While abundant anecdotal evidence shows that banks are still not
lending to small businesses like they did before the recession,
private-equity interest in the multichannel retail sector appears
to be on the increase-seeing potential in those businesses that
are reporting strong growth even in today’s volatile economic
environment.
For example, in June, Isis Private Equity invested £4
million in GettingPersonal.co.uk, an online retailer of
personalised gifts. The deal, funded by Baronsmead VCTs, backs
founders John Smith and Giles Harridge in their plans to grow the
business by investing in product development and marketing. For
the year ending April 2010, GettingPersonal’s turnover was
£9.6 million, an increase of 52 percent on the previous
year.
Rapid growth at My-Wardrobe.com is also attracting investment.
Launched in April 2006, the luxury-fashion etailer reported a 93
percent like-for-like increase in sales to £8.3 million for
the 12 months to March 2010. There has also been a 110 percent
like-for-like growth in visitors to the site since 2009-from 2
million to 4.2 million, and a significant increase in
international traffic. In July, My-Wardrobe raised £6
million via an investment round led by Balderton Capital. The
money will be used to extend My-Wardrobe’s product offer, as well
as fund its expansion into international markets.
Another business, E-Trader Group, operator of online fashion site
Koodos, secured a £2 million investment from existing backer
MMC Ventures to support its future growth.
Receiving £7.5 million from its backer Index Ventures, which
was joined by Greylock Partners for the series C funding round,
is online marketplace Notonthehighstreet.com. The business,
founded by Sophie Cornish and Holly Tucker in 2006, is on target
to grow by at least 100 percent in 2010. The investment will be
used to expand the team, enhance the website and invest
“other initiatives”. A new website went live in
August offering a more personalised shopping experience to
customers, including showing recently viewed items, an advanced
search facility, customer reviews, and a dynamic shopping-basket
feature that shows users the contents of their shopping cart when
hovering over it with the mouse cursor.
Other alternatives
Venture capital is not the only route etailers can take to raise
cash. Private-sales website SecretSales.com secured a second
round of funding from German secret-sales site Brands4Friends.
Without disclosing the level of investment, SecretSales chief
executive Nish Kukadia said the capital will be used to
“accelerate the growth of the business by opening more
marketing channels, augmenting the technology infrastructure and
bringing on board some key hires”. These include the
appointment of John McKenzie, who joins from competing site
BrandAlley as associate buying director. Brands4Friends initially
invested in SecretSales in February this year, but upped its
stake following strong growth.
The most novel fundraising idea is undoubtedly Hotel Chocolat’s
chocolate bonds. It raised £3.7 million in July from the
sale of its chocolate bonds to its most loyal customers. Instead
of paying interest in cash, bondholders will receive free boxes
of chocolate a year equivalent to a 5.38 percent return. The
funding paves the way for Hotel Chocolat to invest in its
Cambridgeshire factory, create a total of 400 jobs, and create an
eco-friendly chocolate factory at its cocoa plantation in St
Lucia.
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