BlackStar deal shows tough e-tailing times

BlackStar, the video and DVD online retailer, closed its second-round funding yesterday, but underlined the difficulties facing e-tailers looking for money to take their businesses through to profitability.

The company secured £6m – giving it a valuation of about £20m – from wealthy individuals in Dublin. Darryl Collins, finance director, said: “Most [VCs] were very interested. But it is difficult in this environment where they have overstretched in certain areas.” The scale of the change in fortunes for UK e-tailers is illustrated by the second-round valuation. The second round funds also took nearly three months to raise, compared with less than a month for the first round when Mr Collins said: “VCs were jumping into everything that said internet.”

He said the difficult market conditions meant the company was now ‘not on the IPO trail’. But he said BlackStar hoped to take advantage of any change in investor sentiment on the public markets.

Analysts expect a wave of consolidation among start-up business-to-consumer companies as they come to terms with the new environment where capital is no longer as cheap as at the beginning of the year. Mr Collins said there were no plans to get involved in expected consolidation, although it had talked to a number of companies and was keeping an open mind.

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