Why Nasty Gal Landed Venture Capital Funding | Pham Capital

Nasty Gal?s Sophia Amoruso: Fashion?s New Phenom

Victoria Barret
Forbes Staff

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Josh Linkner
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The VC model is not broken. It?s just working too well. (Part I)

Victor W. Hwang
Contributor

This is a guest post by Danny Rimer of Index Ventures.

It seems so appropriate now, given the nature of the company?s success story, that I first heard about Nasty Gal through word-of-mouth?as Martin Mignot, a colleague based in Index?s London office, told me about them. Martin?s girlfriend, Therese, frequented the site. Intrigued by the company?s brand appeal, Martin set up a call with Sophia Amoruso, Nasty Gal?s founder. After that first meeting, Martin told me that I really had to connect with Sophia myself?as soon as possible.

I vividly remember our first call. Sophia was in the middle of a hectic day. Speaking from her car, en route to Nasty Gal?s distribution center to check in on the status of some important shipments, she was also about to fire a senior member of her team.

I was struck by how measured her tone was as she recounted her day. When I asked for Nasty Gal?s financials, I was blown away, again struck by how matter-of-fact she was in delivering?the?numbers: $28m in revenue in 2011, up from $10 million in 2010, all without outside financing or marketing. I set up a follow-up meeting with her the next week on her trip to the Valley.

We met in the lobby of the Rosewood Hotel and Sophia talked me through her approach to e-tailing. The origin of the Nasty Gal brand was an eBay store that Sophia started in 2006, and I listened to how Sophia?s views about the intersection of e-commerce and fashion had evolved over time, as well as what drove her now.

It became very clear that our views about what was likely to work in the online fashion space were closely aligned. We agreed that e-tailing businesses are predicated on the best of what an offline business has to offer: great product,?great?brand loyalty, and a space to be social as well.?There are a lot of business model innovations in e-tailing right now, like flash sales, daily deals and celebrity endorsements, but the most successful ones have the same attributes as the most successful fashion brands?built purely on the quality of supply and the customer experience. By the end of the meeting, Sophia agreed that I, along with Martin and another colleague Tony Zappala, should spend a day at Nasty Gal?s offices.

I had seen similar types of offices when we first invested in Net-a-Porter and ASOS. But what jumped out at me, visiting Nasty Gal, was how everyone I met with knew what the priorities for the next twelve months were; how hard-working the staff was; and how convincing Sophia had been to bring them on board from retailers with bigger brands.

Afterwards, there wasn?t much of a debate between Tony, Martin and me. Nasty Gal is a?great?opportunity for a venture capitalist to discover: a clever and dedicated entrepreneur, a straightforward business model, and agrowing market filled with opportunity.?Incredibly, the company was built?on the?organic?relationship that Nasty?Gal?cultivated?with its audience.?Girls?visit?the site?for?content?first?a characteristic that major e-tailers aspire to, but one that few have been able to achieve.

We?ve been working with Nasty Gal for close to a year now, and the process has been a new experience for everyone involved. Since Sophia bootstrapped much of the business, many aspects of the next stage of scaling are new to her. On our end, we have committed to a more active form of investment. My colleague, Tony, moved his family to Los Angeles and is temporarily helping her build out a framework for scaling the business. And Sophia is ensuring that the business is growing in line with her vision?which is at the heart of Nasty Gal?s past successes, and which will be just as critical as the company charts its future growth.

Article source: http://www.forbes.com/sites/victoriabarret/2012/06/28/why-nasty-gal-landed-venture-capital-funding/

Source: http://phamcapital.com/?p=1148

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