Because fashion never goes out of style, fashion portals continue to bring in the money not just from consumers looking for the next big thing — be it style or bargain, and ideally both — but also investors keen to ride the wave. The latest example is Rad, a Paris-based startup that focuses on hipster clothes and accessories and likens itself to the online equivalent of Urban Outfitters. Today, Rad is announcing €2.5 million ($3.3 million) in funding. Rad is just under one year old, but on its own steam and through viral marketing it’s already picked up 1 million users. This round of money, €2 million of it from Index Ventures, is the first Rad has raised and it will use the backing to expand its business internationally. That will be first to the UK and Germany, and co-founder and CMO David Smadja tells us that the aim is to hit the U.S. in two years.
The funding comes in the wake of a much bigger round for a more established online fashion brand, but one that points to how hip can still mean big money: Fab earlier this week announced the closing of a $150 million round at a $1 billion valuation. And it’s still raising more.
Index, for its part, has built up a strong portfolio in online fashion, and as it were, sites that aim specifically for a more edgy look. Among the 150 companies it currently backs are biggies like Nasty Gal, Farfetch and ASOS, as well as smaller sites like The Business Of Fashion. (And yes, Index also has a lot of skin in the game with more mainstream operations like Etsy.)
Interestingly, it’s the Nasty Gal parallel that Martin Mignot, the partner at Index who led the investment, also highlights. Just before investing in Rad, he had thought that the online fashion space was played out, but when his girlfriend showed him Rad, he sat up and took notice. (It was she who first brought Nasty Gal to Mignot’s, and Index’s, attention, “and that story has played out well so far, ” he notes understatedly in a blog post on the funding.) The fast growth, and the team, were what comprehensively won him over, he says.
“We are delighted to be partnering with the Rad team, who have proven, in their short history, that they have an innate understanding of fashion, brands and design,” says Mignot. “Working with ground-breaking businesses like Etsy and NastyGal has proven to us that retail is an area undergoing enormous change and Rad has a great opportunity to become a global company in this space.”
While Rad has been doing well on its own — it says it’s on track to make €15 million in sales in its first year of operations, self-funded — the extra capital will give it a boost to move into new territories and staff up.
“We are raising to accelerate our growth — hire key people, build a logistics platform, speed up acquisition through marketing, develop our production capacities,” notes Smadja. “Ideally, we would like to enter the US market in the next 2 years but right now we’re focusing on Europe, next markets being the UK and Germany.” Other co-founders include Anthony Serero (its CEO), Simon Amzalag (its CFO) and Julia Serero (its chief buyer).
While online fashion is most definitely a crowded market, it’s the smart move to look for a particular slant on the market early on. In the case of Rad, it’s the young women and sometimes men who shop at Urban Outfitters — hip but not too out there. “Our competitor would be Urban Outfitters,” Smadja says. “The direction we’re taking will set us apart in terms of offer (we focus on small brands and cool products that are difficult to find and our dynamic is much different).” The difference is that because it is online, and because Rad has adopted the private sale business model many other sites have used, particularly in early days (Fab has, for example, since dropped its invite policy), “We are competitive on prices, something that Urban can never be.”
The other key part of Rad is that it tries to work the trend among shoppers these days to opt for low prices and fast turnover in wardrobe. “We do not believe in traditional seasonality in fashion,” he says, noting that they stay away from the idea of offering 2 big collections each year. “We focus on products and because of our turn around and dynamic, we’re able to showcase hundreds of collections a year at best prices.” Whether it will be able to hold to its anti-establishment approach as it grows up will remain to be seen.
Other investors in this round included Nicolas Santi-Weil (Founding Partner at The Kooples, who will be joining the Rad board) and the New York-based Vaizra Seed Fund.