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We won’t be getting our hands on a Shein filing just yet, but we can’t wait to — especially to understand the logic and math behind its ubiquitous ads. But in the meantime, we landed on some unexpected tidbits from Molten Ventures, which will be of interest to both VCs and founders.
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Lights and shadows
Fast-fashion platform Shein confidentially filed to go public in the United States, according to multiple media reports that consolidated earlier rumors. A few weeks ago, Bloomberg suggested that it was targeting a valuation of up to $90 billion.
While the company is now headquartered in Singapore, it kept its supply chains and warehouses in China, where it was founded in 2008. If it took another decade for Shein to come on your radar, you are not alone; I am still flabbergasted by how ubiquitous the company and its advertising have become since then.
I feel the same about Chinese rival Temu, although it happened faster: The PDD-owned e-commerce platform, which Redditors were quick to call “the wish.com version of wish.com,” only launched in 2022, but lately, it just seems there’s no escape from its ads either.
I don’t think I’m exaggerating when I say that most of the ads I am seeing these days are for Shein or for Temu — and that’s not even accounting for spam.
Competitors have taken notice, too. In Etsy’s latest quarterly earnings call, CEO Josh Silverman called out how “those two players are almost single-handedly having an impact on the cost of advertising, particularly in some paid channels in Google and in Meta.”
In an understatement, Silverman noted that “they’re spending a large amount of money on marketing [and it’s] not clear that they’re using ROI thresholds to do that.”
Will this dampen appetites for Shein’s shares or bolster it? I can’t wait to find out — and as the IPO process moves forward, I can’t wait to finally read the Risks section of its filing and extrapolate what it could mean for Temu, too.
Filings and findings
Shein may have opted for a confidential filing, but once public, it won’t be able to avoid the transparency requirements that listed companies have to comply with — and which I love. It means that we get access to a level of information we are not usually privy to, so I love it even more when the company in question is a VC fund, as is the case of Molten Ventures.
Back in August 2021, when Molten was still known as Draper Esprit, Alex and I chatted with its co-founder Stuart Chapman to understand why a VC firm would get listed and what it changed to its operations. We also noted that it wasn’t an isolated case in the U.K.; a few weeks earlier, Forward Partners had gone public on the AIM, a submarket of the London Stock Exchange.
Fast-forward to this week, and we learned that Molten was conducting an all-share acquisition of Forward Partners, of which it was already a shareholder, for approximately $52.24 million, in order to acquire its portfolio of early-stage companies. At the same time, it also secured about $72.42 million in a new equity fundraise.
What’s particularly interesting is the level of detail that Molten is disclosing as part of this double process. Dive into the filings if your local legislation allows you to; this is a trove of information for anyone interested in working in venture capital and curious about the math behind funds. For instance, I was surprised to see that Molten had made a return of less than 1x on Cazoo, although that’s anecdotal compared to its 30% average return per year since its 2016 IPO.
If nerding out on return rates is not your thing, there’s a different tidbit that’s quite revealing on the current balance between founders and funders: that 97% of Molten’s portfolio investments are “protected by favorable preference structures.” This tells us two things: that downside protection is the new normal and that whether founders like these terms or not, it is what the investors’ investors want to hear to sleep well.