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Hopkins’ departure raises questions about e-commerce funding, valuations

Lana Hopkins’ announcement last week that she was stepping down as co-CEO of Mon Purse, the customisable handbag business she founded in 2014, came as a surprise to many in the industry who had grown accustomed to seeing the entrepreneur promoting her business on social media and at retail events.

But while Hopkins told Internet Retailing last Thursday she was stepping down of her own accord to pursue a new venture, which she could not discuss in detail until she officially handed over the reins as co-CEO, the AFR on Friday suggested the founder was forced out, after losing a tug-of-war for control of the business to COO Andrew Shub, who joined Mon Purse in 2015.

The reshuffle at the top of one of Australia’s most promising e-commerce exports – Mon Purse was the first Aussie accessories concession available at Selfridges in the UK and Bloomingdale’s in the US – is not simply a palace intrigue story.

It also raises questions about the financial health of Australian startups, especially the many ‘tech’ startups springing up across fashion, beauty, food and countless other sectors, which have attracted millions in venture capital (VC) funding in recent years.

Though they are often billed as industry disruptors, the reality is that many struggle to scale, access to capital notwithstanding.

What’s in a valuation?

Alyce Tran, co-founder and CEO of Australian fashion brand The Daily Edited (TDE), said all the hype around startups – as evidenced by phrases like ‘entrepreneur’ and ‘capital raise’ becoming commonplace – has romanticised what it really takes for a business to succeed.

“I don’t think of myself as running a startup. I think of myself as running a small business,” she said, adding that capital raises traditionally have been the territory of big business.

According to Tran, small businesses – that is, startups – don’t need millions in funding and international growth strategies to be successful, but rather they need to focus on “servicing your customers really well and having fantastic products”.

Unlike Mon Purse, TDE has not received funding from any VC firms, although Tran, who formerly worked as a lawyer advising VC and private equity clients, said she and co-founder Tania Liu had plenty of offers.

Instead, Tran and Liu bootstrapped the business and they famously continue to run TDE “like a household”, never spending more than they earn, and setting aside some money in a savings account each month. They have no debt and don’t even have a corporate credit card.

“We save some money for the future, because what if we have three bad months? That could happen. It’s amazing that it hasn’t happened yet,” Tran said, noting the company is growing 40 per cent month-on-month.

Despite – or perhaps because of – their unsophisticated financial approach, the co-founders have been able to open bricks-and-mortar stores in Australia and the US and expand TDE’s range, while remaining profitable. The business is on track to earn $30 million in revenue this financial year, with “solid” EBITDA off the back of that, according to Tran.

Tran and Liu sold a 30 per cent stake in the business to Oroton in March last year, for $4.5 million, implying a valuation of around $15 million. But Tran said she doesn’t spend much time thinking about TDE’s valuation, since it is entirely dependent on the “potential” of the business, rather than hard numbers.

“You could look at the EBITDA and say it could be 10 times this…but the only thing I can say as fact are sales. That’s tangible,” she said.

According to the AFR, Mon Purse saw its valuation tumble from $30 million last February to $5 million.

This article has been updated to clarify that Andrew Shub is COO, not co-CEO.

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