Flight Club, one of the most popular secondary markets for rare and retro sneakers, announced Thursday that it had agreed to merge with fellow online sneaker marketplace GOAT while simultaneously garnering $60 million in funding from venture investors.
The funding round is led by Index Ventures but also includes existing GOAT investors Accel, Matrix Partners, Upfront Ventures and Webb Investment Network. The round brings GOAT's total funds raised to $97.6 million and will help Flight Club grow its geographical presence while also enhancing GOATs online marketplace.
"There was a lot of inbound interest in GOAT from VCs, but we weren't necessarily looking to raise. However, the Flight Club opportunity came up, which made a lot of sense and warranted us raising their funding round," said a spokesperson for Flight Club and GOAT in an emailed statement to The Deal. "We're working on accelerating GOAT and Flight Club's domestic and international growth, which includes expanding Flight Club's retail presence."
The Flight Club-GOAT merger and financing comes as fellow sneaker reseller, Stadium Goods, on Feb. 8 received funding from the venture arm of LVMH Louis Vuitton Moet Hennessy SE, the parent company of such brands as Louis Vuitton, Dior and CÉLINE. LVMH Luxury Ventures is likely taking a minority stake in the re-seller, as that was the investment vehicle's thesis from its start in early 2017.
Flight Club and Stadium Goods are both based in New York and carry a plethora of brands for consignment and re-sale by its patrons. GOAT is based in Culver City, Calif. and also offers resale and consignment options for its customers. The retail outfits are known for carrying sneakers and apparel from brands including Supreme, Palace, Adidas AG and Nike Inc. (NKE), among others.
"As the first company to focus on reselling rare sneakers, Flight Club revolutionized sneaker retail and paved the way for what is now a two billion dollar resale industry," said Eddy Lu, co-founder and CEO of GOAT, in a statement. "The merger of Flight Club and GOAT, together with $60 million in new funding, will allow us to significantly scale our online and retail operations to meet customer demand both domestically and internationally."
Index Ventures' Danny Rimer—previously a director at Etsy Inc. (ETSY - Get Report) , Skype and internet radio company Last.fm—along with Flight Club's Damany Weir will join GOAT's Board of Directors following the merger.
Index is an investor in cloud storage firm Dropbox Inc., e-tailer Farfetch, news aggregation app Flipboard, Skype, now owned by Microsoft Corp. (MSFT - Get Report) and Slack Technologies Inc., among others.
For its part, Stadium Goods raised $4.6 million in equity funding in January 2017, according to Women's Wear Daily, in a financing round led by was led by Forerunner Ventures, and including Chernin Group. Mark Cuban is also a partner and adviser, WWD said.
The rise of re-sellers and consignment shops in the sneaker business comes as consumers, especially younger consumers, move toward more exclusive and high-priced sneakers. Retail price tags for some top of the line Nike and Adidas shoes that run north of $150 a pop. For comparison, in the 1990s a pair of Air Jordans may have cost the consumer $100 a pair, an astronomical figure compared to other mildly priced sneakers like Converse of the time.
Companies including Nike and Adidas have taken to making fewer pairs of more exclusive sneakers and charging a larger premium for those releases. As a result, the resale value of the shoe can be more than double the original price. And under the consignment model, Flight Club never actually owns much of the inventory.
Outside of the rise in reselling sneakers, the popularity of Flight Club, GOAT and Stadium Goods can also be attributed to the rise of urban culture and fashion.
Case in point, Supreme, the 24-year-old brand founded in Lower Manhattan and based on the convolution of the Hip Hop and skateboarding cultures, recently raised $500 million from Carlyle Group LP (CG) in return for a 50% stake, according to WWD. The deal put Supreme's enterprise valuation at around $1.1 billion, $1 billion in equity and $100 million in debt, the publication said.
LVMH and Stadium Goods could not be reached for comment.