The ecomom liquidation is underway. Here’s how things looked at the end

By Michael Carney , written on March 19, 2013

From The News Desk

When ecomom terminated the last of its employees one month ago following the shocking death of its founder Jody Sherman two weeks prior, we were told the company would be liquidating its remaining assets. It’s a process most entrepreneurs and investors hope never to encounter, although the laws of startup success dictate that most will.

Yesterday we got an intimate look at the process, when a source sent PandoDaily the February Won, Inc. (dba ecomom) Sale Memorandum used to solicit bids from creditors, shareholders, and other interested parties.

Ecomom was a four-year-old ecommerce retailer specializing in eco-friendly products for kids and family households. The company raised a total of $10.7 million, including a $4.7 million Series C round just five months before it succumbed to a culture of aggressive discounting and alleged purchasing errors. At the time its employees were let go, the company was said to be just weeks from insolvency.

As Sarah Lacy wrote previously, it is not our wish to drag the memory of an ambitious company and a widely loveded founder through the mud. But in entrepreneurial failings exist valuable lessons for others in the startup ecosystem. Much of what transpired can be viewed as a cautionary tale for the broader ecommerce 2.0 sector.

Below are some high level takeaways from the liquidation proceedings, as well as the reaction of three ecommerce veterans who asked to remain anonymous (full documents embedded below):


  • The company amassed a customer database consisting of 100,000 email addresses, with the average customer being a 26- to 35-year-old, educated married woman with one to two children under eight years old. Half of all customers have annual household income of more than $76,000.

It would likely prove difficult to reactivate these customers under the Ecomom brand, but they could prove attractive to another company targeting the same demographic. One potential suitor for this database, assuming there’s not already significant overlap, would be Brian Lee and Jessica Alba’s

  • Ecomom’s social media accounts: Facebook (~32,000 Likes); Pinterest (~1,400 Followers); and Twitter (~13,000 Followers).

Assuming the followers on these social services mirror those in the above email database, Honest or another similar acquirer would be a natural fit.

  • Purchasers receive ownership of all remaining non-perishable inventory, as well as a database of 6,000 professional product photographs of these products.

Any inventory would be sold at a loss and would only be of value to another ecommerce company in a similar space which carries third-party products.

  • The company holds eight trademarks and service marks registered in the US and/or European Union, as well as 17 domain names.

The ecomom trademarks and domain names would only be attractive in the event that the potential acquirer chooses to resurrect the failed business. Given the historical challenges, this seems like an unlikely outcome.

  • The acquirer will receive details of all programs, methodologies, and historical order data.

Like the trademarks and domain names, the programs and methodologies would only be valuable in the case of a continuation of the existing business. Historical order data, however, could be used in conjunction with the email database to inform future targeted marketing.

Marketing & Customer Acquisition

  • Ecomom developed an opt-in email list of more than 100,000 over the four years since its 2008 launch. Nearly 50 percent of these subscribers received daily-deal emails and 44 percent made at least one lifetime purchase.

As the executive of one successful ecommerce retailer put it, “At first pass, it seems pretty small scale in terms of subscribers and media spend for a four year old business, although it’s hard to assess with this limited information.” As Sherman explained in one of his communications to investors, ecomom was really about forming in depth, valuable lifelong relationships with families rather than a churn and burn scale model of a So for the right company, 100,000 deeply engaged mothers spending a lot to keep their babies healthy might prove valuable.

  • The company’s annual marketing spend was approximately $250,000 per year, not including voucher discounts.

The reaction of another exec to this figure was, “Marketing spend seems lite for a $10mm raise, but then I’d guess that sales can't be more than $2 million per year. My guess is there just wasn't enough demand for the merchandise and the ability to get in front of those customers was not as easy as anticipated.” Looking more closely, “not including voucher discounts” appears to be the key phrase here. We’ve already reported that ecomom seemingly overspent to acquire its customers in the form of aggressive discounting, making this a bit of a red herring.

  • The company’s average order size was roughly $60 (with free shipping on orders over $50).

This number is fairly healthy, according to our panel of experts, but it’s hard to pass judgement without more details about margins and shipping costs. As one founder put it, “The biggest missing data point is their average gross margin. If they are competing on price on razor thin margins, then the business is a struggle regardless of volume. I believe great online retail business have greater than 55 percent gross margins.”

  • The site achieved a 28 percent funnel conversion rate.

One source said, “This sounds good on the surface, but define funnel conversion rate. What's their order conversion rate (orders / unique visits)?”


  • Ecomom completed a site redesign using a Magento Enterprise Storefront and Amazon Web Services in September 2012, four months prior to February 2013 liquidation. Its new site could accommodate 700 concurrent users, 400 orders per hour, and average daily sales of  approximately $55,000, as well as peak sales of over 3,000 orders per day.

It’s hard to speculate as to the value of this platform to a potential acquirer. That said, anyone with the capital to spend acquiring ecomom’s assets is likely to already have its own well-built ecommerce site.

Transaction Instructions and Conditions

  • The Assignee’s plan is to “sell the Assets, wind down ecomom, and distribute the net proceeds to creditors of Assignor [ecomom].”

  • This will be a closed bidding process whereby the names of the bidders and the bids will not be disclosed to the other interested parties.

  • Assets will be sold on an “as-is, where-is” basis with all faults, and with limited representations or warranties.

  • There will be no indemnity for the purchaser of assets and the purchaser will indemnify the Seller the use of the assets after the closing date.

One ecommerce exec summed up his thoughts, saying:

The reality is most Startups fail and most of the time it is not because of any one thing. This shit is hard and the pressures and expectations of investors, employees, partners, and even yourself are relentless. I would rather celebrate Jody for trying versus playing Monday morning QB on his business.

Unfortunately, there are details of the ecomom story that we’ll never know. Similarly, there are questions about how things could have gone differently that may never be answered. At the end, the above information is effectively the company’s Last Will and Testament. The company’s slogan reads, “Ecomom: It’s All Good.” Sadly, this couldn’t be further from the truth.










[Image via the disinhibitor]