Finnish startup Fruugo avoids meltdown with approx. €1 million in bridge funding

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Finnish startup Fruugo fascinates me to no end.

Founded in late 2006, the company set out to build a massive pan-European social e-commerce service, which it finally launched in closed beta at the beginning of this year. Their mission statement? To make Fruugo the equivalent of Google in search when it comes to social commerce on the Web.

The company reportedly raised dozens of millions of euros, at one point flirted with an employee headcount of 150 to 160 people (including contractors) and boasted a rock star board of directors that included people like former Nokia CEO and current Chairman of Shell Jorma Ollila as well as F-Secure Founder/Chairman Risto Siilasmaa. In 2008, they burned through about 14.5 million euros before they even put the closed beta product live and were ultimately forced to lay off almost half of its workforce as a result.

Now this article – note that it’s in Finnish and trust me, the Google-translated version wouldn’t help you make sense of it either if you don’t speak that language – claims an amount ‘south of €1 million’ was put into the company as a bridge investment. The round was extended to all existing shareholders, including the two directors mentioned above as well as media group Sanoma and Seppo Sairanen (the previous majority owner of financial group FIM). Also according to the piece, the company now employs approximately 25 to 30 people, a far cry from the more than one hundred full-time employees it boasted two years ago.

The extra funding is seemingly merely an intermediate step to keep the company up and running before more money is raised from institutional investors in the near future. Fruugo CEO Juha Usva recently told press that the company’s financial situation was ‘tight’ and that they were having more trouble finding capital because of the recession than anticipated.

This is what Usva just informed me by e-mail:

“Fruugo recently arranged a share issue, directed to existing shareholders. With this we raised sufficient funding to continue working on some other arrangements, but in practise the fund raising continues. From business perspective, we have now moved to an active business mode, and are building the scope gradually (from category and geographical perspective). Things are moving to a good direction, and we are looking forward to successful remaining of the year and 2010.”

To be continued for sure, not in the least when the company actually starts rolling out the service to the rest of Europe. If they ever get around to it.

  • dasein

    Fulfillment is always a crux for these pan-European e-commerce sites.

    A €6 item on Fruugo costs the user €8 to ship, from the UK to NL.

  • Jüri Kaljundi

    The biggest question for Fruugo is which marketing model will work out for them.

    On one side there is a very local approach in each European country. Local marketing and biz dev people. Local campaigns. You have to be there in Slovakia, Greece, Island, Italy and Germany. This is usually what works in Europe, to be recognized as a real player in each specific country. It is costly, time and any other resource consuming.

    On the other side there is a hope, that you can do marketing as a single campaign across Europe. You could say that Amazon, Google, Youtube have not done local marketing in any of the countries mentioned above and is still successful. Viral marketing. Social media marketing. Low marketing costs per acquired user. No customization for each country. Very few companies have succeeded in that and probably no European ones across Europe.

    The difference in marketing budgets for these 2 scenarios could be as much as 20 mEUR vs 1 mEUR. Only time will tell, which model they choose and even then we will not know what the other one would have achieved. Its a big gamble. Smart decisions and especially operational marketing excellence will be needed for our Northern neighbours. Wish them luck!

  • Ben

    Quick typo: I think you mean “rock star,” not “rock start” board of directors.

    • Robin Wauters

      Correct, thanks – fixed that now.

  • damiansen

    They should listen to Jason from 37signals. Learn how to make money is more important and should happen first than learning how to spend it.

  • Fabio De Bernardi

    This looks increasingly like the story. And they already wrote a book about it so there isn’t much money to be made there either…

    • @PaulH


  • Finisher

    They are finnished (no pun intended).

  • Stefan

    Crazy Investors, I would like to know where do they see profits being made and returns.

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  • Lisa

    They have a good idea, hopefully it will work out.

  • Lessons from 10 disappointing tech stories of 2009

    […] this was prior to a closed beta launch) and now has 25 to 30 people. Fruugo CEO Juha Usva recently told TechCrunch’s Robin Wauters that “Things are moving to a good direction, and we are looking forward to successful […]

  • Yervich Nailer

    Didn’t the bubble burst about ten years ago?

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