An all-star team of Canadian retail talent has lined up behind a new venture capital (VC) firm hoping to exploit the wide-scale disruption in their sector.
Vancouver-based Campfire Capital is backed by more than 30 past and present Lululemon Athletica Inc. executives – including partners Christine Day (ex-CEO, now running frozen food startup Luvo Inc.), John Currie (ex-CFO) and co-leader Brooke Harley (ex-director of business development) – as well as local entrepreneur Roger Hardy, CEO of Shoes.com and an active early stage investor.
But Campfire, which is almost half done raising its first $40-million fund to invest in retail startups, is no West Coast clique. Other backers include Ottawa-based David Segal, founder of DavidsTea, and Montreal's Aldo Bensadoun (founder of footwear giant Aldo Group) and Andrew Lutfy, the retailer behind the Dynamite and Garage fashion chains.
They are more than passive investors, considered part of Campfire's network to be tapped for advice to young retailers as well as investment leads.
"What Campfire offers is that wealth of 'been-there, done-that' people," said Mr. Segal, who joined Campfire's investment committee after putting up $500,000 last summer. "It's not just money [nascent retailers] need, but expertise."
Campfire grew out a push by several Lululemon executives to invest in "the next generation of purpose-driven consumer brands," said Ms. Harley, a lawyer who spent six years at Lululemon. Mr. Currie said working at Vancouver-based Lululemon during its liftoff years "instilled in all of us a real love for high growth and the entrepreneurial spirit. … Brooke in particular was diligent in seeking out what were the next up-and-coming brands. She was always talking about the next big thing in apparel, or footwear, or whatever."
Ms. Harley made her first $250,000 investment three years ago in Vancouver's Native Shoes and "from there I really knew there was a bigger opportunity."
She convinced Mr. Currie, Ms. Day and another colleague to collectively invest $250,000 in online fashion merchant Frank & Oak's $15-million (U.S.) venture financing in 2014. Despite their modest investment, Mr. Currie landed a board seat with the Montreal startup. "We've always surrounded ourselves with good advisers," said F&O co-founder and CEO Ethan Song. "In their case, that's what we were looking for."
Mr. Currie said: "That really made us think, 'Okay, if we want to do this, and not just make investments but invest in companies where we can maybe help them along, how best to do that?' "
With so many technology VCs piling into e-commerce-centred consumer brand companies, Campfire's founders saw opportunity to put their retail savvy to work through a new venture fund, giving them a leg up over Silicon Valley counterparts that "don't bring any understanding of the [retail] industry," Mr. Currie said.
The three Lululemon colleagues and fourth partner Manica Gautam – who had gotten to know many of Canada's successful private merchants as an investment executive at Onex Corp. – started Campfire last year. Their first big move was increasing their stake in F&O to $2-million. Ms. Harley and Ms. Gautam, Campfire's lead partners, are actively looking at opportunities.
The most exciting play in retail is a surge of online-first brands that have left incumbents either defending their turf – such as Procter & Gamble's Gillette business, which countered Dollar Shave Club by launching its own subscription razor service then sued for patent infringement – or making venture investments in millennial-focused brands, an approach favoured by Coca-Cola, Campbell Soup and Nordstrom.
Ms. Harley said Campfire is looking for companies in the U.S. and Canada that are building "innovative, functional high-quality products" but that also control all aspects of their brand, from product design to distribution. "We don't invest in marketplaces, we don't invest in wholesale," Ms. Gautam said. "We invest in vertical brands."
Typical targets start out selling directly from their own websites, then add a few physical stores when sales hit a critical level. "Those days of having success in a certain silo have come and gone," Mr. Lutfy said. "For these brands to be successful you need to be able to operate in various verticals. Pure play e-commerce to me is done, as is pure-play bricks and mortar. You have to be a pretty sophisticated thinker to understand all those different verticals. I think [Campfire's principals] are smart enough that they get it and they see that future."