2 Reasons Why We Are Investing €2m In Rad
Index Ventures is leading a €2.5m Series A investment alongside Angel investors in Paris-based Rad, a discovery platform for cool fashion, art and design products, and I will be joining the board. Here is why we are excited to be working with them…
When, over the Christmas holiday, I took some time to think about the sectors I wanted to invest in this year, e-commerce was low on the list. And as a subcategory, flash sales were even lower. Pretty much at the bottom. It felt like the boat had sailed a long time ago and that the big categories (fashion, design) were definitely owned by well-established players. And that the numbers simply didn’t add up for new entrants, with the cost of acquiring a member far outstripping even the most optimistic life time value calculations (I recommend reading Benchmark Partner Bill Gurley’s excellent post on that particular topic).
That was until I met Anthony Serero, Rad’s co-founder and CEO.
I had been tipped off about the website by my girlfriend, who is a much more avid fashion shopper than I am, and tends to have a good eye for brands. The previous startup she recommended I check out was Nastygal - it was 3 years ago and that story has played out well so far. So when last September she told me that Rad was moving up her Hot Fashion list, I decided to get in touch with Anthony asap and spend some time with the team.
1. The fastest team I’ve ever met
The company was still small then, turning over less than €100k a month, but things were ramping up fast, and Anthony’s pitch and attitude were unlike anything I had ever seen. He was so hungry and self-confident I almost thought he was playing an act on me. Until I realised he was dead serious, had the numbers to back himself up, and had not set up to create yet another flash sales website to flip rapidly, but rather to build something unique, and much much bigger.
Although they started with the daily newsletter flash sales model, they rapidly added their own flavour to it with their Art shop, which features the work of indie graphic designers and offers them a fully-integrated production and distribution platform. It didn’t take them months to launch it and ramp it up either, but weeks. This is a constant with this team: what takes other businesses years to achieve takes them months. It their current growth continues, it will have taken them less than a year to reach their first million member, their 200,000th fan on Facebook and their first €1m revenue month. All of which with a €20,000 initial investment.
2. A brand that clicks
Traction is a very important concept for consumer startups but also a very nebulous one. A lot of seed entrepreneurs ask me the same question: how do you know when you’ve achieved traction? To which I typically reply: traction is like porn, you know it when you see it. And it was very much the case with Rad, who reached 200,000 members without spending a single euro in marketing. This is what happens today when your brand really clicks with your customers, and they take to Facebook to share it with their friends.
The beautiful thing with brands is that once people recognise them and love them for certain attributes, they tend to bear meaning well beyond the initial style or even items they were initially associated with. I experienced this no later than last weekend when I went shopping for a new pair of brogues and ended up with a pair of…Dr. Martens. Brogues are not exactly what the British shoemaker is known for, but it turns out that they radically overhauled their line with a more preppy look, while retaining what made the success of their brand: rock-solid build, forever-lasting air-cushioned soles, and, of course, the trademark yellow stitching.
By successfully getting associated with “cool products” in their audience mind, in the same way that Dr. Martens is associated with solid, subversive, quality shoes in mine, Rad has the potential to build an emotional connection that lasts for much longer than the products they are selling today. Because brands never die and can be declined on an infinity of physical form factors. And that’s what so exciting about them.
This is the kind of ecommerce websites we at Index want to get involved with. Drawing from our experience with Nastygal, I’ve devised a super simple equation to summarise our approach:
Branded Ecommerce = Unique Product + Beautiful Merchandising + Well-Defined Audience + Scalable Distribution Channel = High margins + High repeat + Low marketing costs
And, while still very early, Rad, like Nastygal, already scores very high on all these dimensions.