U.S. e-commerce giant Etsy has made a $1.6 billion bid for Depop, the popular British start-up platform for buying and selling second-hand clothes. Founded in 2011, Depop is 10 years old and has seen a huge surge in popularity over the past year. If the Etsy bid is accepted it will result in a major return for the tech company’s founders and early investors.
Depop is used by around 27 million fashion fans who trade second-hand clothes and accessories. A particular attraction for Etsy is that 90% of the platform’s users are under the age of 26. That was yesterday made clear by Etsy chief executive Josh Silverman who explained that Generation Z, the young shoppers born between the late 1990s and early 2010s, will account for 1.3 billion of the global workforce by 2030. They already make up a quarter of the workforce globally.
As Silverman said:
“That’s four times the US population and Depop is the choice of Gen Z. We think Depop is the most exciting company in the most exciting sector in retail right now. Recommerce of clothing is growing at 40 per cent year-over-year and is projected to be a $64 billion market in the US alone.”
However, not everyone was happy about another successful British-owned business being bought up by a deep-pocketed international suitor. Sir Vince Cable, the UK’s business secretary for five years between 2010 and 2015, even suggested the British government should be getting involved. He commented:
“Why on earth is the government not using its new powers to screen takeovers,” he said. It isn’t just the Chinese who make takeovers which may not be in the national interest. I don’t know what Etsy’s plans are, but they [the business department] should be having a careful look.”
The government potentially blocking the sale of a privately owned online fashion retail platform because the buyer is from the USA doesn’t sound realistic and that level of interventionism would likely cause outrage. It’s especially hard to see a government with the free-market values of this one, and desire to strengthen post-Brexit trade relations with the USA, even entertaining the idea. But there is concern over the number of promising British technology companies being hoovered up by larger U.S. rivals.
And Etsy is not Amazon. The U.S. platform positions itself as a champion of smaller online retail entrepreneurs who use it to run e-commerce shops for their products. Silverman was yesterday keen to emphasise the company’s positioning, saying:
“We don’t want to be everything for everyone; we want Etsy to stand for something.”
Depop has raised around $100 million in venture capital over the years and counts Octopus Ventures, Creandum, Balderton Capital and Klarna founder Sebastian Siemiatkowski among its backers. Founder Simon Beckerman has seen his stake diluted significantly through successive funding rounds and now only owns around 4.26%, around the same as chief executive Maria Raga, who joined from Groupon in 2016. That would, however, still be worth around £45 million if Etsy’s $1.6 billion bid is accepted.
Depop’s last published accounts show sales grew 55% in 2019 by the company still recorded a pre-tax loss of £15.5 million. Last year, however, revenues doubled again to $70 million and Etsy have the funds to invest in further Depop growth. The plan is to keep the two companies separate but to “share learnings”.
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