ChannelAdvisor – SSDD?

I know I have to be careful here because I am not someone “in the know”. I do, however, know a few things. One of those things is that if your company has not been profitable for 9 years then maybe there is a flaw somewhere. Call me crazy but doesn’t it seem to make sense that if a company claims 55% growth in top line revenue PLUS an additional $20 million in VC that profitability is – gulp! – expected after 9 years?

ChannelAdvisor, which is right here in my neck of the woods in central North Carolina (Research Triangle or RTP for the terminally hip out there), has announced that they have let go of about 20% of their staff. In and of itself that is tragic news for those laid-off for sure. I have a healthy skepticism about these kinds of things because I was a late arrival on the good ship PSINet back before the internet bubble disintegrated. The story actually sounds eerily similar because PSINet had spent the better part of 10 years growing and acquiring while avoiding being gobbled up by the big telco players back in the day. There were a lot of paper millionaires running around the halls of PSINet shrugging off calls for profitability. It was a given that it would happen as long as the right things were being said etc etc.

Well, lo and behold, as one acquisition after another sucked cash and resources it was obvious that the good ship PSINet was taking on some serious water. Needless to say, I headed for the life rafts and got off before it got too ugly. After all, I got in after the options “gold rush” had long dried up. Now, I am NOT saying that this is happening at ChannelAdvisor but if you are growing top line at 55% and you take on $20 million to cover operating expenses where is all that top line revenue going? And if your layoffs include part of your sales force (including the VP of Sales) then I only see red flags here. The claims on this front are the consolidation of a decentralized sales force into a more streamlined global force. At PSINet, we decentralized so we could be in front of our clients like our competitors were. You say tomato, I say tomatoe ….

Once again, I am simply an observer here. I have NO, as in zero, inside information other than someone I know was a casualty (and that was just in an FYI e-mail with no editorial at all). I am just another person looking at this situation as objectively as possible and the spin that is appearing from ChannelAdvisor sounds, well, real spinny. As you might expect there is a fair amount of vitriol in posts about the company (can anyone say Online Reputation Monitoring?) but I am looking at those as angry folks in a difficult situation and they need a place to vent.

Look, I hope that CEO Scot Wingo’s claims that CA will be profitable next year are true. However, I saw the same thing said in early 2002 when ChannelAdvisor closed on $5.7 million in funding. Small “growth” companies have to keep saying it or else people will lose faith. Well, it’s been 9 years, $80 million in VC including this latest round (July ’08) of $20 million for “general corporate operations”. Is this still a potential “billion dollar company” or the same company that went from 70 to 40 employees to get to profitability by the third or fourth quarter of 2002? SSDD – Same Spin Different Day? You tell me.

SMB Takeaway: 9 years is a long time to not turn a profit especially if your claim is a market leader of anything that is as big as e-commerce. Oh and $80 million is a lot of money! If you are employed by such a company….well let’s just say the resume needs to be “ready to go”.