Online retailer Shoes of Prey secured $US5.5 million ($6.5 million) in venture capital this morning to fund its bricks-and-mortar expansion. The retailer, which enables customers to design their own shoes, started off as a pure play online offering. But Shoes of Prey’s founders, Jodie Fox, Michael Fox and Mike Knapp, have realised the value of having a physical store presence after the success of Shoes of Prey’s David Jones concession stores. The funding round was led by US-based Khosla Ventures after the Shoes of Prey team got in touch with Ben Ling, the investment partner at Khosla, through a former Google colleague. Michael Fox told SmartCompany the deal came together fairly quickly after first reaching out to Ling in July this year. “That seems to be how venture capital in the US works, warm introductions always seem to help,” Fox says. New investors alongside Khosla Ventures include Bonobos co-founder Andy Dunn, and ThirdLove co-founders David Spector and Heidi Zak. Existing investors also took part, including Blackbird Ventures, Atlassian co-founder Mike Cannon-Brookes and Bill Tai from Southern Cross Ventures Partners. The deal leaves the co-founders with “just under” 50% in equity while Shoes Of Prey’s employees retain 15% equity in total. In order to “get the deal done” Shoes of Prey’s co-founders had to agree for one founder, at this stage Jodie Fox, to step down from the board. “US venture firms generally have much smaller boards so we reduced the board to three, so only two of Mike, Jodie and me could be on the board,” Fox says. “We might set up a rotating structure”. Fox says “it’s not ideal” but the business should be able to work around the limitation. Shoes of Prey will use the funding to open more bricks and mortar stores, including in the United States, hire some more key staff and increase its manufacturing facilities. “We have signed a deal with Nordstrom to open six stores in the US. The first one opened two weeks ago in Seattle and we are opening a store in Westfield Bondi Junction and funding will help with all those stores rolling out,” he says. Shoes of Prey will roll out another seven stores over the next few months. “We still sell most of our shoes online but we have realised that there is life left in physical retail,” Fox says. “It offers a great opportunity for customers to come in and interact with the brand.” Expanding Shoes of Prey’s manufacturing in China will also reap rewards for the business. “We have maxed out the size of the space of our factory in China, so we have leased a new three storey 4000 square metre factory and that will give us a lot of room to expand,” Fox says. “The key thing is that it will bring our delivery time down to deliver shoes within two weeks of the consumer ordering”. Shoes of Prey previously raised $3 million in Australia in 2012 with further fundraising in 2013. This article originally appeared on SmartCompany.
Online retailer Shoes of Prey has inked a deal with United States department store Nordstrom to open six retail outlets in its stores. Shoes of Prey revealed today it will open six concessions in Nordstrom stores in Seattle, Washington, California, New Jersey, Illinois and New York with the first store opening on November 17. Jodie Fox, co-founder of Shoes of Prey, told SmartCompany discussions with Nordstrom first started around 18 months ago. “It was through an introduction from a friend, it was all through networks that we managed to start the conversation,” she says. “It is always the best way to kick things off.” Fox says the US market currently makes up 14% of Shoes of Prey’s turnover but she expects this deal will lead to the US market contributing 50% of revenue. “This is such an important and exciting deal for Shoes of Prey, it makes designing your own shoes truly a mainstream option,” she says. “The US market is absolutely enormous just by sheer number of people.” Fox says the Shoes of Prey founders will be “doing a lot of commuting” and have already opened an office in New York. She says the deal involves much more than just setting up stores, with Shoes of Prey opening up its own production facility in China and planning a second factory. Fox says there are cultural differences to deal with in doing business in the US. “We might speak the same language and watch the same TV shows, but we are so different,” she says. “Our first hire has been a full-time PR person in-house and that has helped us understand those cultural translations. It’s a different environment in the way that you speak to press, it is quite transactional.” The deal with Nordstrom follows the success of Shoes of Prey’s first bricks-and-mortar outlet in David Jones’ Sydney store last year. “David Jones was just such an exciting success story for us,” Fox say. “It acquired customers really well and did double the amount of revenue it was supposed to do.” The David Jones concession contributed 10% of Shoes of Prey’s turnover last year. Fox is unwilling to specify turnover figures but it has been previously reported in the multi-million dollars. Fox and her co-founders, Michael Fox and Mike Knapp, are in the process of raising more funding to bankroll their overseas push. Fox says she is not sure whether the next move will be to sell the business or to undertake an initial public offering. “We have a dream for what Shoes of Prey can be. Shoes of Prey is about much more than shoes, it is about getting what you want when you want,” she says. “It has possibilities for far more products.” This article was originally published at SmartCompany.
Reform of Australia’s employee share scheme laws could potentially boost the economy by $1.4 billion in the long run, according to a report by Employee Ownership Australia and New Zealand (EOA). The EOA chair and Link Market Services global head of EPS, Angela Perry, says the Employee Share Schemes – Their Importance to the Economy report presents a strong case for a reversal of the 2009 Employee Share Scheme laws. Currently employees are taxed when they receive share options from their company, rather than when they are sold or become full shares. The report’s key findings are as follows: The amount of money subject to income tax under the employee share plans has halved since the 2009 changes. Reversal of those changes could increase tax revenue by over $215 million per year. If option plan taxing returns to the pre 2009 position then there is potential to increase plan usage by over 200% and increase annual taxable income by over $131 million. With reform, salary sacrifice plans are likely to increase immediately by 10%, impacting 40,000 employees and increasing the amount of savings per employee to $5000. The findings add to an already considerable pile of evidence of the benefits of reform, supporting what could now be considered a near universal view of those in the startup industry. “We weren’t surprised by the findings, but we felt it was important to get the facts and figures out there,” Perry says. “While most people in the startup industry would anecdotally agree with the evidence, with thought it was necessary to provide evidence in support, with distinct and reliable information.” The study examined anonymous client data from Australia’s two key share plan administrators, who together combine for between roughly 80% and 90% of the market. Among those who have spoken out in favour of employee share option scheme reform are Australian Private Equity and Venture Capital Association chief executive Yasser El-Ansary, RetailMeNot founder Guy King, Blue Chilli’s Alan Jones, Shoes of Prey co-founder Michael Fox, Starfish Ventures’ John Dyson, Deloitte, the Institute of Public Accountants, and federal Minister for Communications Malcolm Turnbull. However, even with the support of a prominent cabinet minister the government has been slow to act on the issue. A review into employee share scheme laws, which was started under the former Labor government late last year, was due to report to the Department of Treasury in December. However, it appears to have stalled during the change of government, before consultation was reopened by the Coalition government in January. That consultation period closed on February 7 and in late May the department said issues raised regarding share option scheme laws were now being considered as part of the Prime Minister’s Taskforce which was established to develop a National Industry Investment and Competitiveness Agenda, which was due to make its recommendations to government by “mid 2014”. StartupSmart asked the government when it expects to release its findings from the review and had not received a response at time of publication. Perry was optimistic reform would eventually occur. “We will be sending this to our contacts within the government,” she says. “(Liberal MP) Tony Smith has always been a supporter, and we’ll be putting forward a case based on reversing those 2009 changes.”
The 2014 budget delivered the news that many startups were expecting, with the abolition of the Innovation Investment Fund and Commercialisation Australia. Speaking on budget night, Treasurer Joe Hockey said that the government would be abolishing a range of industry assistance programs and would “refocus our effort on innovation and self reliance.” “Businesses should stand or fall on their ability to produce goods and services that people actually want,” Hockey said. The government will instead establish a single business service to deliver a Entrepreneurs’ Infrastructure Program, which will supply $484.2 million over five years. The government claims it will achieve a saving of $845.6 million over five years by ceasing both CA, IIF as well other programs including the Australian Industry Participation, Enterprise Solutions, Industry Innovations Councils, Enterprise Connect and Industry Innovation Precincts. According to information released on budget night the new program will focus on supporting the commercialisation of good ideas, job creation and lifting the capabilities of small businesses, the provision of market and industry information, and the facilitation of access to business management advice and skills from experienced private sector providers and researchers. In a statement, Minister for Industry, Ian Macfarlane said industry policy would no longer be an “overlapping plethora of small grants and entitlements.” “The new programme will bring research and business together to develop and commercialise home-grown ideas and equip small to medium enterprises with the management and business skills to lead change and expansion,” Macfarlane said in a statement. Shoes of Prey founder Michael Fox responded to rumblings around the abolishment of Commercialisation Australia, prior to the budget announcement, when the grants were frozen until the budget was released. “That’s already been incredibly frustrating for us. We put in an application for a grant in November,” he told Private Media. Fox says applying for funding from Commercialisation Australia had been a “huge amount of work”. “It took two or three weeks full-time for me as the chief executive and that much time again from other people in the business to prepare the application,” he says. At the time he said it would be very disappointing if Commercialisation Australia was cut. Since its inception, Commercialisation Australia has invested over $213 million in 503 companies (as of February 2014) and was responsible for helping a number of Australian success stories like Seek.com.
One of the big surprises in the budget is the cut to the Research and Development Tax Incentive scheme, relative to the cuts in the company tax rate, reducing the rates of refundable and non-refundable offsets by 1.5 percentage points. The R&D Tax Incentive Scheme is regarded as one of the most utilized options for startups to access government help. Cuts to the scheme, were not flagged as a target for the government in the lead up the budget. Shoes of Prey founder Michael Fox told Private Media, prior to the announcement, that R&D tax incentives were the one thing keeping his company in Australia, rather than the US. The cuts are “consistent with the government’s commitment to cut the company tax rate from July 2015,” according to the budget papers. “The government will preserve the relative value of the Research and Development Tax Incentive by reducing the rates of refundable and non-refundable offsets by 1.5 percentage, effective from July 1.” “The measure is estimated to provide a gain to the budget of $620 million in fiscal balance terms over the forward estimates period. “In underlying cash term, the gain to the budget is $550 million over the forward estimates period.” The reduction means an estimated $70 million per annum not being able to be claimed through R&D tax incentives by Australian companies.
Australian online custom shoe design company Shoes of Prey has won gold at the World Retail Awards in Paris for store design. Shoes of Prey co-founder Jodie Fox told StartupSmart from China, where she’s working with the company’s product team, the win was a “wonderful coup”. “There won’t be many times in my life I can say I beat Karl Lagerfeld,” she says. Located on the fourth floor of upmarket department store David Jones in Sydney’s CBD, the store has been outperforming expectations in the nine months since it opened, Fox says. “It’s really proven itself,” she says, adding that the company is excited by its possibilities, although plans to roll out more physical stores were yet to be confirmed. The store was designed by retail specialists The General Store and beat the Puma flagship store in Osaka, Japan, and a Karl Lagerfeld concept store in Paris in the less than 1200sqm award category. Strategy partner at The General Store, Matt Newell, told StartupSmart his team approached the design in terms of creating an experience. “I said to Jodie the last thing I will give you is a beautifully designed store. We wanted to present an experience,” he says. The Shoes of Prey store is just 29sqm in size and dominated by a 2.4 metre high flower made out of the company’s shoes by set designers from the Australian Ballet and includes many of the materials used to make the shoes. It features a table finished with soft black leather, chairs made with a range of materials like suede and stamped patent leather, a “signature scent” and “custom-composed” soundtrack that includes the sounds of high heels clicking and Fox’s cat purring. Newell says he hopes the Australian retail industry will consider the importance of multidisciplinary teams when it comes to retail design and “goes for it” in future. “Australian retailers have this terrible tendency to travel around the world and steal ideas from (British supermarket chain) Tesco and bring it back and do it half as well,” he says. “We’re so focused on what the rest of the world is doing, we should be backing ourselves. The creative talent in Australia is off the charts.” Shoes of Prey chief executive Michael Fox said in a statement: “This is our first foray into physical retail, so winning ‘Store Design of the Year’ at the World Retail Awards is an incredible achievement for our team.”
The first ever annual Startup Spring Festival, a celebration and awareness raising festival about the Australian tech start-up scene, now includes over 100 events. The festival will include hackathons and start-up weekends, “walkabout” tours of incubators and co-working spaces, as well as a wide range of educational opportunities and travelling events. Launched in late August, the festival is coordinated by StartupAus, a not-for-profit collective of tech entrepreneurs including Google Australia director of engineering Alan Noble; Freelancer founder Matt Barrie; Shoes of Prey founder Michael Fox, Bill Bartee from Southern Cross Ventures; and Peter Bradd, chief executive of Sydney co-working tech hub Fishburners. The festival aims to showcase the tech start-up scene across the country, in major cities such as Sydney and Melbourne, but also in rising tech start-up cities Brisbane and Adelaide. There will also be events in Perth, Tasmania and Canberra. In August, Bradd told StartupSmart the event was designed to get the good news and momentum building in the tech start-up scene out beyond to a wider audience. “Strategically, we need to show there is momentum to get buy-in from other stakeholders. Government, big corporates and some universities don’t quite understand or believe in entrepreneurs, so awareness is quite important for making change,” Bradd said.
The power of brave branding: Australian fashion start-up announced as a finalist for the World Retail Awards7:25PM | Sunday, 21 July
Australian online fashion start-up Shoes of Prey has been named as a finalist in the World Retail Awards. Founded by Mike Knapp and married couple Michael and Jodie Fox in 2010, the brand has boomed over the last few years. Shoes of Prey lets users create shoes using its online design tool. The brand has recently opened its first bricks-and-mortar retail store and is one of six finalists in the Store Design of the Year round. Jodie Fox told StartupSmart the nomination was recognition of the power of brave brands, and that start-ups shouldn’t shy away from developing a strong and unique brand. “So long as you are true to expressing who your brand is and providing a valuable experience to your audience, don't be afraid to be bold and make a statement,” she says. “Start-ups are designed to disturb the space they compete in. It's been a really successful venture for us and we are thrilled to be listed as a finalist.” Fox says the store was designed to showcase the creative possibilities of the Shoes of Prey brand. “The store was meticulously designed, from the scent to the soundtrack to the sculptures, to engender an atmosphere of unbridled imagination that invites women to reconsider the way they shop for shoes,” she says. Managing the rapid growth of Shoes of Prey across multiple areas of the business has been a challenge. Fox says the focus has been on ensuring the customer experience remains strong. “This involves everything from improving the product, enhancing the website, to messaging our brand and then scaling production to keep up with demand. “This process now involves the boutique, and while it's a challenge, it's also exciting to be able to bring a product that I love and believe in to more and more women,” Fox says. Finalists for the World Retail Awards are assessed by a panel of 16 judges, including Myer chief executive Bernie Brookes. The winners will be announced on August 2.
Tech start-ups have the potential to contribute $109 billion to the Australian economy, or around 4% of GDP, by 2033, according to a new report, which identifies four key ways to unlock the potential of the sector. The report, titled The Startup Economy: How to support tech startups and accelerate Australian innovation, was commissioned by Google and prepared by PricewaterhouseCoopers. Preliminary findings of the report, which provides a snapshot of Australia’s 1500 tech start-ups, were released in March. Google commissioned the report after helping form #startupAUS, a new industry group that is working on a national campaign to promote the Australian tech start-up sector. The group is led by Google Australia engineering director Alan Noble, Freelancer.com founder Matt Barrie, Shoes of Prey co-founder Michael Fox, Fishburners’ Peter Bradd, Southern Cross Ventures’ Bill Bartee and Startmate founder Niki Scevak. Google and PricewaterhouseCoopers have now released the findings of their report, which shows start-ups have the potential to contribute $109 billion or 4% of gross domestic product – and 540,000 jobs – to the Australian economy by 2033. According to PwC partner and economist Jeremy Thorpe, the findings will prove useful as the start-up sector continues to grow. “There is no comprehensive catalogue of start-ups in Australia [but] we believe there’s 1500 start-ups in Australia… The majority are in Sydney,” Thorpe says. “The vast majority of start-ups do not succeed – they actually fail… [Only] 40% of entrepreneurs in the start-up space, when they fail, will start again.” The report highlights four key ways to unlock the potential of the Australian start-up sector: Attract more entrepreneurs with the right skills In the short term, Australia needs 2000 more tech entrepreneurs each year drawn from the existing workforce. In the long term, Australia’s education sector must produce more skilled tech entrepreneurs. Encourage more early stage funding Funding for the Australian tech start-up sector will need to increase. Australia invests approximately $US7.50 per capita in venture capital per annum, compared to the United States ($75) and Israel ($150). Open up local markets to tech start-ups Governments are major consumers, with spending totalling $41 billion in 2012. They can become more start-up-friendly with procurement reform. “Companies can [also] think more innovatively about how they use start-ups,” Thorpe says. Foster a stronger and open culture of entrepreneurship Australia has a considerably higher “fear of failure” rate than nations like the US and Canada, constraining the sector. The tech community is key to changing this by celebrating its own success and becoming more inclusive. According to Noble, this last point is a key takeaway. “This is a good thing – that the community realises the fate of the sector is actually in its own hands,” Noble says. “#startupAUS is a start-up itself. We’re still actually figuring out what the organisation’s structure will look like. It will be some form of not-for-profit. “We want to make sure it’s very much driven by the community itself. It won’t be like your traditional government body – it will be a much more community-led organisation. “A big part of its success will be ensuring we do provide ways for the community to collaborate… and, with any new venture, no one has a monopoly on ideas. “Hopefully the research released today will go some way to helping to inform the debate and get to where we need to go by 2033.”
Google has commissioned PricewaterhouseCoopers to gather data on Australian tech start-ups, and has already released preliminary findings, after partnering with five well-known Australian tech entrepreneurs including Matt Barrie.
This week’s Secret Soloist is answered by Shoes of Prey co-founder Michael Fox. This is an exciting position to be in and, as you’ve identified, it’s critical to ensure you have your product and value proposition clearly defined to the point where people are willing to part with their money to buy your product.
Deloitte has partnered with law firm Norton Rose to conduct a survey on employee share option plans in order to present the government with hard-and-fast data on the issues affecting start-ups.
Some say it’s too late. Some, even those who have been continuously calling for the nation to go to the polls for the past three years, say it’s too early, given the budget announcement isn’t until May.
Australia’s optometry and optical dispensing industry is expected to grow just 0.4% in 2012-13, according to an IBISWorld report, but online eyewear retailer Sneaking Duck says it isn’t worried.
Serial entrepreneur and StartupSmart mentor Michael Fox has outlined problems with employee share option plans (ESOPs) for start-ups, after being invited to meet with the federal government.
Venture capital firms in the United States raised $20.6 billion from 182 funds in 2012, new figures show, with Australian start-ups among those that benefited from the surge in investment cash.
Mike, Jodie and I are often asked how we persuaded ourselves that it would be okay to quit our jobs to start Shoes of Prey and how we managed to self-fund the business without overstretching our resources.
Government regulations need to change if Australia is to create a 'Silicon Beach' that will compete with the world's leading digital economies, a gathering of tech giants and start-ups has told Prime Minister Julia Gillard.
New Zealand has replaced the United Kingdom as the predicted third biggest export destination for Australian exporters in five years’ time, according to the 2012 DHL Export Barometer.
Going by economic indicators such as unemployment, inflation and interest rates, Australians should feel pretty good about how we stack up with the US.