A Resell Business Owner's Reaction to StockX's Latest Funding Round

I recently read the news that online sneaker and streetwear marketplace StockX had successfully secured another round of funding. This follows up another round of funding approximately a year ago. I have kept close eyes on StockX’s success, as I myself am a small business owner who operates a company in the same industry as StockX. I previously have used the platform for selling, with payout revenue from StockX well in excess of $10,000. However, in recent months I have become more and more disenchanted with the company. The initial stressor involved StockX’s data breach — which affected me — which they covered up for months until a newspaper expose revealed that the account data was compromised and for sale on the dark web. Furthermore, their poor management of the pandemic created dangerous working conditions and an immense backlog of orders. For me, that meant waiting over a month for my payouts of items sitting delivered in their warehouses. While likely unavoidable, the company’s fees are astronomical from both the seller and buyer side. A recent purchase from StockX for $45 entailed $4.20 sales tax, $4.95 processing fee, and $20 shipping fee for a total of $74.15. From the seller side, every product sold incurs a 15% seller and processing fee.

StockX hit a $3.8 billion valuation following issuance of new stock and the sale of existing stock. The new valuation propels the company up the unicorn companies list, a prestigious title lauded upon private companies who have eclipsed the $1 billion mark. The funding round was spearheaded by Altimeter Capital, an existing investor, and Dragoneer Investment, a new funder. Considering our recent coverage of private equity in class, this recent capital raise by StockX was definitely an interesting story to observe. Upon further digging, I found that Altimeter Capital manages a long/short public equity fund and growth-stage private capital funds. Evidently, StockX was a perfect candidate for private funding, as it is poised for massive growth in the booming streetwear fashion industry.

According to people familiar with the company’s plans, StockX is looking to go public in the near future. It is astonishing to see that an online marketplace more niche than eBay, is going public in the near future. Incidentally, it makes total sense that StockX CEO Scott Cutler, was a former executive at eBay, an aged company that is actually making a strong push towards capturing market share in the bustling sneaker market. Furthermore, it was shocking to read that the company turned a profit for the first time in the third quarter of 2020. It really highlights the perils of startups and the necessity of capital raising. I took the liberty to familiarize myself with various stages of private equity funding. The earliest form is seed funding, which is used to employ a team to expand on market research and product development for their concept. Following seed funding is series A funding, which is for companies with a track record to further enhance their offerings and brand presence. Then series B funding is taking a company to the next level, providing capital to satiate their growth with talent acquisition and advertising. Finally, series C funding is the last common private funding round. The C round is for successful companies looking for additional funding for more research and development, expansion, or other projects. For StockX, this recent funding round appears to be a series C or later funding round. Already a quite established company, this funding appeared to allow employees to cash out shares before StockX’s IPO, and further supply equity for StockX to expand into new markets such as trading cards and electronics.