet you could even do it by leasing buildings, chopping them up, remodeling them, and subleasing them as coworking spaces!

It's very easy to get a valuation, as this evergreen piece from Basecamp always elegantly shows [0]

[0] https://signalvnoise.com/posts/1941-press-release-37signals-...

The problem with that is you wouldn't get 100 million.

This is a merry-go-round of printed money and the game is to get yours before the ride stops.

Very well put. Governments are in a race to inflate their currencies, and the dollar being the global reserve makes it uniquely positioned to decrease the wealth of the entire world every time another dollar is printed. My only recommendation is to buy assets, but who knows which assets are in a bubble! Maybe it’s all of them.

They're a Direct To Consumer (DTC) Lifestyle brand.

If you sort of wave your hands and say "whatever" to that description what it means is "profit" compounded by "profit".

DTC cuts out all the middle retailers' profit points.

"Brand" lets them charge a premium for their product on an ongoing basis.

You can buy a very comparable piece of luggage off of AliExpress [1] for about half [2] of what Away is selling theirs for, which means that at volume Away is probably getting a 3x to 4x markup. The profit of branding.

If you're looking for something to compare Away to, look at Lululemon (revenues of $3.7 Billion in 2019). I'm sure they're nowhere near that currently, but the venture capital bet is that there's at least a 1/10 shot of them reaching that sort of level.

1 - https://www.aliexpress.com/item/4000472391335.html

2 - https://www.awaytravel.com/suitcases/bigger-carry-on/navy

I feel like it's a bad form to infer a markup based on the price of a lower quality dupe.

Like would you compare a Canada Goose jacket with it's dupe at Hollister and say they're "comparable"?

https://www.canadagoose.com/ca/en/victoria-parka-3037L.html?...

https://www.hollisterco.com/shop/us/p/cozy-lined-thermore-pa...

There's always going to be knock-offs, but perhaps it would be better to compare Away to, say, Travel-pro? [https://thewirecutter.com/reviews/best-carry-on-luggage/]

It's not like Away is an artisanal product that's going to be used for decades. It's just half-decent luggage with a fresh look. It's OK as a product, but the aspirations of their leadership and investors is WAYYY oversized.

I'm sure they're quite nice jackets, but they're a flex. You're telling the world you can drop a grand on a jacket.

Nothing wrong with that, or enjoying a great jacket in the process. But it's clearly a signal of wealth.

Those jackets are 100% a flex, but they (and their competition like Arc'teryx, Moose Knuckles, etc.) aren't a flex in the typical middle-class way of overpaying for a middling product because it has a trendy design. They're a flex because you're telling the world that you're willing to drop $800-1200 on a coat so you can wear whatever you want underneath and don't have mess up your outfit with layers.

The point I was trying to make is that there's a significant value to the "brand" of Away that's independent from costs that went into making up the product.

Mentally adjust the cost that Away is paying per item up 20% if that makes sense to you, but the point is that this is a product with big margins that Away is pushing even higher as a result of their brand.

Like how an identical pair of sneakers can roll out of a factory but the one with a swoosh on the side is able to sell for 10x.

Away is not a traditional business in the way you are thinking. They are one of those digital-native, DTC Instagram brands that resells Chinese goods with great marketing. Their product happens to be bigger ticket and higher margin per unit than most of these types (which are often apparel), so it gets more attention.

There is too much cash in the economy and not enough places to park it.

Otherwise, this would just be another simple luggage company.

It’s also quite possible to raise money on non-VC terms. Say 80% of profit until recoup + 10% CAGR hurdle then 5% of profit. Away obviously takes some capital to get going which a founder may not have but this structure doesn’t enslave you to a unicorn valuation.

Even old-school manufacturers like Samsonite raise money, get acquired, get spun out, go public, and acquire competitors [0]. Many billions are involved. Why should business be boring?

[0] https://en.wikipedia.org/wiki/Samsonite

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