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StockX’s New Unicorn Status Makes an IPO a Possibility

Following hot on the heels of the expected initial public offering of luxury resale marketplace The RealReal this week, real-time resale-bidding host site StockX has closed on a $110 million Series C round that gives it a valuation north of $1 billion.

That kind of valuation gives the bid-ask trading platform, which describes itself as “The Stock Market of Things,” rock star status in the start-up world. And the “unicorn” designation from its $1 billion-plus valuation puts it on a possible path to an IPO down the road.

The funding round was from two venture capital firms, DST Global and GGV Capital, and private equity firm General Atlantic. The raise includes participation from current investors GV and Battery Ventures; both are venture capital firms that were part of the Series B raise of $44 million in September 2018. StockX has an aggregate raise of more than $150 million.

Once companies get to raise those kinds of heady funding levels, they often find themselves in a special place, and not just because they become part of the special “unicorn” club that includes Rent the Runway, which raised $125 million in March.

High dollar amounts in raises translate to high expectations for investors when it comes to an exit strategy. With unicorns, it’s the $1 billion-plus valuation that’s both a blessing and a curse. While it can garner attention and create investor interest, it also could limit who might be the next investor. And sometimes, there aren’t a whole lot of options that are available.

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Anthony Cho, who founded investment firm Provence, has noted in the past that sometimes the IPO route is the only exit option. “You need big numbers to get a big exit,” he said. But an IPO can be an option only provided certain variables such as timing and investor appetite are actually in place in get an IPO done.

The other option is hoping for a buyer to roll in, but even that has its limits. Financial sponsors such as private equity firms will probably think twice about an acquisition before signing on the dotted line. That’s because they’ll first have to explore their most likely exit three to five years down the road when its time for them to take their chips off the table. That leaves strategic buyers, which can be an even smaller pool of investors.

Cho noted in a prior interview with SJ that the sale of Bonobos to Walmart for $310 million was a good deal for the mass discounter, even if investors in the final capital raise “didn’t make much money and the early-stage” investors got diluted by the subsequent funding rounds.

For now, one of StockX’s new investors believes the firm has a long runway for growth.

Hans Tung, managing partner at GGV Capital, will join the StockX board. He said that the company’s model is more than just a marketplace because it disrupts the way “consumers engage in the purchasing process and has global growth potential.” He also noted that the company has the ability to scale its model globally, and “provide unprecedented access to consumer goods for users across the world.” In addition to the consumer-to-consumer (C2C) play, Tung said the model could work for bid/ask prices on services in fashion beyond just physical goods.

As for possible IPO plans, Tung said Wednesday in a telephone interview that’s “in their plan down the road, but for now it is still building” the business. GGV’s Robin Li, a principal at the VC firm, scoped out the landscape before the firm’s investment and, according to Tung, saw that the model represented a “different way to do C2C. It’s a way that’s more standardized, offers better quality [goods] and a different experience.”

With the new financing, there’s also another change at StockX. Co-founder Josh Luber will be succeeded by Scott Cutler as chief executive officer. Cutler was brought on to take the company to the next level. His background includes stints at StubHub as a technology executive and as executive vice president at the New York Stock Exchange, where he oversaw more than $1 trillion in capital market financings and led some of the largest technology IPOs, including LinkedIn, Twitter and Alibaba. He was most recently senior vice president, Americas, at eBay Inc.

Cutler said the company is one of the fastest-growing technology companies “in the world with a rapidly expanding global user base comprised of passionate enthusiasts. It is what sets StockX apart and why I welcome the opportunity to lead the team as we look to what’s next–extending the reach of the platform and broadening its offering to provide more users with access to an authentic, transparent, anonymous marketplace.”

Luber will continue to serve on the executive leadership team and on the company’s board of directors.

Luber co-founded StockX in February 2016 along with Greg Schwartz, who serves as chief operating officer, and Dan Gilbert, founder and chairman of Quicken Loans and chairman of the Cleveland Cavaliers. Other early investors include individual angels such as model Karlie Kloss, streetwear designer Don C, entertainers Eminem and Mark Wahlberg and entertainment executive Scooter Braun.

Luber, a self-described sneakerhead, initially focused on just sneakers when the firm started. It then expanded to streetwear and accessories, such as watches and handbags. It recently expanded into collectibles. Funding from the new round will help the company open pop-ups to extend its offline reach, as well as provide a location for quick authentication, according to Tung. The company also works directly with brands to release products directly on the StockX platform, which Luber refers to as “initial public offerings” for those products.

StockX said it does “millions of dollars in transactions daily and moves thousands of products” through its four authentication centers across the U.S. and Europe. It will soon open a fifth center outside of Amsterdam.

With The RealReal set to begin publicly trading this week, and the new financing completed by StockX, the resale category has been gaining traction with consumers and is now getting some momentum with investors. That’s good news for fashion firms in general looking to possibly go public. Investor appetite has been whetted by the success of Levi Strauss & Co. and e-commerce platform Revolve earlier this year. In the wings could be Poshmark and Tradesy, both of which have been floated as IPO candidates.