Chronext has grown from a kitchen table startup in London ten years ago to a business with its sights set on sales exceeding €500 million in five years time, according to a ‘teaser’ document designed to attract funding of €25 million this year.
The secondary market luxury watch specialist has already raised €60 million from investors since 2013, its co-founder and chief executive Phillip Man told WatchPro in January.
“When we were two guys at a kitchen table, the first money we ever received was from Startup Britain, a government-backed fund that lent us £10,000. We also put in about €3,000 of our own savings. We bootstrapped it for the first year, and then secured funding from a venture capital fund in Germany. Since 2013, we have raised around $60 million,” Mr Man said.
Chronext is projecting net revenue growth of 62% over the next five years, and will post its first EBITDA profit in 2021.
Potential investors are told that by 2023, Chronext estimates a 6.4% EBITDA margin on sales of €500 million, a profit of €32 million.
“Key growth drivers include international expansion as well as growth in the pre-owned space while maintaining our leadership position in Germany,” the document states.
Chronext sells new and pre-owned watches on consignment from retailers, traders and individuals; and it buys a certain amount of stock that is authenticated and refurbished before going back on sale on its ecommerce site. Whether a watch is consigned or directly owned by Chronext, the company checks every watch it sells and attaches a two year warranty with each one.
Net revenue is the money Chronext earns from its cut of a consignment sale plus the full value of each watch sold that it owns.
Its funding teaser says that it has 23,500 customers to date, with an average order value of €5,000.
During the current phase of development, which Chronext says runs from 2018 to 2019, the company says it will continue with its ongoing international roll out with newly opened locations in Canada to serve the North America market, Hong Kong and Australia. This international expansion will be “efficient and de-risked and fast … based on a tried and tested roll out blue print”.
Investors that have already provided funding of €60 million over the past five years are said to be supportive of the current funding round and growth forecasts. “[We have] full backing from existing shareholders to raise additional funds in order to capitalize on growth opportunities,” Mr Man tells WatchPro today. “[There is] strong interest from a large number of highly reputable investors to participate,” he adds.
Underpinning the prospectus and growth forecasts is the assertion that the market for luxury watches sold online will grow to €60 to €80 billion. Chronext hopes to grab an increasing share of that market through a combination of selling pre-owned and new watches sourced from retailers, traders and individuals. In addition, it expects to make higher margins by working directly with watchmaking brands. Mr Man says Chronext is currently an authorized dealer for 14 watch brands, and this is an area he wants to expand.
“Chronext is uniquely positioned to bring both the new and the pre-owned segments online,” the prospectus says.
In addition to the current funding round for €25 million, Chronext says that an additional €10-15 million of optional funding could be used for an accelerated growth plan or opportunistic M&A (merger or acquisition).