How do you sell to a generation who don’t want to be sold to? This is the Gen Z riddle that Depop has resoundingly solved, as proven by the company’s stellar acquisition by Etsy.

When we first met the team back in 2016 the seeds of success were there, but Gen Z marketing was still in its infancy. Founder Simon Beckerman’s instinctive use of influencers and his genuine aim to create a mobile-first market place connecting people looking to buy and sell streetwear, has since proved you can reach a $1.6 billion valuation without sacrificing the authenticity and integrity demanded by 15-25 year olds. But nothing about Depop has been off-the-peg. So how have they done it? 

The opportunity

The current fashion industry is uniform, wasteful and elitist. At least this is the hook from which Depop has hung its strategy. Its aim has been to provide a unique market place for unique fashion, whilst empowering the next generation of creatives. In this ‘creator economy’, sellers can re-sell items bought elsewhere through Depop or items they have customised or created from scratch.

The team has created a brilliantly differentiated business combining a social network with a transactional marketplace, through a clear ability to target, engage and retain a demographic of users (predominantly under 25s) that other competitors and traditional ecommerce businesses have found it difficult, if not impossible to market to. This is a group which could be considered to be low value, with low disposable income as well as being notoriously fickle and fad-led. That said, the addressable market is very large with over 90m people falling into the target group in the US alone, and 16m in the UK.

Organic growth

Gen Z don’t really exist on traditional marketing channels, much as the tech giants would like them to. Depop’s success is perhaps best described by the fact that 80-90% of their audience acquisitions have been organic. Friends recruiting friends, because they want to, not because they’re incentivised (a polite word for bribed) to. Celebrities have embraced the Depop marketplace and community in much more than just token gestures. To see those network dynamics, at scale, across multiple markets, is rare. To us as investors, it signals true validation of the product being of genuine value to the customer. This means the company has scaled very capital-efficiently. It’s been a fine line to tread, as some marketing spend is always required, but Depop has managed to leave their community uncontaminated by any sense of ‘selling out’, forming ever-deepening (and ever more valuable) relationships.

Leadership

Maria Raga has been at the helm since we invested. Maria joined the company in 2014 from Groupon, to control Operations and Finance. In 2016 she was asked by the board step up to the CEO role and as incoming investors in 2017 we were thrilled to give her our full backing. Maria’s exceptional focus and execution attracted General Atlantic to join us as investors in 2019 and onwards to today’s outstanding success. The company has grown 100% year on year, an incrementally harder target to achieve each time it happens.

Conclusion

To create a brand and a platform your customers absolutely love – to the extent that they want the reflected glory of bringing in all their friends – is a spectacular achievement in any field. To pull it off in the fickle world of fashion is even more dazzling. Maria and her team have stayed true to their core offering, and taken it out to the world. They’ve kept it simple – and as shown by the $1.6bn valuation today – it’s worked.