1. Digital
Commerce
2.0
Investment
Thesis
June
2011
Bill
Gilroy
wtgilroy@gmail.com
917-­‐533-­‐7087
Proprietary
and
Confidential.
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not
distribute.

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
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and
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2

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
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3

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
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4

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
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5

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.
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6

7. Successful
Brands
will
be
Leaders
in
DC2
Gilt
Groupe
Polyvore
Social
Media
Retail
Internet
Mobile
Tory Mobile Wholesale
Boutiques.com
NET-­‐A-­‐PORTER
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and
Confidential.
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7

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
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8

9. Comparison
Shopping:
A
DC2Case
Study
`
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and
Confidential.
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9

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.
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not
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10

11. Selected
DC2
Company
Profiles
11

12. Sector:
Online
Retail
Warby
Parker:
Disintermediating
the
Prescription
Eyewear
Market
V R E
Company
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
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and
Confidential.
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12

13. Sector:
Online
Retail
Gemvara:
Bringing
custom
to
fine
jewelry
V R E
Company
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.
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not
distribute.
13

14. Sector:
Online
Retail
Stella
and
Dot:
Reinventing
the
Avon
Lady
V R E
Company
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.
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14

15. Sector:
Platform/Service
Rent
the
Runway:
Netflix
for
Fashion
V R E
Company
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.
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15

16. Sector:
Platform/Service
Polyvore:
Content,
Community,
Entertainment
and
Commerce
V R E
Company
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
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16

17. Sector:
Platform/Service
ShoeDazzle:
Record
Club
Model
Revolutionizing
Shoe
Market
V R E
Company
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
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17

18. Sector:
Media
/
Content
Total
Beauty:
Deep
Focus
on
Large
Sector
to
Rapidly
Scale
V R E
Company
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
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18

19. Sector:
Mobile
Kickbucks:
Marrying
Mobility,
Loyalty
and
Precision
Proximity
V R E
Company
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.
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not
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19

20. Sector:
Infrastructure
Pixazza:
Enabling
Interactive
Shopping
Experiences
V R E
Company
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)
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20

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
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21

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.
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22

23. Appendix
• Additional
Selected
Company
Profiles
Proprietary
and
Confidential.
Do
not
distribute.
23

24. The
DC2
Market
is
Global
and
Expanding
Rapidly
Company
Loca2on
Business
Investors
London,
UK
Boticca.com
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
Milanoo.com
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. Sector
Example
–
Online
Retail
(Custom,
E-­‐enabled
Selling)
V R E
Company
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. Sector:
Online
Retail
Bonobos:
Creating
an
Online
Men’s
Retail
Brand
V R E
Company
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
men's
apparel
Proprietary
and
Confidential.
Do
not
distribute.
26

27. Sector:
Platform
/
Service
Birchbox:
Bridging
Content,
Community
and
Commerce
in
Beauty
V R E
Company
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. Sector:
Platform
/
Service
H.BLOOM:
Is
There
a
Platform
for
Every
Niche?
V R E
Company
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. Sector:
Mobile
Pose:
Creating
a
Fashion
Community
around
Photo
Sharing
V R E
Company
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. Sector:
Infrastructure
TellApart:
Harnessing
Retailers’
Customer
Data
to
Drive
Sales
V R E
Company
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