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BuyWithMe, coupon peddler based in Boston and New York, cuts half its workforce

Posted by Scott Kirsner  October 20, 2011 11:02 AM

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Adding to the turmoil in the "daily deals" space, BuyWithMe is cutting more than half its staff. The Boston and New York-based company, led by Massachusetts CEO Jim Crowley, raised $16 million last year, but seems to have used much of that money to acquire other companies peddling local discounts. Like a shopaholic on a spree, BuyWithMe picked up six companies in the past six months.

An employee with whom I spoke this morning said there had been lay-offs earlier this month that affected New York more than Boston, and that the company would be "refocusing." "We aren't manufacturing money the way we used to," said this employee, who requested anonymity because he was not authorized to speak for the company. "Rather than frantic growth, we're going to be more about quality and less about quantity." BuyWithMe executives and investors weren't responding to calls or e-mails this morning.

TechCrunch reports that BuyWithMe is looking for a buyer. BetaBeat reports that the company had been trying to raise $100 million in fresh funding that would have valued the company at $500 million. DailyDealMedia first reported the lay-offs yesterday.

Chris Rohland, a former BuyWithMe executive who started at the company in late 2009, says, "We were once bigger than LivingSocial, and neck-and-neck with Groupon. [Founder] Andrew [Moss] wanted to run with the big dogs." Rohland left the company in January, and is now sales director for Boston.com's daily deals service, Boston Deals.

A venture capital industry source told me this morning that BuyWithMe "couldn't raise more money, and the insiders [current investors] didn't want to throw good after bad." This investor added that it will be interesting to see how BuyWithMe's troubles affect Groupon's planned IPO. Public market investors could be more skeptical about how challenging it is to compete in the daily deals arena — or they could see Groupon as the big winner, with rivals falling by the wayside.

BuyWithMe's venture capital backers installed two CEOs: Cheryl Rosner, an Expedia alum who left last December, and Jim Crowley, a videogame veteran who is still running the company.

"I think getting deals via e-mail is no longer a novelty, and companies have realized that they don't want to share half their revenue with a Groupon or BuyWithMe," says Wilson Kerr, an executive at Unbound Commerce who has followed the sector closely. "Companies would rather offer their own deals, without cutting Groupon in. They can maintain more control over pricing and the customer relationship that way."

Update: BuyWithMe CEO Jim Crowley released a statement confirming "a significant reduction in staffing this week," and asserting that the lay-offs happened "so the company is in the best position to serve its merchants and members."

Earlier this year, I wrote about BuyWithMe, Groupon, SCVNGR's LevelUp, and other discount services, asking, "...Could all this excitement about a new way of circulating coupons be an unsustainable blip?"

That's starting to look like the case...

Do you think BuyWithMe will survive?

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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