Atlas-backed Koodos sold to E-trader group, at a discount

[UK] We’d been hearing whispers that Atlas-backed discount fashion buying club Koodos was looking at its ‘options’, but we’ve confirmed today that it was yesterday acquired by the e-trader group which specialises in the onwards sale of surplus stock. The price is undisclosed but it’s a cash and shares deal which we understand to be in the vicinity of less than £250,000. In other words, that is pretty cheap, especially for a VC-backed business. It had one undisclosed round from Atlas in June 2006 but has been looking for £3-6m follow-on funding since the beginning of the year.

While the Koodos operational team is staying on, CEO Miriam Lahage will be departing after a handover period.

E-Trader Group CEO Harvey Sinclair, a serial entrepreneur with exits, told me the sale came about because Atlas is “backing the E-Trader story. We’ve been talking to them at length and they buy into it heavily.”

However our sources say Koodos had run into severe trading difficulty recently, hence the sale. We put it to both Atlas and to E-trader Group that we understood Koodos had in fact had gone into administration. Atlas denied this. Sinclair told us Koodos had been “looking at a financing structure which allowed their business to work more efficiently.”

We understand the koodos customer database is in the region of 200k customers, though e-trader group is not releasing figures.

But with some back of the envelope calculations, let’s just say they sold for £250,000. With 200,000 customers that means they sold the database for less than £1 per user. This is not great.

It’s at this point that you just have to put this down to experience – startups not doing so well is all part of the guts and glory of the scene. No doubt the recession has affected sales, though it appears Koodos has failed to capitalise on the frenzy surrounding buying clubs.

Koodos sold leading fashion brands at prices of up to up to 70 per cent off. Customers could shop on the website for bargains and sign up for exclusive previews of sales of special collections. It also launched, an ‘independent’ blog promoting fashion offers. koodos ships to 17 countries, including the USA, France, Germany, Italy, Spain and Sweden.

koodos was started in June 2006 with backing from Atlas Venture. The company was headed up by Lahage, who previously oversaw ecommerce for the huge US discount fashion business T.J.Maxx and department store chain Marshalls. She relocated from Boston to London three years ago.

It’s been previously reported that Lahage was poached to work on the startup, which suggests it had reasonably significant backing from Atlas, such that it could pay a decent salary for such a high profile executive.

e-trader group has backing from Elderstreet and Sinclair sold his Hotgroup recruitment sites to the Trinity Mirror group in 2005 for £50m.

Whatever the back-story, E-Trader Group is looking at a pretty good position now.

Big fashion retailers have two problems: bulk overstock and end of line excess which is highly valuable.

E-Trader has a broad strategy to dominate the clearance overstock marketplace firstly with its B2B marketplace Stockshifters and now with a consumer brand like Koodos as well. It’s now able to offer a single marketplace for B2B and B2C.