Lamoda, the Russian online fashion site incubated by the Samwer Brothers’ Rocket Internet, is upgrading its wardrobe. On Tuesday, the company is announcing a new injection of $130 million — understood to be a record round of funding for a Russian ecommerce site, passing the $100 million that Ozon, Russia’s Amazon, picked up in 2011. This latest round was led by Access Industries, the VC and holding company controlled by Len Blavatnik, with participation also from Rocket Internet regulars, Summit Partners and Tengelmann Ventures.
Like these two, Access Industries is also a repeat Rocket Internet investor, with stakes in Pinterest clone Pinspire and home furnishings site Westwing. Last May, Blavatnik and Access Industries also put $200 million as a direct investment into Rocket Internet itself. The company has told us that today’s investment is separate and new.
“Lamoda is a dynamic e-commerce company with strong growth and an experienced management team,” noted Blavatnik in a statement on the investment. The company is not revealing the valuation of Lamoda after its cash-for-equity deal.
Niels Tonsen, one of the German co-founders and the CEO of Lamoda (along with Dominik Picker-Huchzermeyer, Burkhard Binder and Florian Jansen), tells TechCrunch that the funding will be used to continue expanding the company into more of Russia and adjacent markets like Ukraine.
Riding the double trends of a growing middle class and a rising population of internet users — Russia is currently ranked as the largest internet market in Europe by comScore with 61.3 million consumers — Lamoda competes against the likes of Ozon, as well as KupiVIP and a number of smaller sites. The addressable market in the whole of the Russian-speaking world counting other CIS states, Tonsen notes, is 200 million. It also fits with the Samwers’ wider focus on fast-growing emerging markets where large U.S. players like Amazon or eBay have yet to make significant inroads — although eBay has set a goal to focus much more on Russia, and Amazon is now also getting more active in the country.
Like its rivals, Lamoda aggregates and resells clothes and accessories from some 800 brands — 1 million products in all — and also runs a logistics operation to deliver them, called Lamoda Express.
Russia, as we have pointed out before, has a notoriously inefficient postal service, and so the bigger ecommerce companies tend to take matters into their own hands and run both logistics and delivery themselves, along with a cash-on-delivery payment scheme because credit card penetration is also low. Lamoda’s aim, says Tonsen, is to offer its courier service in over 25 cities by the end of this year, from its current number of 10.
“Our company had very good traction in recent months,” he tells TechCrunch. “Things are going well on delivery platform and in our warehouse, so now is the right time to continue building the service.”
The company is not releasing any revenue figures, nor will it say whether it has become profitable yet. But Tonsen points out that its 1 million customers make 20 million visits per month to its two sites (there is a second in Kazakhstan), and that it has a “multiple three-digit million run rate, and growing by a couple of hundred percentage points per year.” Some 15% of its traffic comes via mobile devices and is rising, he adds.
Today’s round comes on the heels of a funding round announced just in September 2012, which was reportedly between $40 million and $80 million and led by JP Morgan, another big Samwer backer. Before that, there was an investment of an undisclosed amount made by Rocket Internet and the Samwers themselves. Other Russian backers of the Samwers include Yuri Milner’s DST, which also invests in Rocket Internet, but not publicly in any individual company.
One area that Tonsen says today’s investment will not be used is in acquisitions. “We are a believer of building things ourselves, such as what we’ve done with fulfilment and sales,” he says. “We have a private label, and we will continue to push into that part.” Other investments — and a common focus for online fashion sites — may get made in technologies that will help Lamoda offer better visualizations for internet shoppers to pick fits and looks they’re more likely to keep than return.
And like other companies in the Samwer portfolio, Lamoda may work with other Rocket Internet startups. “We’re considering eerything that could make sense,” he says. “But some like Payleven, which relies on mobile payments with cards, wouldn’t make that relevant at the moment here.”
Lamoda is a good news story today for Rocket Internet, but it wasn’t always this way. Today’s funding and growth are turnaround tales for the company, which once was something of an embarrassment for Rocket Internet. In 2011, an email surfaced from Oliver Samwer admitting early mistakes when first launching the company, and calling for a more aggressive strategy as a result — a “blitzkrieg,” in his words. That may bristle with some critics of the Samwers, but ironically, it looks like, for now at least, it has paid off for Lamoda and the Samwers’ Russian ambitions.