Exclusive: Vesta seeking growth equity for furniture DTC rollup
Vesta, an L.A.-based interior design firm that recently acquired two furniture rental startups, is looking to raise up to $50 million in growth equity, CEO Julian Buckner tells Axios exclusively.
Why it matters: DTC consolidation is expected to accelerate in the face of a collapsing investment landscape.
By the numbers: At its peak in 2021, U.S. VCs plowed some $5 billion into DTC, but that has shrunk 97% so far this year to a little more than $130 million, per Crunchbase.
Driving the news: Under its parent company Showroom, Vesta acquired Fernish and Feather this summer to create a DTC home furnishings group.
- Per PitchBook, Fernish had raised just over $70 million while Feather had raised just over $71 million, and Buckner says some investors in Fernish and Feather were invited in.
- The company declined to comment on the deals' valuations, which were not disclosed.
Details: By plugging Feather and Fernish into its existing distribution network, Vesta quickly made those businesses profitable, Buckner says.
- Combining those businesses made a lot of sense given the fixed costs, he says.
- Showroom is cash flow positive, Buckner says.
What's next: Aiming to expand the business 5X in three years versus eight years, Buckner says the company would need between $30 million and $50 million in growth equity.
- The right capital partner would need to "help us see us around corners we can't see around," Showroom's vice chairman Michael Barlow says.
- Buckner says he has shied away from raising equity capital, but put some debt on the balance sheet and has reinvested "every dollar" of free cash flow to maintain 30% growth per year.
Zoom in: Showroom already has a letter of intent to buy another company, with M&A currently a huge opportunity, says Barlow, who is also Fernish's co-founder.
- And it is "keeping warm" a couple of investors if acquisition opportunities that the company can't finance off of its balance sheet come up, he says.
The big picture: "We are changing how the retail experience for home goods is done (with) a branded type of distribution channel," Buckner says.
- Via the acquisitions, the integrations of which are 85% complete, Showroom is building a completely circular infrastructure for home furnishings, Buckner says.
- It's something the big box retailers aren't set up to do, he says, adding the new company has the potential to provide recycling services to other companies.
- While saying exit options are open, Buckner says they are building a future public company.