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Dc2 deck7


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Dc2 deck7

  1. 1. Digital  Commerce  2.0   Investment  Thesis   June  2011   Bill  Gilroy   917-­‐533-­‐7087  Proprietary  and  Confidential.    Do  not  distribute.  
  2. 2. Executive  Summary   The  retail  marketplace  is  being  profoundly  disrupted  by  the  rapidly  evolving   Digital  Commerce  sector,  with  significant  implications  for  retailers,  brands   consumers,  and  investors.   •  In  the  beginning,  there  was  Amazon  and  Ebay….today  Digital  Commerce  encompasses   a  huge  array  of  merchants,  platforms  and  service  providers  and  represents  a  critical   growth  area  for  traditional  retailers  and  brands     •  Digital  commerce  2.0  (DC2)  is….   –  causing  massive  disruption  to  the  retail  marketplace   –  enabling  large-­‐scale  and  permanent  changes  to  consumer  behavior  and   shopping  patterns   –  taking  an  increasing  share  of  global  consumer  spending   –  a  huge  market  and  rapidly  growing   –  still  in  the  first  inning   Significant  value  will  be  created  for  investors  at  this  stage  of  the  cycle  who   have  ability  to  understand  this  rapidly  evolving  market  Proprietary  and  Confidential.    Do  not  distribute.   2  
  3. 3. Online  Retail  is  a  Huge  and  Rapidly  Growing  Market  •  Online  retail  sales  in  the  U.S.   10% are  forecast  to  grow  from   CAGR $155.2B  in  2010  to  $248.7B  in   2014  (10%  CAGR)  and  from  6%   to  more  than  8%  of  total  retail   sales   Source:  Forrester  Research   •  There  is  a  $100  billion  incremental  revenue  opportunity  in   online  retail  just  in  the  U.S.  over  the  next  five  years   Proprietary  and  Confidential.    Do  not  distribute.   3  
  4. 4. DC2  is  more  than  Online  Retail  •  Consumer  shopping   patterns  are  rapidly   changing    •  Online  plus  “web-­‐ influenced”  retail  sales  will   comprise  53%  of  all  retail   sales,  or  $1.4  trillion  in  total   sales  •  Successful  brands  will  be   multichannel   Source:  Forrester  Research   •  In  addition  to  online  retailers,  a  huge  ecosystem  of   complementary  platforms  and  services  are  emerging  that  are   creating  an  additional  investment  opportunity   Proprietary  and  Confidential.    Do  not  distribute.   4  
  5. 5. Huge  Secular  Trends  are  Driving  Growth  Ubiquitous  Web   Consumer   Best-­‐in-­‐class   Prolifera2on  of   Innova2on  /  Compu2ng   Familiarity  and   shopping   smartphones   New  Shopping   Preference  for   experience   and  growth  in   Models   Shopping  Online   mobile   commerce   •  Digital  commerce  grew  (and  increased  share)  during  the  recession   •  Huge  secular  trend   –  In  2009,  154  million  people  in  the  U.S.  bought  something  online,  or  67%  of  the  online   population   –  In  2010,  5.5  million  people  shopped  online  for  the  first  time   –  70%  of  growth  came  from  existing  shoppers  simply  buying  more  Proprietary  and  Confidential.    Do  not  distribute.   5  
  6. 6. DC2  Innovation:  Sector  Analysis*   Sector   Representative   Primary  Business   Comments  /  Issues   Companies   Model   Online  Retail   •   Direct  retail  sales  to   •   Different  models:   consumers  (private   discount,  custom,  flash   label  and  third-­‐party   sales,  etc   brands)   •   Service  focus   •   Customer  acquisition?   •   Wholesale  strategy?   Platform  /  Internet   •   Revenue  Share     •   Customer  acquisition   Service   •   Transaction  Fees   •   Scale,  scale,  scale   •   First  to  market   Media/Content   •   Advertising   •   Low  barriers  to  entry   • Affiliate  marketing  fees   •   Differentiation   •   Scale   •   Commerce  component?   Mobile   •   Fees  from  retail   •   User/experience   partners  /  clients   adoption   •   First  Inning   •   Huge  opportunity   Infrastructure   •   License  fees/solution   •   Technology  solutions   sales   •   Investment  area  for   •   Revenue  Share   brands  and  retailers   *  Sectors  not  mutually  exclusive  Proprietary  and  Confidential.    Do  not  distribute.   6  
  7. 7. Successful  Brands  will  be  Leaders  in  DC2   Gilt  Groupe   Polyvore   Social  Media   Retail   Internet   Mobile   Tory Mobile Wholesale   NET-­‐A-­‐PORTER  Proprietary  and  Confidential.    Do  not  distribute.   7  
  8. 8. Key  DC2  Success  Factors  • Successful  DC2   E xperience   companies  are   •   Service   execu4ng  well  in   •   Social   at  least  2  of  3   •   Fun  /  Entertainment   major  areas   •   Convenience   •   Game  mechanics   Digital   •   Unique  story  /  branding   Commerce   •   Rewards   V alue   R elevance   •   Custom  /  Mass  custom   •   Discount  to  retail   •   Local   •   Direct  to  consumer   (disintermediation)   •   Niche   •   Group  Buying   •   One-­‐to-­‐one   •   Flash  sales   •   Relevant  information   Proprietary  and  Confidential.    Do  not  distribute.   8  
  9. 9. Comparison  Shopping:  A  DC2Case  Study   `   Proprietary  and  Confidential.    Do  not  distribute.   9  
  10. 10. Gilt  Vs.  Bluefly   (1)   Year  Founded   2007   1998   2010  Revenue   $400M   $89M   %  Growth  2010  /  2009   135%   9%   %  Growth  2009  /  2008   100%   -­‐15%   Profitable?   Breakeven   No   Unique  Monthly  Visitors   968,133   817,442   %  Change  y/y   16.58%   -­‐5.79%   %  Change  m/m   13.98%   -­‐8.95%   V R E V R E Value  /  Relevance  /  Experience   (1)  Gilt  Groupe  financial  data  estimated.   Proprietary  and  Confidential.    Do  not  distribute.   10  
  11. 11. Selected  DC2  Company  Profiles   11
  12. 12. Sector:   Online  Retail  Warby  Parker:  Disintermediating  the  Prescription  Eyewear  Market   V R ECompany   Warby  Parker  Headquarters   New  York,  NY  Year  Founded   2010  2010E  Revenue   NA  Profitable  (Y/N)   Yes  Unique  Monthly  Visitors  (1)   21,050  Funding   ~$2M  Investors   First  Round  Capital,  Lerer   Ventures,  SV  Angel  CEO   Neil  Blumenthal  Business  Description   Online  retailer  of  branded   prescription  eyewear  •   Several  online  retailers  are  pursuing  a  classic  disintermediation  model  to  deliver  exceptional  value  to  customers.    Warby  Parker  has  entered  a  crowded  marketplace  for  designer  prescription  eyewear  and  distinguished  itself  with  a  highly  targeted  strategy,  prominent  value  message  and  a  fun  and  seamless  shopping  experience   Source:  Warby  Parker   Proprietary  and  Confidential.    Do  not  distribute.   12  
  13. 13. Sector:   Online  Retail  Gemvara:  Bringing  custom  to  fine  jewelry   V R ECompany   Gemvara  Headquarters   Lexington,  MA  Year  Founded   2006  2010E  Revenue   ~$7M  Profitable  (Y/N)   NA  Unique  Monthly  Visitors  (1)   134,585  Funding   $20.2M  Investors   Highland  Capital  Partners,   Canaan  Partners,  Balderton   Capitall  CEO   Matt  Lauzon  Business  Description   Online  retailer  of  custom   fine  jewelry  •   Custom  retailers  are  proliferating  online,  particularly  within  the  jewelry  and  apparel  categories.    Gemvara  offers  an  easy-­‐to-­‐use  platform  for  customers  to  design  their  own  jewelry  or  select  from  styles  developed  by  other  customers,  all  at  price  points  from  a  few  hundred  dollars  to  several  thousand  dollars.   Proprietary  and  Confidential.    Do  not  distribute.   13  
  14. 14. Sector:   Online  Retail  Stella  and  Dot:  Reinventing  the  Avon  Lady   V R ECompany   Stella  &  Dot  Headquarters   San  Bruno,  CA   •   Using  technology,  a  new  breed  of  direct  Year  Founded   2004   sellers  is  transforming  the  industry.    Stella  &  2010E  Revenue   $104M   Dot  has  built  a  $100M  jewelry  brand  by  Profitable  (Y/N)   Yes  Unique  Monthly  Visitors  (1)   184,137   employing  a  sales  force  of  independent  stylists  Funding   $37M   that  are  equipped  with  their  own  company-­‐Investors   Sequoia  Capital   Jessica  Herrin   branded  URL  and  mobile  app.  CEO  Business  Description   Direct  seller  of  designer   jewelry  utilizing  ‘direct-­‐ seller’  approach   Proprietary  and  Confidential.    Do  not  distribute.   14  
  15. 15. Sector:   Platform/Service  Rent  the  Runway:  Netflix  for  Fashion   V R ECompany   Rent  the  Runway  Headquarters   New  York,  NY  Year  Founded   2009  2010E  Revenue   ~$6M  Profitable  (Y/N)   Yes  Unique  Monthly  Visitors  (1)   150,796  Funding   $30M  Investors   Highland  Capital  Partners,   Bain  Capital  CEO   Jennifer  Hyman  Business  Description   Offers  members   opportunity  to  rent   designer  fashions  •   Rent  the  Runway  has  rapidly  scaled  to  1  million  members  and  profitability  in  less  than  2  years.    For  brands,  the  platform  is  a  marketing  and  customer  acquisition  channel,  as  98%  of  members  try  brands  they’ve  never  worn  before.   Proprietary  and  Confidential.    Do  not  distribute.   15  
  16. 16. Sector:   Platform/Service  Polyvore:  Content,  Community,  Entertainment  and  Commerce   V R ECompany   Polyvore   • Most  visited  Headquarters   Mountain  View,  CA   fashion  website  on  Year  Founded   2007   the  Internet  2010E  Revenue   ~$15M  -­‐  $20M  Profitable  (Y/N)   Yes  Unique  Monthly  Visitors  (1)   2,370,546   • 10  million  Funding   $8.1M   uniques/month  Investors   Benchmark  Capital,  Matrix   Partners,  Harrison  Metal   (source:  Company)   Capital  CEO   Pasha  Sadry  Business  Description   Community  site  for  online   style  where  users  are   •   ~150  million   empowered  to  discover   style  and  set  trends   pageviews/month   •   Analytics   Goldmine   •   Partner  with   brands  to  drive   deep  engagement   Proprietary  and  Confidential.    Do  not  distribute.   16  
  17. 17. Sector:   Platform/Service  ShoeDazzle:  Record  Club  Model  Revolutionizing  Shoe  Market   V R ECompany   ShoeDazzle  Headquarters   Los  Angeles,  CA  Year  Founded   2009  2010E  Revenue   ~$20M  Profitable  (Y/N)   No  Unique  Monthly  Visitors  (1)   2,233,581  Funding   $60M  Investors   Andreesen  Horowitz,   Polaris  VP,  Lightspeed  VP  CEO   Brian  Lee  Business  Description   Based  on  a  personal  style   evaluation,  ShoeDazzle   selects  and  ships  a  pair  of   shoes  every  month  to  its   more  than  3  million   members  •   ShoeDazzle  has  attracted  more  than  3  million  subscribers  that  receive  five  shoe  recommendations  every  month  from  ‘celebrity  stylists’  based  on  a  style  evaluation  of  each  member.    Members  can  skip  a  month  or  shop  for  something  else.    All  items  are  $39.95   Proprietary  and  Confidential.    Do  not  distribute.   17  
  18. 18. Sector:   Media  /  Content  Total  Beauty:  Deep  Focus  on  Large  Sector  to  Rapidly  Scale         V R ECompany   Total  Beauty  Media  Headquarters   Santa  Monica,  CA  Year  Founded   2009  2010E  Revenue   NA  Profitable  (Y/N)   No  Unique  Monthly  Visitors  (1)   512,442  Funding   $16M  Investors   Wallington  Investments,   USVP  CEO   Emrah  Kovacoglu  Business  Description   Online  site  offering  content   and  community  in  the   beauty  category.  •   Content  and  media  sites  covering  fashion  and  beauty  have  proliferated  online  due  to  low  barriers  to  entry,  robust  advertising  spending,  and  strong  consumer  interest  in  these  categories.    Total  Beauty  is  acquiring  complementary  sites  to  achieve  the  scale  necessary  to  make  the  ad  model  work.         Proprietary  and  Confidential.    Do  not  distribute.   18  
  19. 19. Sector:   Mobile  Kickbucks:  Marrying  Mobility,  Loyalty  and  Precision  Proximity   V R ECompany   shopkick  Headquarters   Palo  Alto,  CA  Year  Founded   2009  2010E  Revenue   NA  Profitable  (Y/N)   No  Active  Users   1.5  million  Funding   $20M  Investors   KPCB,  Citi,  Red  Hoffman  CEO   Cyriac  Roeding  Business  Description   Mobile  app  that  offers   users  rewards  and  deals  for   walking  into  stores  and   malls  •   Mobile  is  creating  enormous  opportunities  for  brands  and  retailers.    Shopkick  has  already  amassed  1.5  million  users  who  have  visited  250,000  locations  nationwide  and  scanned  more  than  3.5  million  items.   Proprietary  and  Confidential.    Do  not  distribute.   19  
  20. 20. Sector:   Infrastructure  Pixazza:  Enabling  Interactive  Shopping  Experiences   V R ECompany   Pixazza  Headquarters   Mountain  View,  CA  Year  Founded   2008  2010E  Revenue   NA  Profitable  (Y/N)   NA  Unique  users  per  month  (April  2011)   100  million  Funding   $17.8M  Investors   CMEA,  August  Capital,   Foundation  Cap,  Ron   Conway  CEO   Bob  Lisbonne  Business  Description   Platform  that  makes   photos  interactive  to   deliver  relevant  content   and  enable  sales.  • As  retailers  and  brands  continue   to  embrace  DC2,  significant   investments  will  be  made  in   technology  infrastructure.     Pixazza  reaches  more  than  100   million  unique  users  per  month   (45%  growth  March  –  April  2011)   Proprietary  and  Confidential.    Do  not  distribute.   20  
  21. 21. Where  is  this  heading?   •  Online-­‐only  brands  will  struggle  to  ‘cross-­‐chasm’  from  initial  adopters  without   Online   innovating     Retail   •  Increasing  blend  of  digital  and  bricks  and  mortar   •  Proliferation  of  disintermediation  models  in  focused  sectors   Platform/   •  Initial  land  grab  will  be  followed  by  the  market  coalescing  around  winners   Service   •  Successful  companies  will  nail  ‘experience’  and  ‘relevance’     •  Proliferation  of  me-­‐too  sites;  well  capitalized  companies  grow  though   Content  /   Media   acquisition  to  achieve  scale   •  Companies  will  add  commerce  capabilities  and  begin  to  look  like  online   retailers  or  platform  /  service  providers   Mobile   •  Poised  to  explode;  a  massive  amount  of  retail  market  share  will  be  put  up   for  grabs  as  consumers  gravitate  to  the  best  mobile  offerings   Infra-­‐   •  Brands  and  retailers  will  continue  to  increase  investments  in  digital   Structure   strategies,  creating  large  market  for  technology  and  service  providers     Proprietary  and  Confidential.    Do  not  distribute.   21  
  22. 22. Investment  Thesis  for  Digital  Commerce  •  Large  market  and  growing  rapidly  •  Gaining  significant  share  in  a  trillion  dollar  plus  market  in  the  US  alone  •  Benefitting  from  large-­‐scale  secular  trends  that  are  accelerating  •  Global  •  Huge  amount  of  innovation  •  Still  early   Proprietary  and  Confidential.    Do  not  distribute.   22  
  23. 23. Appendix  •  Additional  Selected  Company  Profiles   Proprietary  and  Confidential.    Do  not  distribute.   23  
  24. 24. The  DC2  Market  is  Global  and  Expanding  Rapidly   Company     Loca2on   Business     Investors   London,  UK  is  the  global  online   ISAI   destination  for  accessories  that   connects  customers  directly  with  top   independent  designers  all  over  the   world   New  Delhi,  India   Exclusively.In  is  a  members  only  retailer   Accel  Partners  India   offering  a  curated  daily  selection  of  the   Tiger  Global   best  in  Indian  fashion,  home  decor  and   travel.     Beijing,  China  is  one  of  the  Internet’s   Sequoia  Capital   premier  merchants  of  wholesale   fashion  apparel.     Rio  de  Janeiro,  Brazil   Brazil’s  leading  daily  deal  site   General  Atlantic,  Tiger   Global   Moscow,  Russia   Russian  flash-­‐sale  site  for  high  street   Balderton  Capital,   and  luxury  fashion  and  home  goods     Bessemer  Venture   Partners,  Accel  Partners,   Russia  Partners,    Proprietary  and  Confidential.    Do  not  distribute.   24  
  25. 25. Sector  Example  –  Online  Retail  (Custom,  E-­‐enabled  Selling)   V R ECompany   J.  Hilburn  Headquarters   Dallas,  TX  Year  Founded   2007  2010E  Revenue   ~$10M  Profitable  (Y/N)   NA  Unique  Monthly  Visitors  (1)   134,585  Funding   $12.3M  Investors   Battery  Ventures,   Bridgescale  Partners  CEO   Hil  Davis  Business  Description   Direct  seller  of  custom   menswear  • J.  Hilburn  is  building  an  affordable  luxury  custom  menswear  brand  online  by  pursuing  a  direct  selling  model  with  a  team  of  ‘stylists’  nationwide.   Proprietary  and  Confidential.    Do  not  distribute.   25  
  26. 26. Sector:   Online  Retail  Bonobos:  Creating  an  Online  Men’s  Retail  Brand   V R ECompany   Bonobos  Headquarters   New  York,  NY  Year  Founded   2007  2010E  Revenue   $10M  Profitable  (Y/N)   No  Unique  Monthly  Visitors  (1)   76,252  Funding   $22.3M  Investors   Accel  Partners,  Lightspeed   Partners,  Stage  1  CEO   Andy  Dunn  Business  Description   Online  retailer  of  branded   and  third-­‐party  mens   apparel   Proprietary  and  Confidential.    Do  not  distribute.   26  
  27. 27. Sector:   Platform  /  Service  Birchbox:  Bridging  Content,  Community  and  Commerce  in  Beauty   V R ECompany   Bonobos  Headquarters   New  York,  NY  Year  Founded   2010  2010E  Revenue   NA  Profitable  (Y/N)   No  Unique  Monthly  Visitors  (1)   NA  Funding   $1.4M  Investors   Accel  Partners,  First  Round   Capital,  Lerer  Ventures  CEO   Hayley  Barna  Business  Description   Beauty  product  discovery   service   Proprietary  and  Confidential.    Do  not  distribute.   27  
  28. 28. Sector:   Platform  /  Service  H.BLOOM:  Is  There  a  Platform  for  Every  Niche?   V R ECompany   H.  BLOOM  Headquarters   New  York,  NY  Year  Founded   2010  2010E  Revenue   NA  Profitable  (Y/N)   NA  Unique  Monthly  Visitors  (1)   NA  Funding   $2.2M  Investors   Battery  Ventures  CEO   Bryan  Burkhart  Business  Description   Subscription-­‐based  luxury   flower  arrangements  at   affordable  prices  to   consumer  and  corporate   customers   Proprietary  and  Confidential.    Do  not  distribute.   28  
  29. 29. Sector:   Mobile  Pose:  Creating  a  Fashion  Community  around  Photo  Sharing   V R ECompany   Pose  Headquarters   Lexington,  MA  Year  Founded   2010  2010E  Revenue   NA  Profitable  (Y/N)   No  Active  Users   NA  Funding   $1.6M  Investors   True  Ventures,  GRP   Partners,  Founder   Collective  CEO   Justin  Rosen  Business  Description   Mobile  app  that  makes  the   in-­‐store  shopping   experience  social   Proprietary  and  Confidential.    Do  not  distribute.   29  
  30. 30. Sector:   Infrastructure  TellApart:  Harnessing  Retailers’  Customer  Data  to  Drive  Sales   V R ECompany   TellApart  Headquarters   Burlingame,  CA  Year  Founded   2010  2010E  Revenue   NA  Profitable  (Y/N)   No  Active  Users   NA  Funding   $1.6M  Investors   Greylock  Partners,  Bain   Capital,  Reid  Hoffman  CEO   Josh  McFarland  Business  Description   Predictive  customer   analytics  platform  that   drives  revenue  using   customer  data   Proprietary  and  Confidential.    Do  not  distribute.   30