13 June 2022
Shakira, DraftKings and the NBA invest in consumer startups
Take a look at the latest VC and M&A activity in ecommerce and consumer goods.
Take a look at the latest VC and M&A activity in ecommerce and consumer goods.
Welcome to Dealboard. In this weekly feature, The Current is providing a look at the mergers, acquisitions and venture capital deals making news across the ecommerce and consumer goods landscape.
This week, celebrities back a DTC-born cereal brand's push into retail, and the NBA backs smart textiles. Plus, lab grown-diamonds attract new investment, while an online jewelry retailer is set to return to the public markets.
Cereal brand Magic Spoon raised $85M in Series B financing, and is planning its first nationwide retail launch at Target.
The funding round was led by HighPost Capital, and is joined by institutional investors including Siddhi Capital, Coefficient Capital, Constellation Capital, Carter Comstock.
A slate of celebrity investors also participated in the round, including Shakira, Russell Westbrook, Halsey, The Chainsmokers, Nick Jonas, Amy Schumer, Odell Beckham Jr. and Nas.
Launched in 2019 by Gabi Lewis and Greg Sewitz, Magic Spoon started with a direct-to-consumer model for its high protein, low-carb, grain-free cereal. With flavors like Fruity, Cocoa and Peanut Butter, the products are designed to inspire nostalgia while offering healthy ingredients.
Following the financing, the company is planning a retail rollout for the rest of 2022. It will debut in Target, then plans to launch in a variety of big box stores and natural grocers in the coming months.
bttn, a technology company focused on healthcare distribution, raised $20 million in a Series A financing.
Led by Tiger Global, the round values the company at $110 million.
The Seattle-based company’s platform is designed to simplify the process of buying name-brand medical supplies. It focuses on medical practitioners, businesses and emergency responders. The company said it has done business with 7,000 customers in a year since its launch, with more than 1,000 orders made on bttnusa.com. In April, the company added eight distribution and fulfillment centers.
“The Series A investment will help us scale and accelerate growth, allowing bttn to support more customers with a best-in-class shopping experience,” said JT Garwood, CEO and cofounder of bttn, in a statement.
A pyramid diamond from LUSIX. (Courtesy photo)
Lab-grown diamond producer LUSIX announced a $90 million investment, led by LVMH Luxury Ventures, Ragnar Crossover Fund and More Investments.
Founded by inventor Benny Landa, Israel-based LUSIX was spun off from Landa Labs in 2016. The backing of LVMH signals support from a leader in luxury.
With the new financing, the company is planning to start construction this summer on a solar-powered production facility. It will be the company’s second facility that runs on 100% solar power.
Products from U Beauty. (Courtesy photo)
U Beauty, the luxury skincare brand founded by influencer marketing pioneer Tina Craig, received a minority investment from consumer-focused investment firm Sandbridge Capital.
It’s the first institutional capital for the brand, which has a suite of products developed with technology that is designed to target areas of the skin with high levels of damage. The company’s products are currently available at Violet Grey, Net-a-Porter, Nordstrom, Bergdorf Goodman and Saks Fifth Avenue.
U Beauty is one of those rare mission driven brands that we have had the good fortune to partner with over the years, with its authentically modern clean beauty approach and importantly differentiated brand positioning,” said Sandbridge Founder and Managing Partner Ken Suslow, in a statement. “We are excited to contribute our experience in helping to build enduringly successful global brands in support of U Beauty's demonstrably strong foundation."
(Image via Recover)
Recover, a company which makes recycled cotton fiber and cotton fiber blends, raised $100 million in new funding.
The financing was led by Goldman Sachs Asset Management’s sustainable investing business, which is investing with majority shareholder STORY3 Capital Partners.
Recover aims to bring a sustainable alternative to the apparel supply chain. Its recycled cotton fiber helps to save water and reduce carbon. Currently, the company works with Primark, Inditex, C&A, Revolve and Lands’ End.
The company now plans to increase production capacity. It recently opened new manufacturing hubs in Pakistan and Bangladesh, and is planning to open additional hubs in Bangladesh and Vietnam in the near future.
Swedish fintech company Juni announced the close of two funding rounds.
First, it raised a $100 million Series B equity round led by Mubadala Capital. This included participation from investors including EQT Ventures, Felix Capital, Cherry Ventures, and Partners of DST Global.
Second, the company raised $106 million in venture debt financing from TriplePoint Capital.
The company offers a financial management platform that brings together physical and virtual cards, credit cards, accounting, analytics and digital advertising platforms.
“With this funding, we will help ecommerce businesses win by building the right insights, features and integrations while injecting capital into their marketing spend,” said Samir El-Sabini, cofounder and CEO at Juni.
Nfinite, a technology company with a focus on visualization and ecommerce merchandising, raised $100 million in a Series B round.
The funding was led by software investor Insight Partners, with participation from existing investor US Venture Partners.
Nfinite makes a SaaS-based visual merchandising platform for ecommerce, which allows retailers to create and manage product visuals using CGI technology. The company said its technology has been adopted by three of the world’s top five retailers, and is looking to provide tools for marketers exploring the metaverse. It is looking to grow a marketplace for talent and tools in the 3D ecommerce space.
With the financing, Insight Partners Managing Director Rebecca Liu-Doyle will join the company’s board of directors.
Going forward, the company plans to expand its customer, engineering, and marketing operations.
Smart fabric technology maker Nextiles raised $5 million in a Series A funding round.
The round for the New York-based company was led by Drive by DraftKings, with participation from the NBA, Madison Square Garden Sports Corp., Alumni Ventures, SmartSports, Phoenix Capital Ventures and Newlab. It also includes participation from ice hockey star Hilary Knight.
Blending flexible electronics and sewing technology, Nextiles is developing smart threads that can be sewn into a fabric and measure mechanical changes with Bluetooth as the fabric bends, stretches and twists. With this, the company said it can provide force analytics and 3D motion capture from compression clothing. It is currently working in tennis, baseball and is aiming to expand in basketball.
Reflex cofounders Mike Meyers and Carson Jones. (Courtesy photo)
Retail marketplace Reflex raised $4.5 million in a seed funding round.
Indicator Ventures led the round, with additional investment from Sugar Capital and Red Swan Ventures. Previous investors in a $1.45 million pre-seed round also joined, including ATX Venture Partners, Precursor Ventures, Active Capital and Clutch VC.
The company also attracted angel investors including former J. Crew, former Coach North American Retail Division president and former Staples CEO Ron Sargent, as well as RetailMeNot founder Cotter Cunningham and Favor CEO Jag Bath.
Reflex’s dual-sided marketplace is designed to connect retailers and associates to work in stores. It uses a model of “flex” work, which lines up workers with retail experience, but does so in a way that provides on-demand work. Going forward, Reflex plans to expand across Texas, and add additional US retail markets over the next 18 months.
Online jeweler Blue Nile is set to go public through a merger with a special purpose acquisition company, the companies announced on Friday.
The deal to combine with Mudrick Capital Acquisition Corporation II is expected to provide $450 million in capital, and value the company at $873 million. Blue Nile will list on the NASDAQ under the name MUDS. The company will be led by the current management team, including Blue Nile Chief Executive Officer Sean Kell.
Founded in 1999, Blue Nile brought the purchase of diamond engagement rings to ecommerce. It now has a variety of jewelry offerings, and ships to 44 countries, including China, the U.K., Canada, and Australia.
“As the pioneer of and category leader in online fine jewelry, Blue Nile is well positioned to win as the go-to ecommerce destination in the space,” said Jason Mudrick, Founder and Chief Investment Officer of Mudrick Capital Management, L.P., in a statement.
This marks a return to the public markets for Blue Nile, which was taken private in 2016 via acquisition by Bain Capital Private Equity, Bow Street and Adama Partners.
The deal is expected to close in the fourth quarter of 2022.
TrueCar acquired automotive retail and fintech platform Digital Motors.
Based in Irvine, California, Digital Motors helps dealerships go omnichannel. The company provides auto dealers, lenders and others with tools to augment a physical presence with a digital storefront or marketplace.
With the deal, TrueCar plans to grow its TrueCar+ marketplace, which was described in an announcement by TrueCar CEO Mike Darrow as an “asset-light marketplace where consumers have easy and transparent access to a national inventory of vehicles and our dealers have efficient and turn-key access to a national audience of consumers.”
Darrow called the acquisition a “key step” in adding ecommerce capabilities, and added that the company will benefit from the expertise of Digital Motors’ team.
Pet wellness platform Antelope said it acquired Diggin’ Your Dog and Super Snouts, a company which supplies pet CBD supplements, health products and treats.
Launched in August 2021, Antelope was created by private equity firm Alpine Investors and CEO Wendy Wen. It is aiming to build a next-generation conglomerate of natural pet brands.
Diggin’ Your Dog and Super Snouts was founded in 2011 by Christy Love and her partner Dawn Love. Christy Love will remain CEO. The company’s products will be offered on Antelope alongside nature pet treats brand Bocce’s Bakery and digital insurance and training provider Doggo.
Chinese tech company Tencent acquired a $264 million stake in India-based ecommerce platform Flipkart. According to the Times of India, the deal gave Tencent a 0.7% stake in the company, while Bansal now owns 1.8% of the company.
It comes as Flipkart, which is backed by Walmart, is planning an initial public offering in 2023. Its latest-reported valuation target is $60-70 billion.
German fashion and lifestyle platform Zalando acquired a majority stake in luxury culture-focused media platform Highsnobiety.
Founded in 2005 by David Fischer, Highsnobiety today includes a publishing arm, creative consultancy and a curated commerce platform. It is set to retain its editorial autonomy in the deal.
“Both of our companies share a passion for building strong brand partnerships and enabling brands to inspire audiences with their products and stories," David Schneider, Zalando’s founder, said in a statement. Partnering with Highsnobiety will allow us to execute much faster on our ambition to offer the most relevant and engaging - as well as convenient - shopping experience to our customers. I’m excited to see our joint vision materialize and to shape the future of fashion content in commerce together”.
The deal marks a confluence of commerce and media. Zalando said its platform is a destination for "inspiration, innovation, and interaction." Now it is bringing an editorial voice into the fold with a reputation for tastemaking.
Finally, here’s a quick update on a change to a merger we reported earlier this year.
Simply Better Brands Corp. and Jones Soda won’t go forward with a merger deal that was initially announced in April. The omnichannel platform and craft soda company cited “unfavourable market conditions.” When it was announced, the deal was valued at $98.9 million. However, the letter of intent between the two companies has now been terminated.
“We are disappointed that due to current market conditions we are unable to move forward with our intended transaction at this time,” said Kathy Casey, CEO of Simply Better Brands, in a statement. “The Jones Soda brand is one we felt confident would add tremendous value to our existing platform and ultimately be accretive to shareholder value. We wish Jones management and their board much success in their future.”
The retailer's marketplace is expanding quickly.
When it comes to ecommerce growth, was the pandemic a blip or a new trendsetter?
As we move further from the height of COVID-related closures, it’s a question that will start to be answered through the lens of history.
So far, the narrative of ecommerce growth in the U.S. from 2019-2022 has gone like this: Ecommerce’s share of overall retail saw a huge spike at the height of the pandemic in 2020-21, when goods in general were in demand and online shopping was necessary to preserve health and safety. Experts looked out and saw a permanent exponential change in the penetration of ecommerce as a share of retail that would last beyond the pandemic. Then, in 2022, everyone went back to stores and the trendline came back to 2019 levels. Growth was no longer exponential. There was still growth, but it was not happening as fast as during the pandemic period.
With this in mind, it’s worth pointing out that 2023 is the first year that there likely won’t be a pandemic-influenced swing to influence ecommerce growth. It is also a year where demand has suffered challenges amid inflation and interest rate hikes.
So as we seek to determine the importance of ecommerce to overall retail, it’s worth it to continue taking a close look at what growth trends retailers are seeing now, whether ecommerce is remaining resilient amid consumer pullback and how retailers are preparing for the future.
The latest example arrived this week from Macy’s. It’s a fitting one for the times. Overall, Macy’s is seeing a slowdown as consumers pull back on discretionary purchases, with sales declining 7% in the first quarter versus the same quarter of 2022. Digital sales were down 8%.
Macy’s is particularly susceptible to the macroeconomic headwinds that many brands and retailers are facing, as spending among the middle-income consumers it counts as a primary customer base is particularly softening, said GlobalData Managing Director Neil Saunders.
But while ecommerce is slowing overall, the importance it gained to Macy’s business during the pandemic is remaining in place.
In 2019, ecommerce made up 25% of Macy’s revenue, CEO Jeff Gennette told analysts on the company’s earnings call. That jumped to a high of 44% in 2020. By 2022, digital reached 33% of sales after the pandemic boom. In the first quarter of 2023, it remained at 33%. So, while the trend line dipped after shoppers returned to stores, ecommerce share still settled in at a higher post-lockdown point than it was before the pandemic.
This came in a quarter in which traffic was “relatively good” across both online and in-store, Macy’s CEO Jeff Gennette said. It was “flattish” online, and slightly up in stores.
“We do expect that this is the reset year with the penetration between them,” Gennette said. “But we do expect more aggressive growth in digital in the future versus stores as we think about '24 and beyond. And that's going to be foisted by a lot of ideas and strategies.
Over the last year, the retailer has made investments in boosting ecommerce, even as shoppers returned to stores. In a bid to boost the assortment of goods available online, Macy’s launched a marketplace in September 2022 that welcomes goods from third-party sellers.
The marketplace had an “outstanding” first quarter, said Macy’s President Tony Spring, who is poised to succeed Gennette as CEO next year. Gross merchandise value increased over 50% when compared to the fourth quarter of 2022, while the average order value and units per order for marketplace customers was 50% above those not shopping at the marketplace.
Macy’s is continuing to build the marketplace even as it racks up sales. The retailer added 450 brands, ending the quarter with 950 brands.
This is helping to draw in new customers, as well as younger existing customers who are buying more items, resulting in increased basket size.
“We're very excited as to how marketplace is really attracting the Gen Z customer, particularly in categories where it was not economically feasible for us to carry in the past,” Gennette said.
In the end, Gennette said a strong digital and social presence is key to attracting younger consumers. That's a different type of shopper than other age groups.
“We know the younger customer starts first online,” Gennette said. That behavior will still be in place as the generation gets older, and gains more buying power in the process.
Going forward, Macy’s is seeking to expand the model to other retail banners in its portfolio. Bloomingdale’s will open a marketplace in the early fall.
The Macy’s ecommerce trajectory isn’t that different from the wider U.S. ecommerce narrative detailed above. With one quarter of 2023 data, there is evidence that ecommerce share settled out at a higher point after the pandemic than where it started before COVID arrived. There is flattening now, but the retailer is taking it not as a sign of a slowdown, or a signal to change course. Rather, it sees changing consumer behavior as a reason to build for the future.