Gilt Joins the Billion-Dollar Circle

Is flash sales site Gilt Groupe really worth $1 billion? Investors think so.

In the fashion world they say that imitation is the sincerest form of flattery. Well, if that's true, then imitators have a lot to learn from the mother of exclusive flash sales sites, Gilt Groupe.

The members-only site, which launched at the height of the recession to explosive word-of-mouth growth as fashionistas who had to find a way to keep themselves clothed in designer threads, but who had a decidedly more hobo-than-chic budget, flocked to the site hunting for deals, has just landed its most recent funding round, raising $138 million from a group of weighty players and sending its valuation soaring to just above $1 billion in the process.

Among the elite to join the group's exclusive funders are Goldman Sachs (champions of that other much-watched site Facebook, currently valued at $50 billion), Japanese media firm Softbank, Menlo Park, California-based New Enterprise Associates, and Draper Fisher Jurvetson Growth, which counts Skype and Baidu (China's version of Google) among its clients. Previous investors General Atlantic and Matrix Partners also participated in the round.

Sofbank’s investment comes with a joint venture which allows Gilt to expand its offerings to the Japanese market under Softbank's tutelage.

The recent rush to fuel growth of companies in the social-media space, and those tied into social selling, which Gilt mastered early enough not only to have maintained its success but also to have spawned off an entire category of competitors, has some analysts concerned that the sector as a whole is overvalued. Some Facebook investors are reportedly looking for the exit while talk of the company's valuation is still seen through rose-tinted Dior glasses. And analysts following the daily deal space have been asking when consumers will rebel against the overload of deals flooding their in-boxes.

While that day still seems to be far off, like all good bubbles, no one can say for sure who will succeed, who will go bust, who really has something to sell, and whose valuations are an entrepreneurs' dream that's about to come to a crushing end.

Meanwhile, it seems that every day a new daily deal site pops up. Gilt's main competitor, HauteLook, sold its business to Nordstrom for $180 million in February.

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