BuyWithMe, please?

A post by BeatBeat today reflects an inevitable outcome that has been a long time coming for many of the companies receiving funding at tremendous valuations over the last few years. There have been a host of extremely scalable companies raising money at great valuations but distinguishing themselves only slightly. Some of the companies with potential to grow will never reach that potential and will ultimately stagnate, consolidate or simply die off.

BuyWithMe, a company in what was a red hot, daily deal industry, appears to not just have hit a speed bump but instead a wall at full speed. The company, which had acquired 6 companies in 6 months, has laid off a large portion of its work force (rumored at 75%) with scathing postings from disgruntled employees.

BuyWithMe had raised $21.5mm from Bain Capital Ventures and Matrix Partners and appears to be guilty of both mismanagement as well as being boxed out by the leaders in the space, but the point remains. The daily deals space will have few broad winners that emerge victorious, and a bunch of companies that fail to meet expectations. Similarly scalable industries will feature a similar landscape; broad success, niche players and failed companies.

Groupon just went out for their IPO roadshow after a few snags along the way, and ultimately the company will have their success. Differentiate or die is an old marketing phrase that translates quite nicely to companies failing to distinguish themselves enough from the market leaders. Competition breeds quality for consumers, but the right horse, not the right race ultimately wins the day.

Updated 10/21/2011: Trend continues with TheLadders laying off 30 people