Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce…. Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the livingKarl Marx, “The Eighteenth Brumaire of Louis Bonaparte” (1852)Alright, well that was entirely uncalled for. Still, it’s hard not detect a bit of the old dialectician’s glee in the business-news meme that’s dogged (sorry) Groupon Inc. since its IPO last year, and looks to stick around now that the stock is down some two-thirds from its November highs. A dour earnings report propped up by outlandishly sunny accounting methods seems to clinch it: Groupon is destined to become the Pets.com of Dot-com Bubble 2.0.Then again, perhaps LinkedIn (LNKD) or Pandora (P) partisans shouldn’t panic just yet; the eerie echoes in GRPN of a long-dead sock-puppet may finally be less a sign of the whole web sector’s eternal return to creative destruction than just the kindred resemblance, across a dozen years, of two singularly imbecilic business models. Or as the great John Maynard Keynes kinda sorta said once, “Kibble-eaters and penny-pinchers can be un-loyal customers longer than you can stay solvent.” Some breeds of boneheadedness admit no world-historical theorization.So if neither Das Kapital nor Atlas Shrugged — surely, the twin grand-theory holy texts on every Silicon Valley night table — could have anticipated the doomed Eighteenth Brumaires of Pets.com and Groupon, which authors might have warned investors off disaster, if only they’d been read? Why, Pets.com and Groupon, of course! As a first step to going public, companies file a Form S-1 with the SEC.These are the filings that reveal, typically for the first time, juicy balance-sheet details about revenue, debt loads, and executive compensation. Before diving into the quantitative weeds, however, every Form S-1 begins with a section titled “Risk Factors.” Here, lawyers and bankers let loose with every worst-case scenario that could befall the firm — drawing a picture, in glum totality, not unlike an episode of the History Channel’s Life After People. Done right, each “Risk Factors” bullet point becomes a prose poem of unrelenting Murphy’s Law nihilism.Most of the best “Risk Factors” are brutally specific to the company in question. Facebook’s S-1 ponders the possibility that its CEO is a loon, and admits there’d be no way to stop him:Our CEO has control over key decision making as a result of his control of a majority of our voting stock.
As a result of voting agreements with certain stockholders, together with the shares he holds, Mark Zuckerberg, our founder, Chairman, and CEO, will be able to exercise voting rights with respect to an aggregate of ______ shares of common stock, which will represent approximately % of the voting power of our outstanding capital stock following our initial public offering. As a result, Mr. Zuckerberg has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets…. In addition, Mr. Zuckerberg has the ability to control the management and major strategic investments of our company as a result of his position as our CEO and his ability to control the election or replacement of our directors. In the event of his death, the shares of our capital stock that Mr. Zuckerberg owns will be transferred to the persons or entities that he designates. As a board member and officer, Mr. Zuckerberg owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares, and shares over which he has voting control as a result of voting agreements, in his own interests, which may not always be in the interests of our stockholders generally.Others “Risk Factors” suggest their own solutions. Facebook’s S-1 discloses: “We currently generate significant revenue as a result of our relationship with Zynga [12%], and, if we are unable to successfully maintain this relationship, our financial results could be harmed.” Zynga’s S-1 names, as its top worry: “If we are unable to maintain a good relationship with Facebook, our business will suffer.” If this doesn’t reenact the moment human beings invented marriage, I don’t know what would.So what’s exceptional about the “Risk Factors” in Groupon and Pets.com’s S-1s — specifically the versions (each Amendment No. 3) filed September 23, 2011 and February 9, 2000, respectively — is less their bleakness than their generic-ness. Put another way, if all S-1 risks amount to if–then statements, most every “if” reported by Groupon and Pets.com can sound almost banally likely to happen, with each corresponding “then” existentially catastrophic. Here are all the “Risks Related to our Business”; try to distinguish who said what about their soon-to-be-public company:1. We only began selling our products in ________ and we operate in a new and rapidly evolving market, which makes it difficult for investors to determine whether we will accomplish our objectives.1
2. We may not maintain the revenue growth that we have experienced since inception.1
3. We have experienced rapid growth over a short period in a new market that we have created and we do not know whether this market will continue to develop or whether it can be maintained. If we are unable to successfully respond to changes in the market, our business could be harmed.1
4. The success of our business depends on attracting and retaining a large number of potential customers. If we are unable to do so, we will not be able to achieve profitability.1
5. We base our decisions regarding investments in subscriber acquisition primarily on our analysis of the profits generated from subscribers that we acquired in prior periods. If the estimates and assumptions we use are inaccurate, we may not be able to recover our subscriber acquisition costs and our growth rate and financial results will be adversely affected.1
6. We have incurred net losses since inception and we expect our operating expenses to increase significantly in the foreseeable future.1
7. We have a history of losses and we expect significant increases in our costs and expenses to result in continuing losses for at least the next four years.1
8. If we fail to retain our existing subscribers or acquire new subscribers, our revenue and business will be harmed.1
9. If we fail to retain existing merchants or add new merchants, our revenue and business will be harmed.1
10. Our business is highly competitive. Competition presents an ongoing threat to the success of our business.1
11. If we are unable to recover subscriber acquisition costs with revenue generated from those subscribers, our business and operating results will be harmed.1
12. Increasing our product distribution capacity is an important part of our business strategy and will require significant investments in cash and management resources. If we do not successfully build additional distribution centers, we will face difficulties in increasing our revenues and we may lose customers to our competitors.1
13. Since we currently operate only one distribution center located in the San Francisco bay area, we are susceptible to the risk of damage to our distribution center.1
14. If we are unable to maintain favorable terms with our merchants, our revenue may be adversely affected.1
15. We expect our quarterly financial results to fluctuate significantly from quarter to quarter, which can cause the trading price of our common stock to fluctuate significantly.1
16. Because our operating expenses are generally fixed in the short term, if we fail to achieve anticipated revenues we will incur substantial additional operating losses. Furthermore, our limited operating history makes it difficult to predict revenues and plan our operating expenses.1
17. Our operating cash flow and results of operations could be adversely impacted if we change our merchant payment terms or our gross billings do not continue to grow.1
18. Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or a decrease in subscriber willingness to receive messages could adversely affect our revenue and business.1
19. We have a rapidly evolving business model and our new product and service offerings could fail to attract or retain subscribers or generate revenue.1
20. If we are unable to retain the services of certain individuals involved in the operations of our International segment, our international expansion may suffer.1
21. Our international operations are subject to increased challenges, and our inability to adapt to the varied commercial and regulatory landscapes of our international markets may adversely affect our business.1
22. The integration of our international operations with our North American technology platform may result in business interruptions.1
23. Expansion of our international operations will require management attention and resources and may be unsuccessful which could harm our future business development and existing domestic operations.1
24. An increase in the costs associated with maintaining our international operations could adversely affect our results of operations.1
25. An increase in our refund rates could reduce our liquidity and profitability.1
26. A portion of our revenues may be seasonal, which could cause our quarterly financial results and our common stock price to fluctuate significantly.1
27. If our merchants do not meet the needs and expectations of our subscribers, our business could suffer.1
28. We depend on our ability to build and maintain relationships with our suppliers to obtain sufficient quantities of quality merchandise on acceptable commercial terms. If we fail to maintain our supplier relationships, our revenues will decline.1
29. We depend on our advertising agreement with amazon.com to attract customers to our web store and build our brand. In the event our advertising agreement with amazon.com were to terminate, we could face significantly higher costs and significantly more difficulty in attracting customers.1
30. We utilize consulting advice and support from amazon.com for operational and strategic expertise. Amazon.com has no contractual obligation to provide this support. If amazon.com does not continue to provide the advice and support we need, we could incur higher operational expenses in running our business and difficulties in executing on our business plan.1
31. We cannot assure you that we will be able to manage the growth of our organization effectively.1
32. The loss of one or more key members of our management team, or our failure to attract, integrate and retain other highly qualified personnel in the future, could harm our business.1
33. We may be subject to additional unexpected regulation which could increase our costs or otherwise harm our business.1
34. The implementation of the CARD Act and similar state and foreign laws may harm our business and results of operations.1
35. If we are required to materially increase the estimated liability recorded in our financial statements with respect to _____________, our net income could be materially and adversely affected.1
36. Government regulation of the internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.1
37. New tax treatment of companies engaged in internet commerce may adversely affect the commercial use of our services and our financial results.1
38. Failure to comply with federal, state and international privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or regulations, could adversely affect our business.1
39. We may suffer liability as a result of information retrieved from or transmitted over the internet and claims related to our service offerings.1
40. We face the risk of systems interruptions and capacity constraints on our web site, possibly resulting in adverse publicity, revenue losses and erosion of customer trust.1
41. Our business depends on our ability to maintain and scale the network infrastructure necessary to operate our websites and applications, and any significant disruption in service on our websites or applications could result in a loss of subscribers, customers or merchants.1
42. We have grown very rapidly. This growth has placed, and our anticipated future operations will continue to place, a significant strain on our management systems and resources. We will not be able to implement our business strategy unless we are able to effectively manage this strain on our systems and resources.1
43. Our business depends on the development and maintenance of the internet infrastructure.1
44. We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.1
45. We cannot be certain that we will be able to protect our intellectual property, and we may be found to infringe proprietary rights of others, which could negatively affect our business by diverting our monetary resources and management’s attention to these matters instead of allowing us to focus on the continuing development of our market strategy.1
46. We may not be able to protect our domain names in all countries or against all infringers, which could decrease the value of our brand name and proprietary rights.1
47. Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, or if we receive unfavorable media coverage, our ability to expand our base of subscribers and merchants will be impaired and our business and operating results will be harmed.1
48. Acquisitions, joint ventures and strategic investments could result in operating difficulties, dilution and other harmful consequences.1
49. We enter into strategic relationships to help promote our web store. If we fail to maintain or enhance these relationships, we may not be able to attract and retain customers, build our pets.com brand and enhance our sales and marketing capabilities.1
50. Our total number of subscribers may be higher than the number of our actual individual subscribers and may not be representative of the number of persons who are active potential customers.1
51. Competition from both traditional and online retailers may result in price reductions and decreased demand for our products and services.1
52. A portion of our revenues may be seasonal, which could cause our quarterly financial results and our common stock price to fluctuate significantly.1
53. Our business may be subject to seasonal sales fluctuations which could result in volatility or have an adverse effect on the market price of our common stock.1
54. We depend on the continued growth of online commerce.1
55. Our business is subject to interruptions, delays or failures resulting from earthquakes, other natural catastrophic events or terrorism.1
56. Our systems and operations, and those of our suppliers and shippers, are vulnerable to natural disasters and other unexpected problems.1
57. Our results of operations may be negatively impacted by investments we make as we enter new product and service categories.1
58. Failure to deal effectively with fraudulent transactions and subscriber disputes would increase our loss rate and harm our business.1
59. We are subject to product liability claims and may face liability for content on our web store, any of which could harm our financial condition and liquidity if we are not able to successfully defend against such claims.1
60. We are exposed to fluctuations in currency exchange rates and interest rates.1
61. We are subject to payments-related risks.1
62. Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign laws, could be expanded to include ___________.1
63. State and foreign laws regulating money transmission could be expanded to include ___________.1
64. Governmental regulation of our business could require significant expenses, and failure to comply with government regulations could result in civil and criminal penalties.1
65. Current uncertainty in global economic conditions could adversely affect our revenue and business.1
66. We need to hire and retain a number of additional technology, content and product oriented personnel who might be difficult to find and who are key to our continued growth and ultimate success in the market.1
67. We rely on the services of our key personnel, whose knowledge of our business and technical expertise are important to our continued growth and ultimate success in the market and would be difficult to replace1
68. Our management team has a limited history of working together and may not be able to execute our business plan.1
69. Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business.1
70. Many members of our management team are new to the company or to the ______________ industry or online businesses, and execution of our business plan and development strategy could be seriously harmed if integration of our management team into our company is not successful.1
71. We will incur increased costs as a result of being a public company.1
72. Our operations may be disrupted if we or our product suppliers or other vendors experience systems failure or data corruption from the year 2000 issue.1
73. We will need to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our business could fail.1
74. Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.1As always, past implosions are not necessarily indicative of future results.
1 1 4 7 12 13 15 16 23 26 28 29 30 40 42 45 46 49 51 52 56 59 64 66 67 70 72 73 — Pets.com
All the rest — Groupon
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As a result of voting agreements with certain stockholders, together with the shares he holds, Mark Zuckerberg, our founder, Chairman, and CEO, will be able to exercise voting rights with respect to an aggregate of ______ shares of common stock, which will represent approximately % of the voting power of our outstanding capital stock following our initial public offering. As a result, Mr. Zuckerberg has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets…. In addition, Mr. Zuckerberg has the ability to control the management and major strategic investments of our company as a result of his position as our CEO and his ability to control the election or replacement of our directors. In the event of his death, the shares of our capital stock that Mr. Zuckerberg owns will be transferred to the persons or entities that he designates. As a board member and officer, Mr. Zuckerberg owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares, and shares over which he has voting control as a result of voting agreements, in his own interests, which may not always be in the interests of our stockholders generally.
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2. We may not maintain the revenue growth that we have experienced since inception.1
3. We have experienced rapid growth over a short period in a new market that we have created and we do not know whether this market will continue to develop or whether it can be maintained. If we are unable to successfully respond to changes in the market, our business could be harmed.1
4. The success of our business depends on attracting and retaining a large number of potential customers. If we are unable to do so, we will not be able to achieve profitability.1
5. We base our decisions regarding investments in subscriber acquisition primarily on our analysis of the profits generated from subscribers that we acquired in prior periods. If the estimates and assumptions we use are inaccurate, we may not be able to recover our subscriber acquisition costs and our growth rate and financial results will be adversely affected.1
6. We have incurred net losses since inception and we expect our operating expenses to increase significantly in the foreseeable future.1
7. We have a history of losses and we expect significant increases in our costs and expenses to result in continuing losses for at least the next four years.1
8. If we fail to retain our existing subscribers or acquire new subscribers, our revenue and business will be harmed.1
9. If we fail to retain existing merchants or add new merchants, our revenue and business will be harmed.1
10. Our business is highly competitive. Competition presents an ongoing threat to the success of our business.1
11. If we are unable to recover subscriber acquisition costs with revenue generated from those subscribers, our business and operating results will be harmed.1
12. Increasing our product distribution capacity is an important part of our business strategy and will require significant investments in cash and management resources. If we do not successfully build additional distribution centers, we will face difficulties in increasing our revenues and we may lose customers to our competitors.1
13. Since we currently operate only one distribution center located in the San Francisco bay area, we are susceptible to the risk of damage to our distribution center.1
14. If we are unable to maintain favorable terms with our merchants, our revenue may be adversely affected.1
15. We expect our quarterly financial results to fluctuate significantly from quarter to quarter, which can cause the trading price of our common stock to fluctuate significantly.1
16. Because our operating expenses are generally fixed in the short term, if we fail to achieve anticipated revenues we will incur substantial additional operating losses. Furthermore, our limited operating history makes it difficult to predict revenues and plan our operating expenses.1
17. Our operating cash flow and results of operations could be adversely impacted if we change our merchant payment terms or our gross billings do not continue to grow.1
18. Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or a decrease in subscriber willingness to receive messages could adversely affect our revenue and business.1
19. We have a rapidly evolving business model and our new product and service offerings could fail to attract or retain subscribers or generate revenue.1
20. If we are unable to retain the services of certain individuals involved in the operations of our International segment, our international expansion may suffer.1
21. Our international operations are subject to increased challenges, and our inability to adapt to the varied commercial and regulatory landscapes of our international markets may adversely affect our business.1
22. The integration of our international operations with our North American technology platform may result in business interruptions.1
23. Expansion of our international operations will require management attention and resources and may be unsuccessful which could harm our future business development and existing domestic operations.1
24. An increase in the costs associated with maintaining our international operations could adversely affect our results of operations.1
25. An increase in our refund rates could reduce our liquidity and profitability.1
26. A portion of our revenues may be seasonal, which could cause our quarterly financial results and our common stock price to fluctuate significantly.1
27. If our merchants do not meet the needs and expectations of our subscribers, our business could suffer.1
28. We depend on our ability to build and maintain relationships with our suppliers to obtain sufficient quantities of quality merchandise on acceptable commercial terms. If we fail to maintain our supplier relationships, our revenues will decline.1
29. We depend on our advertising agreement with amazon.com to attract customers to our web store and build our brand. In the event our advertising agreement with amazon.com were to terminate, we could face significantly higher costs and significantly more difficulty in attracting customers.1
30. We utilize consulting advice and support from amazon.com for operational and strategic expertise. Amazon.com has no contractual obligation to provide this support. If amazon.com does not continue to provide the advice and support we need, we could incur higher operational expenses in running our business and difficulties in executing on our business plan.1
31. We cannot assure you that we will be able to manage the growth of our organization effectively.1
32. The loss of one or more key members of our management team, or our failure to attract, integrate and retain other highly qualified personnel in the future, could harm our business.1
33. We may be subject to additional unexpected regulation which could increase our costs or otherwise harm our business.1
34. The implementation of the CARD Act and similar state and foreign laws may harm our business and results of operations.1
35. If we are required to materially increase the estimated liability recorded in our financial statements with respect to _____________, our net income could be materially and adversely affected.1
36. Government regulation of the internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.1
37. New tax treatment of companies engaged in internet commerce may adversely affect the commercial use of our services and our financial results.1
38. Failure to comply with federal, state and international privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or regulations, could adversely affect our business.1
39. We may suffer liability as a result of information retrieved from or transmitted over the internet and claims related to our service offerings.1
40. We face the risk of systems interruptions and capacity constraints on our web site, possibly resulting in adverse publicity, revenue losses and erosion of customer trust.1
41. Our business depends on our ability to maintain and scale the network infrastructure necessary to operate our websites and applications, and any significant disruption in service on our websites or applications could result in a loss of subscribers, customers or merchants.1
42. We have grown very rapidly. This growth has placed, and our anticipated future operations will continue to place, a significant strain on our management systems and resources. We will not be able to implement our business strategy unless we are able to effectively manage this strain on our systems and resources.1
43. Our business depends on the development and maintenance of the internet infrastructure.1
44. We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.1
45. We cannot be certain that we will be able to protect our intellectual property, and we may be found to infringe proprietary rights of others, which could negatively affect our business by diverting our monetary resources and management’s attention to these matters instead of allowing us to focus on the continuing development of our market strategy.1
46. We may not be able to protect our domain names in all countries or against all infringers, which could decrease the value of our brand name and proprietary rights.1
47. Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, or if we receive unfavorable media coverage, our ability to expand our base of subscribers and merchants will be impaired and our business and operating results will be harmed.1
48. Acquisitions, joint ventures and strategic investments could result in operating difficulties, dilution and other harmful consequences.1
49. We enter into strategic relationships to help promote our web store. If we fail to maintain or enhance these relationships, we may not be able to attract and retain customers, build our pets.com brand and enhance our sales and marketing capabilities.1
50. Our total number of subscribers may be higher than the number of our actual individual subscribers and may not be representative of the number of persons who are active potential customers.1
51. Competition from both traditional and online retailers may result in price reductions and decreased demand for our products and services.1
52. A portion of our revenues may be seasonal, which could cause our quarterly financial results and our common stock price to fluctuate significantly.1
53. Our business may be subject to seasonal sales fluctuations which could result in volatility or have an adverse effect on the market price of our common stock.1
54. We depend on the continued growth of online commerce.1
55. Our business is subject to interruptions, delays or failures resulting from earthquakes, other natural catastrophic events or terrorism.1
56. Our systems and operations, and those of our suppliers and shippers, are vulnerable to natural disasters and other unexpected problems.1
57. Our results of operations may be negatively impacted by investments we make as we enter new product and service categories.1
58. Failure to deal effectively with fraudulent transactions and subscriber disputes would increase our loss rate and harm our business.1
59. We are subject to product liability claims and may face liability for content on our web store, any of which could harm our financial condition and liquidity if we are not able to successfully defend against such claims.1
60. We are exposed to fluctuations in currency exchange rates and interest rates.1
61. We are subject to payments-related risks.1
62. Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign laws, could be expanded to include ___________.1
63. State and foreign laws regulating money transmission could be expanded to include ___________.1
64. Governmental regulation of our business could require significant expenses, and failure to comply with government regulations could result in civil and criminal penalties.1
65. Current uncertainty in global economic conditions could adversely affect our revenue and business.1
66. We need to hire and retain a number of additional technology, content and product oriented personnel who might be difficult to find and who are key to our continued growth and ultimate success in the market.1
67. We rely on the services of our key personnel, whose knowledge of our business and technical expertise are important to our continued growth and ultimate success in the market and would be difficult to replace1
68. Our management team has a limited history of working together and may not be able to execute our business plan.1
69. Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business.1
70. Many members of our management team are new to the company or to the ______________ industry or online businesses, and execution of our business plan and development strategy could be seriously harmed if integration of our management team into our company is not successful.1
71. We will incur increased costs as a result of being a public company.1
72. Our operations may be disrupted if we or our product suppliers or other vendors experience systems failure or data corruption from the year 2000 issue.1
73. We will need to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our business could fail.1
74. Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.1As always, past implosions are not necessarily indicative of future results.
1 1 4 7 12 13 15 16 23 26 28 29 30 40 42 45 46 49 51 52 56 59 64 66 67 70 72 73 — Pets.com
All the rest — Groupon