DALLAS — In venture capital, Forerunner Ventures has virtually cornered the modern luxury investment market. On the private equity side, they’ve got a kindred spirit. L Catterton, the investment arm of LVMH and Groupe Arnault (the family office and personal investment vehicle of LVMH CEO Bernard Arnault), is rapidly establishing a reputation in the sector.
Just last week it announced, by way of its $615M Growth Fund, an investment deal in men’s activewear upstart Rhone. It’s also just completed the acquisition, after several months of due diligence, of Italian premium bicycle firm, Pinarello. Their latest deal, just announced today, is another tally in modern luxury’s corner: They now own a stake in Dallas’ *Mizzen+Main.
L Catterton, we’re quickly finding out, operates under strict confidentiality terms. The firm is extremely tight lipped when it comes to divulging the actual specifics of the deals it makes. So while the exact figures of the investment aren’t being made public, we did speak to CEO Kevin Lavelle over the phone to bring you deeper context on the deal.
Here’s what’s important to note about this one:
This is a private equity growth deal, and it’s a pragmatic move by Mizzen+Main.
Pragmatic in a good way. (We’ll address that shortly.) Just know that pragmatism has been the Mizzen+Main way for some time now. They’re scrappy, smart — and, being based in Dallas (and formerly Columbus, Ohio), they operate outside of the traditional markets of NYC, LA, or San Francisco. That distance has been to their benefit, as they tend to ignore what’s thought of as the norm for growing brands like theirs. They’ve never taken on venture capital, and haven’t had to chase unrealistic growth rates to please their would-be investors. Instead, they’ve been profitable for several years now, Lavelle told us, having only taken on previous angel investments totalling $4.25M over four years.
One key finding about L Catterton’s Growth Fund.
It’s angled towards “control-oriented investments in North American consumer-focused companies growing at double or triple digit rates and requiring between $10 million and $50 million of capital.” It’s a safe bet, then, to assume that this investment fell squarely under those particular terms.
Control was a huge deciding factor in this.
As you might have read here before, Mizzen, and by extension, Lavelle, operate on a different plane compared to competing companies in the industry. First, they have a strict “no discounts” policy, something Lavelle has been adamant and outspoken about (just scan his Medium feed). Second, unlike other DTC upstarts, they’ve steered clear of VC capital, understanding that they’re not a tech company. And third, breaking again from DTC standards, they’re not afraid of wholesale: Kevin told us they have 300 stores stocking them around the country, and they’ve got a burgeoning relationship with Nordstrom at the moment, as well. That they’ve decided to accept a private equity deal with L Catterton is no surprise, and fits the company pattern quite well.
Venture capital wasn’t really even on the table.
“We really did not pursue many conversations with venture capital — and this is not a knock on VC at all — it’s just we’re a consumer retail brand,” Kevin told us. “The chance of us growing 10x to 100x over the course two to three years — which is what a lot of VCs need to have in their portfolio to hit their returns — just doesn’t work for us.”
He later added: “We wanted someone who…had a very long term view on building brands over decades. Most of our conversations were focused in the PE (private equity) realm just because we’re not a tech company, and most VCs are primarily tech focused with some product companies scattered throughout their portfolio.”
Even so, he took his time.
“I spent a lot of time with the managing directors at Catterton over the last year getting to know them and how they view the world. We’re very much aligned. What really stood out for me was how committed they are to supporting what we’re doing, how we’re doing it, why we’re doing it, and who we’re doing it with. Meaning they are 100% behind our leadership team. They do not want to change anything that we’re doing. They want to have challenging conversations, and they’re going to push us to be better. But they did not come in and say, ‘Ok, so we’ve done this before, here are the five things that you should do next.’ What they see is, we’re doing so many things right, they want us to keep doing that — and be a resource when we need them to be.”
What the money will be used for.
Adding to the team, supporting continued product innovation, delivering new products more consistently, supporting the wholesale business (300 retail doors nationwide stocking Mizzen), better customer service, and more extensive marketing.
Red thread.
First, this is one of the first of what we’re anticipating to be several more modern luxury fundraise and acquisition announcements for 2017. Second, it’s only April, but L Catterton, through its Growth Fund, has has made some very savvy investments in modern luxury companies this year: Rhone, Mizzen, and Pinarello. And let’s not forget: They’d also be the arm responsible for carrying out the Rapha purchase by LVMH, if it were to happen.
Beyond that, we hear that they’ve also had conversations with at least one other emerging luxury startup. They are aggressively courting the space, as these deals and related activities make quite clear. L Catterton is one to keep an eye on going forward.
(*Full disclosure: Mizzen+Main is a Lean Luxe sponsor, but this announcement is perfectly in tune with our editorial focus. This is news we would’ve reported on — even if we didn’t have a working relationship with them.)
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