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Online shops are a prime destination for venture capital

13 July 2012 17:01
By Niels Valkering

VCs are increasingly finding their way back to internet stores. After the internet bubble snapped in 2000, investors avoided such investments en masse. Only 9 internet commerce companies bagged funding rounds in 2003. However, we have seen deal activity surge in recent years: from 36 deals in 2008 to 145 deals in 2011.

And the increase continues: the first half of 2012 has recorded a total of 105 deals. 41 of these were raised by German companies. UK internet stores reported 22 investments, while France followed with 17 deals. Spanish online shops secured a total of 11 deals in the first half of 2012. Of particular interest are online fashion shops.

The abundance of online stores leads to a situation where it’s hard to stand out, or where users cannot find what they are after. Companies have come up with different business models to overcome this and get the right product to the right customer. Lyst, for instance, tries to solve this problem by allowing its users to follow other users, bloggers and designers to create personalized feeds. Favorite fashion items can be ‘lysted’, which saves them for future purchase or to be shared with others. The UK company was launched in April 2011 and announced a €4.1 million Series A funding round yesterday. The investment was led by DFJ Esprit. Accel Partners, Alex Zubillaga and Venrex also participated.

Another online fashion company that recently raised funding is Spain-based Tueddy. This company is developing an application which should enable its users to reach designers and brands, and find out what their idols wear – before making a purchase. Germany-based Outfittery lines up “style-experts” who arrange outfits based on users’ answers to questions about their style preferences. If the client does not like the products they can be sent back for free. UK-based Smithfield Case sends clothing to the users’ home, where they may try it on first. Other sites like German website Luxodo, simply select products from other online stores.

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