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Freshlabels is a fast-growing online retailer of sustainable fashion with a strong brand and an ambitious European expansion underway.

In 2019 Freshlabels began its foreign expansion by launching an English version of the platform, and at the beginning of last year it added a German version as well. The company’s immediate sixfold year-on-year revenue growth on the German market and revenue doubling for the rest of the European countries proved that the company’s focus on the Western European market was the right choice. The exceptional potential of Freshlabels is strengthened by the growth of e-commerce and digital sales channels in the fashion industry. With an offer of more than 100 carefully selected brands, Freshlabels is quickly becoming the leader among sustainable and quality fashion retailers for a wide customer base.

2020 revenue of €4.7 million, growth of +49% CAGR between 2016 and 2019

3 B&M concept stores in Prague and Berlin

Long-term relationships with suppliers and access to exclusive product collections

Highly rated customer service and exceptionally low return rates

Delivery option to more than 20 countries

40+ members team led by seasoned management

Expert supervisory board members: Venture capital fund Tensor Ventures

150,000+ subscribers and followers (email / Instagram / Facebook)

Growth investment with an expected return of 3x invested sum within 5 years

Spoluvlastněte Freshlabels

Love brand for everyone who wants to go beyond the surface 


Freshlabels was founded upon the idea of ​​discovering and selecting original and high-quality fashion from all over the world and so offering an alternative to instant fashion from fashion chains. It soon became a locally known pioneer of “fresh” brands, which the founders sought at foreign fairs and through a growing network of international contacts. Gradually, their attention was increasingly focused on emerging sustainable and responsible brands. These subsequently became a pillar of the product portfolio.

The offered collections currently come from more than 100 carefully selected brands from all over the world. They combine brilliant design, quality and durability as well as the greatest possible environmental friendliness. Some 37 brands currently meet those highest standards of sustainability, and at the end of 2020, 50% of newly stored goods could boast the ‘Sustainable Tag’ that Freshlabels awards to brands based on comprehensive criteria. The goal for 2021 is to increase this share to 75%.

The main sales channel is an ever-evolving e-commerce platform. In 2014, this was supplemented by the first concept store in Prague. Today, Freshlabels has three unique stores (apart from Prague, also in Berlin). The newest Sustainable Store (design boutique) in Prague offers exclusively sustainable products that are not only for sale, but above all for building a community and spreading Freshlabels’ ideas and principles.

In 2019, Freshlabels began its foreign expansion by launching a delivery option throughout the EU and an English-language version. Currently, the platform has four language versions (EN, DE, CZ, SK) and is preparing others. It is currently focusing on the German market, where its public face is a stylish store in the heart of Berlin. The German-language version was launched at the beginning of 2020. By the end of the year, the share of turnover from the German market was almost 20% and is still growing (turnover in February-March 2021 was more than 100% higher year-on-year).

About the investment opportunity

Investment of € 1.5 mil. via a convertible loan – conversion into the company’s equity as of 06/2022

Expected total revenue of € 8.5 mil. by 2022

Expected return on investment of 30%+ p. a., 3–4x

Moderate investment risk with investment timeline of up to 5 years

Return based on capital appreciation and subsequent exit

Professional VC fund Tensor Ventures in the Advisory Board

Opportunity

The more than 40-member Freshlabels team is led by seasoned management and consultants with many years of experience not only in the segment of small and medium-sized enterprises (SMEs), but also multinational corporations:

Jakub Veselský (CEO) – co-founded Freshlabels while studying at the University of Economics, Prague. He has been dedicated to Freshlabels as CEO for 15 years.

Jan Bouška (COO) – co-founded Freshlabels as a student at the University of Economics, Prague. He has been with Freshlabels since its founding 15 years ago.

Honza Matura (COO) – has 15 years of experience in Lidl CZ, where he was responsible for the management of warehouse and logistics. He has been with Freshlabels since 2017.

Mirek Malát (CTO) – has 20 years of experience in IT and Performance Marketing (Mall, Bibloo). He has been with Freshlabels since 2018.

Jakub Grosman (CFO) – has extensive experience in the corporate environment after working for Philips in various management positions for more than 10 years. He previously studied at Charles University in Prague and is currently completing his PhD at the University of Economics, Prague.

The management of Freshlabels is also supported by the partners of the VC fund Tensor Ventures (current investor):

Martin Drdul is an experienced investor and advisor. He previously worked for more than 10 years at Intel Corp.

Roman Smola has many years of experience in the sector of venture capital. He founded startups Answear.cz, WDF, Glogster and Passenger.

Team

The European fashion market was hard hit by the Covid-19 pandemic last year (estimated year-on-year decline of 22-35%), mainly due to the sudden downturn in tourism, which is closely linked to mobility and shopping. In 2021, a significant recovery of the fashion market is expected. The primary driver of growth will be digital sales channels. People are likely to continue to avoid crowded places such as shopping malls. A survey conducted by the consulting firm McKinsey estimates up to 30% growth of the digital segment in the European fashion industry in 2021 compared to 2019.

The pandemic has had a major impact on the shift in customer behavior. According to a McKinsey study, the pandemic will significantly accelerate DIGITALIZATION and customers will place much more emphasis on SUSTAINABILITY in the fashion industry. With growing online penetration and customer demand for increasingly sophisticated digital interaction, stores will be forced to optimize the online experience along with a mix of sales channels. At the same time, however, they will want to maintain a sense of the human presence. In addition, the arrival of the pandemic amplified the already existing critique of consumerism (fast fashion). It emphasized the need for sustainability in purchasing decisions and significantly contributed in surge of new circular business models (especially resale).

As more people shop online, the role of retail brands will change – flagship stores will primarily present the retailer's brand. Most brick-and-mortar stores will be smaller, the goods will be more adapted to the local market and will fulfill the task of processing online orders.

Freshlabels not only actively responds to all key trends in the fashion industry, but is also directly involved in shaping them. It focuses its current strategy on:

EXPANSION into Western European markets with high purchasing power (DE, FR, Benelux, UK and IE)

LOCALIZATION: launch of new localized domains and language versions for the e-shop (.fr, .nl, .be, .co.uk, .ie); significant support of the ‘concept store‘ in Berlin on the German market

DIGITALIZATION: upgrade of IT infrastructure (customer data analytics, loyalty program, personalization of web content and personalized emailing)

NEW PROJECTS: LOOP: a project based on the circular economy rewards customers with credits for further purchases after returning old clothes; Freshlabels is preparing to introduce its own PRIVATE LABEL

Market potential

A pioneer helping to change the fashion industry 

The shift of customers from fast fashion to a growing emphasis on sustainability in purchasing decisions represents one of the most significant trends in the fashion industry, as evidenced by several studies. Freshlabels has been focused on sustainability since 2015 and has built an excellent starting position for further growth.

Each brand approaches sustainability and responsibility in its own way. Freshlabels provides customers with detailed and easily accessible information. In 2020, the company launched a new, transparent sustainability assessment system that is based on its own comprehensive questionnaires for suppliers. Such an approach is unique in this industry and represents a huge competitive advantage towards customers and suppliers.

In 2020, Freshlabels opened the first Freshlabels Sustainable Store, offering only those products that meet its highest sustainability criteria. In addition to the products, the idea of sustainability is also reflected in the interior concept designed by Lenka Mikova Architects. It combines innovative materials such as recycled and dry-pressed Tetra-Pak with upcycled objects left behind by a previous tenant. The aim is to create a community hub for those interested in sustainability, a space for its own events and customer activation in cooperation with individual brands.

Freshlabels continues to come up with further innovations and initiatives to demonstrate its leadership in sustainability. Customers can have their order sent in used upcycled packaging, which is not only ecological but also economical. In 2021, Freshlabels plans to send 50% of all shipments in this way. The brand has strengthened its authentic connection with sustainability also through educational activities on its website, social networks, mailing, blog, as well as through lectures and workshops. All of this helps Freshlabels fulfill its sustainable mission.

The latest step in this area is the launch of the Freshlabels LOOP project. It works on the principle of repurchasing products that customers have bought in the past but no longer use. Customers will then receive credit for the next purchase and the returned products will either be resold or donated to selected locations.

Freshlabels has recently released a Sustainability report summarizing the challenges and achievements for 2020, as well as plans and goals for 2021. 

Product / Solution

Market acceptance risk – low, as recent market surveys indicate that EU consumers will buy less but be much pickier. An overall increase in shopping in the casual wear segment is expected, at the expense of luxury and formal wear. The demand for sustainability and purposeful brands will increase more than ever before. Consumers will appreciate brands that offer meaningfulness and sustainability – these features will become the new standard.

Purchasing power risk – varies from country to country in Europe. In general, Western European (DE, FR, NL) countries are characterized by a significantly higher purchasing power than the countries in CEE (CZ, SK, HU). Overall, purchasing power risk is minimized by intended growth in Western Europe. 

Competitive risk – high, both from smaller local retailers focusing on sustainable fashion, but also from large European and global e-commerce platforms, such as Zalando or Amazon. Freshlabels is not just another retailer, but a brand with high added value, which has established its relevance for a pan-European audience. In the segment of responsible consumption, the so-called Amazon effect is evident with some customers moving away from huge shopping portals that cannot reflect deeper values, to authentic independent retailers like Freshlabels. The company has built strong business relationships with leading global brands such as Patagonia, The North Face, Fjällraven and many others. Unlike the competition, these partnerships provide the company with exclusive access to special collections and activities. A broadly diversified portfolio of brands mitigates the risk of sudden termination of a business partnership by one of the brands.

Risk of scalability and internationalization – is associated with planned growth and expansion in Western European markets. However, new orders outside the Czech Republic (domestic market) are constantly growing and confirming the relevance of the Freshlabels sales concept to the markets of Western Europe, which are characterized by high competition.

Risks

The growth investment will be used to build a leadership position in the sale of designer, high quality and sustainable fashion in Europe, and to reach the revenues of € 17 mil. at an EBITDA margin of approx. 5%.

Expansion into new markets DE, AT, FR, Benelux, UK / IE

Deepening and expanding the range of products and stocks

Development of e-commerce platform: - advanced data and customer analytics - personalization of content - development of solutions to increase customer retention and loyalty

Extension of the business model through innovative projects related to sustainability (LOOP plus development of own sustainable private label)

Investment Objective

More information

Forbes: Freshlabels a jejich první milion: dělejte věci po svém a nebojte se půjčit si

Czechcrunch: Freshlabels poprvé expandují do zahraničí. Nový Backpack Store otevřeli v samotném srdci Berlína

Czechcrunch: Freshlabels po Česku dobývají i Německo. Prodávat jen udržitelné značky je ale zatím neudržitelné, říkají zakladatelé

Czechcrunch: Jak dát prodanému zboží další smysl. Ve Freshlabels začínají vykupovat oblečení a otevřou second-hand

Forbes: Freshlabels má nový obchod na Letné. Prodává v něm jen udržitelné zboží

Forbes: Budoucnost módy je v resale. Freshlabels nebo COS startují přeprodej nošeného zboží

Czechdesign: Freshlabels představuje udržitelnou budoucnost na Designbloku

iHned: Kvůli covidu přišel prodejce designového oblečení Freshlabels o miliony. Teď otevřel nový obchod

iHned: Freshlabels míří na západ. Nový obchod s batohy v Berlíně navrhla Lenka Míková

Fashionnetwork: Freshlabels eröffnet ersten Backpack-Concept-Store in Deutschland

Ceecee: DIVERSITY IN DESIGN: BACKPACKS FROM AROUND THE WORLD AT FRESHLABELS

Media

The investment in the amount of €1.5 million will be used primarily for the development of the e-commerce platform and expansion of the product and brand offering, together with advanced analytics, thanks to which Freshlabels will be able to actively continue its ongoing expansion into Western European countries. At the same time, Freshlabels plans to continue the expansion of its brand through innovative services focused on sustainability – such as development of its own collections and the customer-oriented Loop service, which functions on the basis of the circular economy – and to come up with creative ways to reduce its own carbon footprint.

For what purpose will the investment be used?

Some 70% of customers are from the Czech Republic and Slovakia, Germans comprise approximately 20% and 10% come from other European countries. In the immediate future, Freshlabels will continue its expansion on the German market and gradually enter other areas of Western Europe, namely Benelux, France, the UK and Ireland.

In which countries does Freshlabels currently operate and what direction does it want to take in the future?

The investment is being implemented directly through a convertible loan with a fixed conversion in 2022. The valuation of the company will be determined based on the results actually achieved. Investors will thus gain up to a 40% share in Freshlabels via the Crowdberry platform.

What is the initial valuation when investing in Freshlabels? How large a share will Crowdberry investors own in Freshlabels through a special purpose vehicle?

The investment’s anticipated level of appreciation is 30-40% p.a., or three to four times the investment on a one-off basis upon exit, under the condition that the current business plan has been fulfilled.

What is the anticipated level of appreciation of investments in Freshlabels and in what form?

The anticipated investment horizon is up to five years.

What is the time horizon of the investment in Freshlabels?

Freshlabels Urban Travellers

Eastpak x Raf Simons VII Collection Launch

Freshlabels

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Increasingly popular online retailer of sustainable fashion

Crowdberry investors have already invested over €65 million in over 40 companies.

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