Founder Profile: Fashion Forward Digital Brands Group Re-Confirms Top Deal Rating
- Oct 19, 2018
Key Deal Stats:
Raising platform: SeedInvest
Pre-Money Valuation: $35M
Raise type: Series A-3
Security: Preferred Equity
At time of publication, October 19, Digital Brands Group had raised $1.2M
The Digital Brands Group was previously selected as a “Top Deal” by KingsCrowd under the brand name DSTLD. This distinction is reserved for deals selected into the top 10% of our deal diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to email@example.com
You can find the Top Deal rating HERE.
For many of you, you may recognize Digital Brands Group as they have previously raised capital from the crowd both on SeedInvest and StartEngine. In fact, DSTLD was rated as a Top Deal just a few months back, which you can check out here.
But now the team is taking on even grander ambitions with plans to create a portfolio of direct-to-consumer (DtC) luxury brands like DSTLD under one larger umbrella. The approach makes immense strategic sense and further bolsters what is already a strong investment opportunity.
After spending a good deal of time chatting with Co-Founder Mark, we love his vision for the business as much as his love for equity crowdfunding. He is a staunch believer in this new ecosystem and is the perfect example of being able to back the best and brightest founders through platforms like SeedInvest. Check out our discussion below to learn more...
Mark, you have started up successfully before including as Co-Founder of Winc, a very popular and fast growing e-commerce wine startup. How did that experience shape your approach to building Digital Brands Group?
Mark: Co-founding both WINC and DSTLD, in addition to having many great relationships with other entrepreneurs with e-commerce startups, was a big factor to transition to Digital Brands Group. The unique nature of DtC brands requires a different type of logistics, working capital, and infrastructure investment. You need to build your own technology stack, marketing team, product, and customer service all before you really have any funding. It’s expensive and time consuming. To put it in perspective, it took Amazon, now the world's second most valuable public company, more than 14 years—or 58 quarters -- after its May 1997 IPO to make, cumulatively, as much profit as it produced in Q3 2018 alone.
Having already built our own highly functional infrastructure with DSTLD, as well as Winc, and knowing the pain points of the business model, we realized there was a void in the digital space that we could fill.
Digital Brands Group is about curating a collection of luxury lifestyle, digital-first brands. We’re bringing together like-minded direct-to-consumer names under one portfolio to share operational, infrastructure, and data resources as means to drive down redundant fixed costs that are difficult to establish and expensive to maintain. By eliminating demanding administrative responsibilities for our brands, we stimulate meaningful cash flow that can be reinvested into revenue generating marketing initiatives as well as product quality and innovation.
Your focus to date under the brand name DSTLD has been on fundamental fashion at a fraction of the cost to traditional retailers. Can you explain the shift the company will undergo as Digital Brands Group?
Mark: We’re looking to build and acquire other great digital-first brands with strong emotional connections with their customers, compelling marketing economics/returns and products that are relevant for years to come.
Currently, we’re working on launching our second brand, ACE Studios, a performance luxury men’s suiting and sportswear brand. We’ve been able to effectively leverage DSTLD’s platforms in order to launch our second brand at a fraction of what it would normally cost.
Our investors have already referred a number of brands to us, in addition to brands approaching us directly, since our current Reg A+ campaign went live a week ago. That’s very exciting to us. It provides compelling evidence that we’re onto something.
What market signals did the team pick up on that led to this decision to move to having several brand entities?
Mark: There has been an obvious shift in the way people shop today; nearly 80% of Americans shop online and e-commerce represented roughly 49.4% of all retail sales in 2017. And while consumers have become accustomed to the convenience, personalization, and transparency of online shopping, it takes the average consumer 15 or more interactions with the brand before they purchase. We feel an omnichannel experience is extremely important to our model, and millennials agree - 68% of millennials demand an omnichannel experience.
Through owning several brands under one umbrella, we’re able to provide the digital-first, omnichannel experience customers are looking for. All of our sites will be easily navigable to from one another, and will have a universal checkout cart. As we plan to open up more pop-ups, we’ll be able to incorporate multiple brands for our customers to interact with instead of just one. This way, we’re still able to own all of our channels and data, something traditional wholesale brands lack to their detriment, while providing a more diverse, but curated, experience.
How does creating more than one brand with backend shared services help to grow the business profitably?
Mark: Essentially, the long and short is you take the aggregate savings and re-invest in marketing which creates a virtuous cycle of profitable growth.
You’ve spoken about the fact that once you surpass $15M in top line revenue as a e-commerce brand you start to find profitability. Do you plan over the next couple of years to achieve profitability as a company?
Mark: 15MM is the minimum, 25M tends to be more normalized. We do intend to achieve profitability as a company by 2021.
You have over 71K customers. Do you have a sense of customer retention rates and how much does it cost to acquire a customer?
Mark: We’re up to 75k since we last spoke!
One of the important focuses of the organization has been on sourcing materials from ethical manufacturers. How have you been able to do so while maintaining decent unit economics?
Mark: We try and achieve healthy margins but not at the expense quality and ethical manufacturing. In some cases we have even moved to more expensive suppliers.
To date, you have completed several equity crowdfunding raises including on SeedInvest twice before and once on StartEngine. Why do you continue to raise capital from the crowd?
Mark: Some of you may not know that we have raised over $4.5 Million in investments through three very successful Equity Crowdfunding campaigns for DSTLD.
We were the first fashion company to embrace this new approach because we believe in the power of making our customers our shareholders. Our customers are our brand advocates, and have gotten us to where we are today. Should we IPO down the road, we want to reward and thank them for being the early adopters.
How will the capital raised in this round be utilized to build out the vision of Digital Brands Group?
Mark: Three major areas. Hiring top talent, investing in infrastructure and acquiring other great brands.
You recently brought on Hil Davis as CEO. What experience does he bring to the table to help bring this organization to the next level?
Mark: We’re very excited that Hil has joined on as CEO. Hil has extremely valuable experience both in the finance world as well as the brand building and supply chain worlds.
In 2007, Hil founded J. Hilburn, a made-to-measure suiting and sportswear company and one of the earliest digital-first DtC brands, J. Hilburn. In just six years, he built the brand from zero to $55M and doubled revenues each year. His experience in the tailored clothing industry will be especially helpful as we launch ACE Studios this winter.
Between shifting buying behavior, a brand that has proven success already and has leaned on over $4M in capital from the crowd, we think Digital Brands Group is the face of a new generation of startups that grow through the crowd, rather than institutions.
And their success to date and continued bolstering of their management team are the types of signs you want to see when backing a company.
We love the strategic approach to broadening its reach through multiple brands and continue to hold in our conviction that this is a Top Deal. Be sure to invest in this fashion-forward high growth startup HERE.