Perhaps I should start with a personal story about how I shop… Well, actually how my wife shops.
She does the buying for both of us.
And she’s good at it. Time and again, she finds the best products at the best prices.
Back in the day, that used to mean going through countless catalogs and stacks of coupons.
But then Amazon came along in the spring of 1995.
It completely changed how my wife shopped. For her and millions of others, it became the go-to online place to find almost anything you want.
Amazon founder Jeff Bezos’ grandiose vision of offering the world a faster, more convenient and ultimately cheaper way to shop through e-commerce gradually turned into a reality…
And along the way, it made him the world’s fourth-wealthiest person.
When you think of it, Amazon trained all of us how to shop online – which is no small deal.
To accomplish this enormous task, it had to grow. And so it did. The company is now worth more than $351 billion dollars.
Nowadays, shoppers take the benefits of online shopping for granted: the vast choices, the quick turn-arounds and the ultimate exercises in convenience: that wherever they are, they can browse their favorite stores and brands.
Retail has changed forever. There’s no looking back now.
Traditional brick-and-motor retailers have been forced to adapt or suffer the consequences…
The retail landscape is littered with corpses. Think of the once-mighty Sears – America’s largest retailer as recently as 1982.
One respected VC investor said, “Everything bad that happened to media in the last decade is going to happen to retail.”
The lesson here? Online is the future.
And Amazon led the way.
But times have changed. So for new online retailers today, Amazon isn’t so much the trailblazer as it is the trail-blocker.
As an investor, I try to never forget that startups competing against this giant usually lose. As I said earlier, Amazon provides almost everything.
Almost… But thank goodness, not quite everything.
There’s just big enough of a loophole to allow for some amazing profits. This includes:
- Zappos – After it sold its first pair of shoes online in 1994, its valuation soared from $500,000 to $163 million. And early investors saw their stakes grow 326-fold.
- Dollar Shave Club – This L.A.-based company was recently bought out by Unilever for a cool $1 billion… That’s a 22,222% increase from its 2012 valuation.
- Warby Parker – Warby offers high-end glasses online at prices far below traditional brick-and-mortar stores. It’s grown from practically nothing to a $100 million company in about five years.
- Everlane – Begun in 2011, this ethical online clothes retailer offers transparency and basic items at discounted prices. It’s looking to raise its second round at a valuation of at least $250 million.
- Zulily, an online seller of baby clothes and maternity wear. After its 2010 launch… it exploded first to a valuation of $1 billion in 2012… all the way to its $1.7 billion IPO in 2015.
All these companies avoided direct competition with Amazon. They found specialty markets where customers felt ignored. Yet these markets hold massive growth potential.
And now I’ve discovered a little, two-year-old company – DSTLD – that has found another massive market to exploit.
It’s practically hiding in plain sight.
DSTLD has eliminated the middleman – and passed on the consequentially considerable savings to consumers via low-priced, high-quality products.
Why do I say it’s “hiding in plain sight?”
Because almost everyone wears jeans.
I do. I even wear them to work sometimes. My wife does. Our young adult children do. My great uncles and aunts do.
It’s the one piece of clothing that appeals to everybody across gender, age, race, religion and class. From white collar to blue collar… from the Northern to Southern hemispheres… and from the very wealthy to the very poor.
Globally, it pulls in $58 billion a year. And that number is growing.
Denim jeans are a large market. We can all agree to that, right?
As such, it’s attracted plenty of makers and sellers.
Some operate on the basis of fashion; others by focusing on quality. And some by offering affordability.
What else is there? There seems to be no room for meeting untapped demand.
Except… Ha! It’s actually staring you right in the face.
It’s a subtle but brilliant idea: one that could unleash a global wave of new demand for a type of jeans never before available to the masses.
So let me repeat: Fashion. Quality. Affordability.
And then let me ask: What if a company offered all three in the same pair of jeans?
I know I’d buy that product.
At first glance, it doesn’t seem possible. There’s a good reason it’s never been done before. Because – well – you can’t do it.
EXCEPT THAT DSTLD CAN!
It manufactures and sells three-in-one jeans. Fashion, quality and affordability: all rolled into one extraordinary pair of pants.
As you can imagine, it’s had no trouble attracting customers. They’re flocking to DSTLD’s website in ever-increasing numbers.
Importantly, DSTLD also passes all of my screening filters with flying colors. This is a must – because I wouldn’t be recommending it otherwise.
So let’s find out how it manages this feat…
First, management is serious and determined.
A few years ago, DSTLD founder Cory Epstein, a management consultant with his MBA, noticed premium jean prices approaching the astronomical $300 mark in local storefronts.
When he found out that luxury jeans cost as little as $30 to make, he instantly knew he had stumbled onto a market where prices were hugely inflated.
He smelled an opportunity…
To build a new kind of brand for the modern consumer.
He enlisted his longtime friend, Mark Lynn – a successful self-made and serial entrepreneur who began his first startup at the age of 17 – to come in as co-founder. And just like that, they were off and running – mastering the inner workings of the industry to create the best and highest-quality jeans possible.
They quickly realized you can’t pretend to offer quality jeans while manufacturing them in any old Chinese factory. You have to walk the walk.
So that’s what they did… using all the same suppliers and washhouses as the top and most expensive brands use, from North Carolina to Japan to Italy. Of course, that includes L.A. – the high-end denim manufacturing capital of the world – where they also set up DSTLD’s base of operations.
And then they simply leveraged the internet.
With no more middleman taking a large bite out of the profits, the savings go directly to the consumer – making the price customers pay extremely affordable.
It was a lot of hard work. Fortunately, their previous entrepreneurial experience helped smooth down some of the bumps.
For example, Mark co-founded Club W, an e-winery that’s become one of the largest and fastest-growing wineries in America. Mark grew the company to more than 100 employees in just five years. Meanwhile, Corey can do it all. He’s used to wearing many hats. Prior to DSTLD, he headed his own consulting firm and advised hundreds of clients on branding, design, development and strategy.
So perhaps it’s not so surprising that, at the end of the day, they did exactly what they sought out to do: provide a premium product at a wholesale price.
Second, it’s operating in a massive market.
The global premium denim jeans market is valued at a stunning $15 billion per year.
So how much of that can DSTLD capture?
Consider that one of its brick-and-mortar competitors offers a pair of popular high-waist skinny jeans for $253… while DSTLD sells its own version for $65. I know which one I’d choose.
If it gets just 5% of the overall jeans market – and I think that’s on the low side – this company would grow 63 times higher than its current valuation.
A 10% market share would result in a valuation 126 times higher than its current worth…
That’s enough to turn a tiny $100 stake into more than $12,500.
That’s certainly a terrific upside. But I’m doing DSTLD a disservice here – limiting its market to only denim wear.
The denim market is where it’s just getting started. It’s also begun offering T-shirts, belts, sunglasses and leather goods accessories.
In addition, over the following 24 months, it plans to expand its product line into a multitude of other markets.
So here’s a number you should keep in mind: $3 trillion…
The global apparel market is $3 trillion and growing!
What that means is that $100 million of revenue represents a fractional 0.0033% of the global market.
Mark told me this global market is large enough to support several huge companies.
“As in billion-dollar companies?” I asked.
“No, Andy,” he replied. “As in tens of billions. Nike has a $93 billion cap. Under Armour – $26 billion. H&M – $56 billion. And Zara – $100 billion.”
He added, “I don’t worry about market share. I worry about growth. And that’s why this is an exciting time for us. We’re at an inflection point. Everything is coming together very nicely. Revenue should really start to take off – beginning right now.”
Which makes this the perfect time to invest.
Finally, metrics and monetization are headed through the roof.
DSTLD has already sold more than $3 million worth of its products. And based on its most recent quarter, it’s averaging $5 million in yearly sales.
Since it’s all online, the company has built a database of the 21,000 customers who’ve already spent an estimated $100 each. Over half come back within 12 months to make additional purchases.
In other words, product is going out the door… money is pouring in… and these guys are building a wildly profitable recurring revenue model.
Current investors include multi-millionaire Paige Craig, one of the most respected VC investors out there today – and for good reason.
Paige has previously taken early stakes in ultra-successful startups including Lyft, AngelList and Twitter. He grew up poor, joined the Marines, and now has a rule that he will invest only in potentially world-changing ideas.[i]
So if he’s interested, so am I.
Terms of the Deal
You’d be investing in DSTLD’s Series A round.
Series A was historically reserved for institutional players only – mainly VC firms.
But that’s changed.
Now, anybody can invest in these private deals. It no longer matters how much you make or how much wealth you have.
DSTLD had raised $5 million in two previous rounds.
The minimum investment is $500. You can put in more if you wish, but you can’t put in less.
The kind of shares you’ll be getting are called preferred shares, so named because they come with preferable conditions. The main one is that they put you at the front of the line in case of bankruptcy.
Remember: These shares aren’t liquid. There’s no developed market to buy and sell them. You can only cash out when DSTLD is bought out or goes public via an IPO. And that could very well be three, five or up to 10 years from now.
One more key issue to keep in mind is valuation. DSTLD is valuated at $22 million. Its last round carried a valuation of $15 million, and its seed round valuation in 2014 amounted to $6 million. So its current valuation is reasonable.
Status: Raising up to $6 million under Regulation A+ (where anyone can invest, not just accredited investors)
Valuation: $22 million
Price per Share: $0.48
Offering: Maximum of 6 million shares of Series A Preferred Stock
Minimum Investment: $500
Use of proceeds: The first $250,000 will be used for online marketing. The next $150,000 will be used for hiring and personnel costs. The next $100,000 will be used for expanding product offerings and testing different categories. Proceeds beyond the first $500,000 will be allocated as follows: 20% for product buys, 15% for personnel costs, 55% for advertising and 10% for capital expenses.
How to Invest
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