Used clothes retailer is Lithuania's first tech unicorn

It's a remarkable turnaround story. Just three years back, Vinted, Lithuanian tech's posterchild, was on the brink of collapse left with just €12 million ($13.2 million) in the bank.

That's when one of the investors tapped Thomas Plantenga, a former executive at online marketplace OLX, to help salvage the 8-year-old startup. Plantenga called for a major overhaul that involved a change in the business model, including ditching mandatory sales fee, office closures and job cuts.

The strategy worked. Vinted saw sales soar and investors pump much needed cash, making it to one of the biggest secondhand fashion marketplaces in the world.

Just a few days back, the company raised €128 million in a funding round that valued the company at €1 billion and gave Lithuania its first tech unicorn. The funding was led by Silicon Valley venture capital fund Lightspeed Venture Partners.

"We are very excited to get validation from external parties that we are on the right track in terms of building a big European business," Plantenga, who is now the chief executive officer, told DW. "We can now move forward with heavy investments to improve our product, customer support and our expansion rate." 

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The genesis

Just like many other great ideas, Vinted was born out of necessity. Co-founder Milda Mitkute was moving to a new apartment but realized she had too many clothes to take with her. Her friend, Justas Janauskas, built a website to help her get rid of her extra clothes. This was the genesis of Vinted.

The Vilnius-based retailer today has 25 million registered users across its 11 European markets. Germany, where it operates under the brand name Kleiderkreisel, France, Belgium and Spain are its largest markets.

Vinted, which has yet to post a profit, said its revenue has increased fourfold since the company's last funding round in the summer of 2018. The company did not disclose to DW its revenue and loss figures for 2018.

"As a company, we have a very strong focus on creating a business that has strong unit economics and has all the proof points to be profitable at any point we would want it to be," Plantenga said. "We do not have an exact timeline on when we need to be profitable. The more good opportunities we find to expand, the longer it will take us to be profitable."

Secondhand fashion on rise

Vinted, where users can buy or sell used clothes and accessories, is one of the many secondhand fashion marketplaces that have mushroomed in the past decade.

The secondhand apparel market, excluding clothing rentals, was valued at $24 billion in 2018 and is expected to grow to $64 billion by 2028, according to online fashion resale platform thredUP and retail analytics firm Global Data. By comparison, the fast-fashion market, which was worth $35 billion in 2018, is expected to only touch $44 billion.

The lure of the secondhand has also rubbed on world's second-largest fashion retailer, Sweden's H&M, which is testing out a clothing rental service. The retailer also owns a majority stake in a Swedish company, Sellpy, that offers a platform for people to buy and sell secondhand clothes and accessories. H&M's US rivals, Banana Republic and Urban Outfitters, have already launched clothing rental services.

"It's a big validation that the H&Ms of this world are starting to act on this trend. It practically means that even they see the need to act on it because it's a big trend," Plantenga said. "It will only make the whole fashion industry more sustainable."

European tech is investors darling

Vinted 's billion-dollar valuation rounds up a century of venture-backed unicorns in Europe, which is witnessing increasing interest from US and Asian tech investors.

European tech firms are expected to raise a record $34.3 billion this year, up from $24.6 billion in 2018, London-based venture capital firm Atomico said in a report published last month. North American venture capital funds, which pumped in $10 billion in the first nine months, are expected to account for more than a third of the investments.

A little over one in five funding rounds raised in Europe in 2019 involved the participation of at least one US or Asian investor, up from just one in 10 four years back, Atomico said.

Thirty European cities have attracted over $100 million in investments this year, the latest being the Lithuanian capital, Vilnius.

The record investments into European tech come as investors in the US and Asia pull back from record level of investment in 2018. Despite the pullback, both the regions remain the most popular hunting grounds for tech investors.

"The interest from outside the region is a function of the strength of the European tech industry. There is a fundamental conviction that Europe is producing really interesting, high potential technology companies," Tom Wehmeier, head of research at Atomico, told DW.

Europe has also indirectly benefited from the redeployment of capital because of US-China trade dispute, Wehmeier said.