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Gilt Groupe Valued at Roughly $1 Billion

May 09, 2011
Wall Street Journal
by Evelyn M. Rusli

In a bid to expand its e-commerce empire, the Gilt Groupe has raised $138 million in its latest financing round.

Best known for its limited sales of women’s and men’s apparel, the Manhattan-based company has raised capital from several new investors, including Goldman Sachs, the media conglomerate Softbank Group, New Enterprise Associates and Draper Fisher Jurvetson Growth. Two previous investors, General Atlantic and Matrix Partners, also participated in the round, which values the company at about $1 billion.

As part of the deal, Softbank will invest $62.5 million in Gilt and form a joint venture with the company’s Japanese site. Softbank will own a 50 percent stake in the Gilt Groupe Japan and make additional investments in the form of cash and resources.

The investment in Gilt, its largest to date, comes as investors clamor for stakes in rising e-commerce companies. Earlier this year, the social buying site Groupon and a rival,Living Social, raised significant capital from several institutional investors.

In January, Groupon raised about $950 million at a valuation near $5 billion, just weeks after spurning a takeover bid from Google.

In February, a Gilt competitor, HauteLook, was acquired by the department store chain Nordstrom for $180 million in stock.

Although Gilt’s valuation has yet to hit the multibillion dollar mark, like those of Groupon or LivingSocial, its chief executive, Kevin Ryan, said demand was high in its latest round. “The round was way over subscribed, we had demand for $200 million,” he said.

According to Mr. Ryan, the company raised the money to expand into new businesses — in particular a full-price site for men’s fashion — and look for possible acquisitions. Although Gilt said it did not have a target in mind, it might make purchases in areas where it does not have a presence, like art and pets.

“There are a lot of players out there,” he said. “There’s going to be consolidation in this space because there are so many smaller players that are not going to have critical mass.”

According to Mr. Ryan, the company will not enter a new segment unless it is confident that the business can reach $50 million in annual revenue within two years.

Gilt, which started as a flash sales site for discounted high-end apparel, has aggressively pushed into new categories in the last two years. Today, its portfolio includes Jetsetter, a travel site; Gilt children, a flash sales site for children’s apparel and goods; and Gilt City, a location-based daily deal site.

As it moves away from its core business of flash sales into full-priced categories, like its upcoming menswear shop, Gilt’s identity as on online retailer is also shifting, but the company plans to maintain a firm hold on the upscale market.

“Over time,” Mr. Ryan said, “people will think of Gilt as a high-end retailer that has a lot of flash sales sites and also full-priced items.”

In addition, a Gilt initial offering is still possible, but not in the immediate term, he said. “We certainly don’t need to raise money,” he said, “certainly not in the next 12 months, but it could happen after that.”

Since it was founded in 2007, Gilt has raised more than $240 million.

Gilt Groupe Valued at Roughly $1 Billion

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