farfetch.com - Building the next global franchise in online fashion and luxury

Posted by on January 16, 2012 @ 8:59 am


farfetch.com - Building the next global franchise in online fashion and luxury

Today marks a big milestone in the life of farfetch.com, the fast-growing global marketplace for independent fashion boutiques, and one of our ecommerce portfolio companies. farfetch.com just announced that it has raised $18 million in a further expansion round of funding with new investors Index Ventures and eVenture Capital Partners joining Advent Venture Partners (we participated in this round too). This new round of funding will allow farfetch.com to expand in its existing markets across Europe and North America, while implementing strategic growth efforts into new markets in the United States and Brazil and Asia.

farfetch.com, a unique, global and curated online marketplace

We first came across farfetch.com in November 2008 when a contact of ours in the fashion industry pointed out the recently-launched company as being an interesting and innovative new player in the online fashion world. We watched it for a while and made contact late 2009 with Portuguese founder and CEO José Neves; we were super impressed from our very first meeting and swiftly decided to back the company. Our business is about backing fast-growing tech-driven businesses, typically founder-led and at a stage where they have started to prove their business model, with a few millions of revenue, customers, a working product and a great team. When we called farfetch.com in November 2009 the bootstrapped company was just hitting this stage. At the time we were doing active deal search in the online fashion and apparel market, where we saw the beginning of a massive online opportunity, especially at the high-end (so far most online fashion businesses had been in the discount market, led by Ventes-Privées in France, Net-a-Porter being a remarkable exception). Another angle for our deal search was “Marketplaces”. As we focus on capital-efficient growing businesses, marketplaces that work (with liquidity, barriers to entry and growth) are right in the sweet spot of our investment strategy. Having met with José we were impressed by what he had achieved with very limited resources: he had proven the farfetch.com model, ie. offering consumers globally the best of fashion and luxury shopping offering and experience, through a marketplace where the best European multi-brand stores sell their carefully curated stock from the best brands from Europe and beyond.

Fast-growth and strong execution, a remarkable European entrepreneurial story

Two years later, looking at farfetch.com today, the performance has been spectacular with very strong execution on a model that remains very unique and highly differentiated. Since its launch in late 2008, farfetch.com has experienced rapid growth and consumer adoption, with a current annual sales growth rate over 200 percent. It has built a global and engaged community of fashion lovers, with over 50,000 customers in 100 countries, with a widespread and diversified global footprint: 50 percent of sales are delivered to emerging and new markets. farfetch.com has 110 boutique partners in Europe and the US, and 60 partners in Brazil. In total over 200 boutique locations in 12 countries are present on the platform, offering 35,000 products from an eclectic mix of high-end luxury with casual contemporary and emerging fashion labels across womenswear, menswear, accessories and lifestyle.

When we first met the company late 2009, the company’s transaction run-rate was around $5m, which had been achieved without external equity investment. The company is currently delivering a run-rate well over 10x this level, just 2 years later. The US is logically the largest market for Farfetch but growth is increasingly driven by the demand from the so-called “emerging markets” where the demand for high-end fashion and luxury products is so strong. Farfetch.com enables those independent brick-and-mortar retailers, who have often been in business for decades with a very strong and loyal local customer base, to reach a new clientele, far away but similarly fashion-savvy and aspiring to a certain lifestyle. The other reason is simply that online continues to take market share from offline as consumers opt for the convenience, service and choice offered by online retailer vs. the High Street. By offering a win-win partnership to the best fashion stores in Europe and in the US, farfetch.com has created a fantastic consumer proposition where people can, from the comfort of their sofa, do their shopping in Milan, Paris, LA or London. At a time when Europe is suffering, such three-digit growth rate is impressive, even more so considering that the average transaction value is comfortably above $500 per order. It just illustrates how smart and agile entrepreneurs can create businesses with global ambitions from virtually anywhere these days (farfetch.com started in Portugal), as the Internet is an open and global trading platform to leverage.

Our investment thesis, building a “unique global online franchise in lifestyle and luxury ecommerce”

We are incredibly excited by the business that José and his team are building. We believe that farfetch.com has the opportunity to build the next global independent franchise in online fashion and luxury. There is currently no independent competitor offering such a wide range of products. Our investment thesis can be summarised as follows:

  • A very large, global, fragmented market where growth is happening online
  • Very capital efficient model, initially proven with limited investment, with the potential to scale significantly and very profitably
  • Impressive founder, repeat-entrepreneur with experience in both the fashion and IT industries, ambitious and with a strong track-record of execution
  • Great achievements so far in terms of revenue growth, cheap traffic acquisition, brand building, operational metrics, with an engaged community of customers
  • Proven model, team focused on ruthless and fast execution of their plan, with significant upside from progressive international expansion
  • Fits very well Advent’s Tech team sector knowledge and with our latest Fund’s Growth Equity strategy

So today we are doubling down on farfetch.com, reinvesting significantly in the company and bringing on board Index Ventures and eVenture to support the expansion further, especially in the US, Brazil and Asia. With new fantastic partners on board along side us, we look forward to the next phase of growth of the company and to continue our successful partnership with José and its team.

Visit www.farfetch.com for more details.